First, India is booming. And this may have some serious implications for Oman.
I’ve already of heard of many NRIs [that’s Non Resident Indians in the jargon, ie Indian Expats] returning to India, both skilled and even labourers, because they can make more money and have a better quality of life in India.
It looks like the old Omani truism "Once Oman didn’t have oil, now we have oil, maybe someday we won't have oil… but we’ll always have Indians!" may be starting to bust.
Some employers are now unable to attract skilled Indian Engineers and other senior professionals at anything near the equivalent Omani wages. While this is good news for Omanis looking for work, it is not so good for Omani Businessmen, long used to an effectively limitless supply of cheap workers in the subcontinent. This is yet another thing to add to the inflationary pressures in Oman.
Employees in India set to strike it rich as wages seen rising 14.4%
NEW DELHI The explosive rate of growth in India has created a phenomenal demand for talent so much that wages are forecast to rise by 14.4 per cent during the year 2008, says a report.
"Wages are forecast to rise by 14.4 per cent during 2008, the fifth successive year of double-digit growth. This far outstrips wage inflation in China (8.6 per cent in 2007) and is second only to Sri Lanka, where wage growth has been driven by high inflation," global management consultancy firm HayGroup said.
The high level of demand for experienced employees is driving wage inflation and creating a culture of job-hopping. Staff turnover of 20 per cent or more is not unusual in high-demand sectors such as the service industry, as talented workers jump from employer to employer, following the promise of even higher wages.
"Reward programmes of companies are in crisis as wage inflation is witnessing an upward spiralling and staff turnover rates hit new highs," the Human Resource consultancy firm said.
"In an environment where employees can achieve a pay rise of between 40 per cent and 50 per cent by moving to a competitor, they are unlikely to stay put," HayGroup added.
In the year 2007, the middle management level witnessed the maximum increase in average annual base salary (16 per cent), while supervisory, senior management and the executive level had an average annual increase of 14 per cent in their base salaries.
No Revaluation for the Rial - CBO
The Government, in its firmest statement yet, has stated that it intends to neither de-peg the rial from the dollar nor revalue the peg. Of course, at this stage its hard to believe the dollar could fall much further, especially in an election year when US dollar almost always rises coming into November. So it probably will make little difference to future inflation I guess.
Dollar peg to stay, says CBO’s Zedjali
MUSCAT The Sultanate has no plan to revalue the Omani rial or to drop its peg with the US dollar, Central Bank of Oman (CBO) Executive President HE Hamoud Bin Sangour Al Zedjali said on Tuesday.
Zedjali told Oman Tribune that a weaker rial helps attract foreign investments and make exports more competitive, which will offset inflation effects. “On the flip side, the falling greenback do have a negative impact on the currencies pegged to it,” he said.
“As a result of the dollar’s weakening, imported goods will cost more whereas the value of the exported goods will go down,” he added.
No shit. That doesn’t really do diddly-squat for the poor in Oman who are forced to buy hyper-inflated rice and oil. The infamous 'Family pack' hardly helps when you don't have the disposable income does it?
Sh. Zedjali continued:
According to the central bank chief, the interest rate policy of the Sultanate is in harmony with not only the economic conditions prevailing in the country but also with the present global scenario.
He said the balance sheets of the commercial banks at the end of 2007 showed total assets surged 42 per cent to RO10.3 billion compared to RO7.2 billion posted in 2006.
Personal loans also increased from RO1.8 billion in 2006 to RO2.6 billion.
Net profit reached RO213.8 million in 2007 as compared to RO162.9 million recorded a year ago.
On the personal loans offered by the banks, Zedjali said there is a limited ceiling of 40 per cent of the total banking loans to the personal loans. “Housing loans also shall not exceed 5 per cent of the total loans granted by the banks,” he added.
Again, the key questions go unasked and unanswered with Oman's totally vapid reporters, sorry, 'copy and pasters', from what passes for Oman's Fourth Estate. For Example, some questions I'd like to see asked:
If personal loans have increased by almost 50%, but are capped at 40% of total loans [by value I assume], what is the current level of loans vs the cap?
What’s the exposure of the banks’ assets to a fall in the raging Muscat Stock Exchange?
If Oman is booming while the global economy is looking weaker (thanks to high oil prices, huge subsidized investments and a stock-market and housing bubble in Oman, with the USA financial collapse) how exactly can a USA-based loose monetary policy, being applied defacto in Oman, be in harmony with all these conflicting forces? Oman’s money supply growth is already running over 40%, so is the CBO happy with that, and does it not see this as a significant contributor to domestic inflation? If the CBO is not happy with the record growth in the money supply, what is the CBO planning on doing about it, given that it has already admitted that it is not able to control Oman’s Monetary Policy?
Oman's annual money supply
17 Mar 2008 Oman's annual money supply, an indicator of future inflation, grew 40 per cent in January, its fastest pace in at least three years, the Ministry of National Economy said on Monday.
M2 hit $16.52 billion on January 31, compared with 4.54 billion rials a year earlier, the Ministry of National Economy said in its monthly bulletin on its website.
That is the biggest rise since at least December 2005.
Inflation accelerated for a seventh straight month to a 16-year high of 8.29 per cent in December, the latest available figure.
Oman, which pegs its rial to the dollar, relies heavily on imported food and has been hit by rising prices as the US dollar slides against major currencies. (Reuters)