A requiem for Blue City. As predicted long ago, Government forced to take over and bail out project. Part One.

The sad tale of Blue City
Last week the Omani Government bought out the senior debt bonds or 'notes' of Blue City after the UAE investment company threatened to exercise their right to take the land, as reported in The National:

Oman now owns Blue City project
Bradley Hope
Last Updated: Apr 1, 2011

The fate of the troubled US$20 billion (Dh73.45bn) Blue City project is now in the hands of the Omani government after its sovereign wealth fund acquired the debts of the developer.

Onyx Investments, a company fully owned by the Oman Investment Fund (OIF), bought from Essdar Capital Managers nearly all of the class A1 and A3 notes issued by Blue City, the companies said.

Essdar, an investment company in Dubai that is part-owned by members of the Abu Dhabi and Dubai Royal Families, bought $655.5 million of the debt at a steep discount last year as the Blue City project faltered.

Essdar's original plan was to use the power designated to the class A bond holders to restructure the project. When that failed because of legal complexities, Essdar planned to foreclose on the project and sell the land. But in the end it chose to sell the debt to a third party.

Neither Essdar nor the OIF would comment on the sale price or plans for the project now that it belongs to the Omani government.
...

Essdar did claim to be happy with the transaction, so presumably made a tidy profit on the deal. I'll try to explain what happened. It's a long story, so this is part one.

The Blue City project, aka Al Madina A'Zarqa, will be very familiar to regular readers of Muscat Confidential. Over the years, it has been a topic of regular posts. Some of the comments sections were the most fun, with outsiders noting the likely failure and iffy dealings even before the regional real estate meltdown, while Blue City apologists (and probably anonymous employees/management) kept abusing us with ad hominem attacks and saying everything would be great.

We now know the result of all that hubris and greed: bankruptcy, default on almost US$1 billion in internationally sourced loans and contractor debts, a deserted & hardly completed building site, the local people of Al Sawadi disenfranchised from their land, and in the end well over a half billion dollars from the Oman Government savings account used to buy out the class A bonds that held the mortgage on the land.

It is Oman's largest bankruptcy ever. 2% of GDP, nearly 10% of net annual oil exports, was lost, in the process damaging Oman's international reputation as a place of investment opportunity (or perhaps cementing our growing reputation as a place of corrupt and unethical dealings plagued by insider trading?).

I'll try to address a few obvious questions:
Who is responsible?
How did it happen?
Where did the money go?
What does the future hold?

Who is responsible?
The answer is easy: The two 50/50 Omani shareholders in local company Cyclone LLC, the ultimate owner of this disaster, who have been in total control of the project from the beginning:


HE Anees Issa Mohamed Al Zadjali was one owner, and as Chairman of the various local companies had effective executive control over the 'development'. He is the son of Issa Al Zadjali - the owner of local newpapaper Times of Oman - and gains his 'His Excellency' title by virtue of being the Honorary Consul of the Republic of Lithuania.



His Highness Sayyid Haitham bin Tarik Al Said, Minister of Heritage and Culture of the Sultanate of Oman (and the Sultan's cousin) is the other owner. HH kept his Ministerial position in the recent reshuffles and reorganisations of the Ministers following the protests.

Neither of the owners had any significant experience of property development.

HH Sayyid Haitham Al Said, as a Minister and member of the ruling Al Said royal family, certainly brought the support of his cousin, the Sultan, and presumably arranged for the purchase of the land from the Government, the various guarantees and permits required, as well as the promise of the required infrastructure that would be needed to link Blue City with the rest of the country - roads, power, water etc. And let's not forget all the eventual Government expenditure that would be part of the vision to attain critical mass, building and funding public hospitals, schools, ROP and other Government services.

It's not clear how Anees Al Zadjali ended up as co-owner in charge of a $15 billion real estate development project. He could bring some free press, as editor and partner of The Times of Oman media group, and he has various other minor business interests in media and agriculture. Due to his involvement in the Blue City project he incredibly even made the UK Times' 2007 list of the Twenty-five shaping tomorrow’s world of Middle East business. Unfortunately the headline probably still holds true, although it's not the sort of future that was being envisioned in 2007.


How did it happen?
The more complex answer shares the blame out somewhat, but doesn't take away the accountability of the two above. The now defunct Ministry of National Economy was involved, naturally, as was the Ministry of Tourism. Bank of New York Mellon were supposedly providing oversight on behalf of the bond holders. The bond purchasers themselves (apparently mostly Japanese investors) were enticed by the nice returns on a seemingly foolproof deal, administered by Bank NY Mellon and secured by a mortgage on most of the land.

Instigator of the project, Bahraini developer Mr. Ahmed Abubaker Janahi through his holding company AAJH, apparently arranged the bonds through a shady Swiss outfit and committed to a whopping $25 million fee for the $925 million in bonds. AAJ also set up the project's vision, got the original master plan drafted, and essentially enabled the project's initiation. He was subsequently bullied off his 70% piece of the project by then 30% shareholders Cyclone, and despite a series of lawsuits, ultimately lost. Local bank Bank Muscat agreed to provide mortgages to purchasers. Various international consultants took their large up-front fees to agree to design unbuilt golf courses, manage non-existant hotels, and even Sir Norman Foster's company did a massive redesign once Cyclone has taken over (as persona non-grata AAJH had done the original design).

The favorite scapegoat of those involved for the project's abject failure will certainly be the regional collapse of the Middle East Real estate market in late 2008, especially for such mega 'off-plan' integrated developments. Certainly the pre-crash bubble environment was infectively optimistic. Anything seemed possible, even ultimately hallucinogenic-ally ambitious and uneconomic projects like Blue City (touted at the time at an eventual $20 billion, Blue City was by far the largest proposed development in the entire region).

I don't buy that excuse for a moment. The project was mis-managed from the start, and hundreds of millions of dollars in borrowed money spent like there was no tomorrow. The Omani partners, once the bond was sold, instead of getting on with the project and their 30% share of it immediately started trying to take all of it, presumably with visions of their 100% cut of the profits on $20 billion in their eyes, even before they started breaking ground. This not only delayed the project by over a year, so that opportunities pre-crash for lots of sales were lost, it wasted more money in redesigns and continuing expenses. The project then slowly and expensively spiraled into bankruptcy.

Anees Al Zadjali, as co-owner and Chairman, surrounded himself with a very highly paid entourage of sub-par real estate people, and of course had no significant real estate development experience himself. Eventually, experienced American developer Richard Russell was lured from the UAE (perhaps not difficult to do as Dubai had collapsed) to take over as Managing Director and CEO. I think Richard did the best he could. By the time he was there, and given the penchant of Anees for micro-management, the project was already doomed, at least in terms of the original scope. Overhead costs were out of control.

Spin - always Blue City's forte - began to be the only thing the project team was good at; constantly using the name of His Majesty and 'his vision'; buying winning 'awards' for a still imaginary development; issuing glowing press releases for every little contract awarded; even getting deposits on around 500 unbuilt properties; whilst generally failing to achieve anything of consequence.

Disputes happened with almost every contractor and subcontractor, in a textbook example of a failed execution of relationship management. Project management consultants Bovis walked off and sued. Engineering consultants ACE ended up appealing to Bank NY Mellon about being unpaid for over $4 million in fees, and they walked too. AAJH, someone who at least had some experience in developments of this scale, continued to seek recompense in the Omani courts and failed, and even offered to come back in for 50/50. His offers to help rescue the project were spurned by Cyclone.

In desperation, advance funds paid to the contractor that should have been reserved until the end for building phase 1 apartments and villas were redirected to try to build a hotel in time for the Asian Beach Games in late 2010, which it seems the Management promised to the Omani Government to try to regain some credibility. This blew the last of the available money, as Bank Mellon turned off the taps following repeated failures of BCC1 to meet contractual sales targets and Cyclone declined to inject more of their own money to meet their obligations.


Photo: Blue City is now just a wasteland of partially completed concrete buildings and foundations. Not much has changed since this was taken in late 2009.


The Asian Beach games went ahead anyway. The hotel was never built, finally reaching just 26% completion (see photo), as detailed in a terse letter last month by Hill International, appointed by Bamk NY Mellon as the noteholders' technical advisor to the project since 2007:

From Hill International (UK) Ltd
TO: Blue City Company 1 SAOC

11 Mar 2011

... Notwithstanding the above, according to the work schedule that was adopted under the unapproved Addenda, BCC1 used a significant part of the balance of the Advance Payment towards funding design and construction works of the Amphitheatre Hotel, a non-residential, not sold, non revenue-generating for debt service, section of the development. We understand that this was due to a promise of BCC1’s/ASIT’S Chairman to higher Omani officials to have the hotel operational during the Asian Beach Games that were to be held in Oman in December 2010.

Despite depleting the balance of the AP, construction of the Project stopped anyway later on in the absence of additional funding being secured by BCC1. The Contractor suspended works in December 2009, with construction works at the hotel reaching a 26.5% completion stage (according to the Contractor’s progress reports)...

The full letter is a very interesting read.

Blue City management presented a 'restructuring' proposal to the bondholders (of the senior notes, by then mostly owned by the UAE investment vehicle ESSDAR) in August 2010. You can read the full thing here.

In their presentation, the failure of the project is blamed on pretty much everything other than Blue City management.

Quote:

...
The project is facing difficult times on account of:
• Excessive and expensive debt burden being borne by the project
• Onerous debt covenants
• Inflexible construction contract
• Global financial meltdown that has severely affected regional property market
• Continued global economic weakness affecting property off‐take/investor confidence
• General negative publicity surrounding the project (Ratings, Shareholder dispute)
• Master plan changes, design changes and delayed sales releases

Among other things, the Blue City team proposed a cunning plan consisting of selling off the hotel(s) and most of the rest of the land to get some cash to finish a reduced Phase 1 development. Their proposal included debt write-offs, re-negotiating the the contract with the contractor, dumping various oversight entities such as Fitch(!), releasing the company from agreed sales obligations, zero interest payments, and even the help of the note holders to find people willing to buy the properties.

Notable by its absence was an offer to change out the senior management and governance structure of the project, given that most of the above list was agreed and executed by ASIT. After all, this situation was hardly the fault of the outstanding Chairman HE Anees Al Zadjali.

The explicit threat to the note holders was that the Government would cancel the concession and they'd be lucky to get anything. Not surprisingly, the UAE decided instead to sell the notes to the Omani Government and book a tidy profit.

Can you blame them?

So now the Government is in the driving seat, paying good money to avoid an embarrassing foreign foreclosure on the land that was theirs to start with. What a mess.

In the end, Blue City's shareholders started with over 25km2 of almost free land in one of the most beautiful parts of Oman's coast, full support from the Government and $900 million in cash. Within a few years they ended up with some piles of concrete and a trail of debts, broken promises and litigation.


In part two: Where the money went, and the way forward.

Corruption in Oman: Redux

Corruption.
It was, truth be told, the topic of my first actual post way back in Sept 2007 (that does seem an age ago...)

It is that aspect of Omani society that is driving the continued polically inspired protests in Oman: the commonly held view that there is significant high-level corruption in this country. A few quotes:

Arabian Business, 18th January

"Oman protestors call for fight against corruption"
...Protesters chanted slogans calling for an end to corruption and carried banners saying “Rising prices have destroyed the dreams of ordinary citizens”...

Financial Times March 15th:

"Oman protesters demand corruption investigation"
In spite of a series of concessions made by Sultan Qaboos bin Said al-Said, the ruler, protesters in Oman are demanding that former ministers be investigated for alleged corruption, according to reports.
...
Despite these concessions, protesters have gathered outside the Majlis al-Shoura building in Muscat, the capital, demanding that a new police chief investigate some of the ministers sacked since unrest started to grip the country.

“The new inspector general must immediately do his job and investigate the sacked ministers for corruption when they were in power,” one demonstrator told Reuters on Tuesday.

Several of the former ministers are members of prominent business families.
...

And perhaps most tellingly, as it was printed in Muscat Confidential's favourite throbbing organ of the local 4th Estate Times of Oman (normally fully aligned with the position of the Omani Government establishment), on March 22nd:

"7,000 sign memo to seek trial"
MUSCAT: Seven thousand protestors from all over the Sultanate signed a memorandum seeking the trial of ousted corrupt ministers and submitted it to Attorney General of Oman Hussain Bin Ali Al Hilali, yesterday.

“Ousting the corrupt ministers and officials will not resolve the prevailing issues in the Sultanate. For the last two decades, these corrupt bigwigs have plundered our country’s wealth. So, they should not be allowed to walk scot-free. They should face the court and stand trial,” Khalil Al Saidi, a protestor, told Times of Oman.

On March 7, His Majesty Sultan Qaboos bin Said responded to unprecedented demonstrations in the Sultanate by conducting a radical cabinet reshuffle and sacking a total of 12 ministers.

“All the financial dealings of the former ministers must be investigated. Their bank accounts, their trips to foreign countries and their investments in various fields should be probed in detail,” Salima Al Rajhi, a protester at the Majlis Al Shura Council headquarters in Muscat, said.

Protestors have put up tents and are staging a sit-in in front of the Majlis Al Shura Council headquarters in Muscat demanding certain social reforms and end to corruption since February 28.

“Ousting the corrupt ministers and reshuffling the cabinet is a positive move. But it is a cosmetic change. Now, we want trial of these corrupt ministers. If His Majesty the Sultan has sacked the corrupt ministers then it shows that we were correct.

Those corrupt ministers should be taken to court. His Majesty the Sultan should not let those corrupt ministers go scot-free. All the murky dealings should be investigated. They should stand trial for misusing public funds. Let them face the court. If they are innocent then they can go and if they are not, they should face the trial. They have plundered our nation a lot,” Khalil added.

In the memorandum, the protestors have demanded that the trial should be open. The proceedings should be made public and those who are found guilty should be given moral punishment.

“The funds of ousted ministers, advisors and officials should be frozen until the probe is completed. The real estate dealings of these bigwigs should also be probed. We know that most of these corrupt people own property in prime locations.

Such lands’ ownership should be considered as leased property in lieu of which rents have to be paid to the state treasury,” Khalil said.

The protestors signing the authorisation urged the Public Prosecution to act as an attorney on their behalf.

“We have urged the release of all developments related to these issues including trials in the presence of the media,” Khalil added.

The memorandum relies on the economic principles stated in the State Basic Law issued by Royal Decree No. 101/1996, which states that “all natural resources are considered property of the state” and stipulated preservation and optimal utilisation of natural resources for the interest of the national economy.

“The petition is based on Article 52 of the State Basic Law, which states that each member of the Council of Ministers is answerable to His Majesty the Sultan.

Article 53 of the same law stipulates that any of the members of the Council of Ministers should not hold chairmanship or membership of a board of a joint stock company and that the government units they run or supervise on should not deal with any company or establishment wherein they have direct or indirect interests. But we can some see violations here. So this should be probed,” said a protestor.

“Future actions will be decided on the outcome of the decision taken by the public prosecution,” protestors added.

You get the idea. Some of it is perhaps pure jealousy. There are some rich people in Oman. Some of them got rich because of hard work, often via trading and generally being good at business. Hey, afterall, Oman is a capitalist system, with no personal income tax or wealth tax and a very low tax on corporate profits at just 12.5%.

Some have gotten rich by doing very little except being the local 'sponsor' of a foreign company, as until recently pure foreign companies would pay 30% income tax, or they could form a local LLC and pay 12.5% but then had to have an Omani sponsor to be able to register a local company. And they tended to pick Omanis who were 'well connected' to be their sponsor, as the sponsor could therefore earn their 5% or 10% commission by 'helping' get Government contracts, and smoothing the planning and permitting processes via their contacts in the Ministries, especially the Ministry of Manpower.

So far I haven't seen any real evidence of this 'corruption' presented in the protesters' arguments. It has all seemed to be based on rumour and scuttlebutt, and the fact that, indeed, many (ex)Ministers are apparently pretty wealthy and own some sweet real estate.

Yet, tales do abound of corrupt Government officials in Oman being occasionally removed from office for corruption, and that they are not punished in the courts to avoid letting ordinary people know that it happened and/or to avoid blaming the Government people tasked with stopping that sort of thing, and/or to avoid bringing shame to their family. This last 'reason' is also used to justify the weird Omani practice of not allowing people convicted of crimes to be identified in the newspapers (in fact, as far as I'm aware, it would be illegal to publish the name or photo of an Omani even after they have been found guilty and sentenced in a public court!)

The very public demolition of the new building next to the airport owned by ex-Minister HE Dr Juma Al Juma was never reported in the traditional Omani media, despite being the talk of the chattering classes. The ex-Head of Muscat Municipality, Eng. Abbas was fired in part over that incident (he authorised the permits for the height despite it being in breach of FIA regulations) and his own alledged misuse of power to get his own building development in Shatti, among many other tales of similar abuses.

There are other obviously suspicious situations. The purchase of WorldCall by Omantel at super inflated prices from a single Omani businessman always raised eyebrows, as blogged here at the time. Result? (after a colossal 95% loss on the US$185mill investment) The CEO later 'resigned for personal reasons' and was then made an undersecretary at the telecoms regulator! So clearly nothing wrong there at all.

Other rumours I've heard. The inflated (200%) prices Gulf Air apparently paid for airplanes in the 90s was never investigated. The extremely low prices (I'm told at a price is equal to just $5/bbl oil equivalent) Oman's scarce natural gas has been sold on fixed long term contracts with no link to either oil price nor inflation to makers of methanol. The rumoured dismissal (but again, no trial) of a Government tenderboard member a couple of months ago for taking 30k rial (US$75,000) payments for assigning contracts to the payers. All just rumours.

But we all know, wasta is wasta. Who gets given nice valuable pieces of free land? Who gets their kids educated overseas at the state's expense? Whose pieces of land in the middle of no-where happen to get roads built and infrastructure laid that dramatically increase the land's value? Whose houses get built slowly by contractors working on big contracts for your Ministry/Municipality? Answer: Those who are connected to the royal family, Ministers, and the powerful. Those with 'wasta'.

We can all see the wastafarian kids of the Ministers and Oligarchs driving around in their Porsches, Lambos and Ferraris. We can see the palaces of the wealthy families along the coast and their private yachts parked in the jetty. The natural question is: where is that money coming from?

Overseas companies tendering for contracts in Oman are continually approached by people who claim - in exchange for an appropriately sized fee - to be able to guarantee their tender will win the contract.

Here is a wonderful 15 min talk by Peter Eigen, founder of excellent NGO Transparency International, on the impact of corruption and what people can do about it.


Video: How to expose the corrupt, talk by Peter Eigen, Founder of anti-corruption NGO Transparency International


Of major concern is that the Sultanate is still not a signatory to The UN Convention against Corruption. Why is this?

...
The UN Convention against Corruption provides a clear framework of laws and actions required to prevent and punish abuse of power for private gain. It addresses the cross-border nature of corruption, includes provisions on the return of ill-gotten assets, and it mandates the participation of citizens and civil society organizations in accountability processes. In the region, only Oman, Syria and Saudi Arabia have not ratified it.
...

This might be a good question for the coordinator for the Arabic Countries at the International Association of Anti-Corruption Authorities (IAACA) Sh. Ali Nasser Al-Bualy, formerly the first Omani Attorney General for the Sultanate of Oman and local legal big wig.

In fact, I'm hoping The ex-Public Prosecutor and Attorney General will help us unravel this problem....

Breaking news: Reports that Omani Police clear Sohar roundabout during night

Update: Clearing of Sohar by Army - and not just the roundabout - now confirmed by ONA, AFP and our reporters on the scene Dan & Jillian.

Photo: Omani Army checkpoints now firmly in charge at Sohar. Great pic ripped from Dan & Jillian's blog (more pics after the jump)

Oman's Public Prosecution office issued the following statement of explaination:

A Statement issued by the Public Prosecution

Muscat, March 29 (ONA)--- The Public Prosecution issued the following statement;

"Out of the royal approach of His Majesty Sultan Qaboos bin Said represented in the wise policy of self control, not to use of power by the military and security apparatuses - which oversee the developments to preserve the achievements of this country,

Despite the acts committed by some people are criminalized by the law, and the consecutive statements issued by the Council of Ministers, the State Council, Majlis A'Shura, the National Commission for Human Rights and the office of the Grand Mufti,

Out of the responsibilities, obligations and powers of the Public Prosecution, as stipulated in the Basic Law of the State and the respective laws which ensure the enforcement of the penal law, chasing criminals and take over the public claims in the name of the society as it has the power to initiate such claim before the competent court,

Based on the complaints and notifications made by adversely affected citizens from the acts of the irresponsible group which banned the existing authorities from carrying out their functions, rioting with intent of violence, disruption of public order, destructing and vandalizing the public and private utilities, prejudicing the public comfort or tranquility, blocking public roads leading to banning traffic movement or causing difficulty in traffic flow and assault on the security personnel

The Public Prosecution has issued orders to the respective departments to chase doers of such acts, arrest and place them under custody for investigation The respective departments and security apparatuses arrested the wanted vandals in the wilayat of Sohar. The outcome of investigation and its results will be unveiled later and those convicted will be referred to the competent court.

The Public Prosecution affirms that doing such acts is a crime penalized by the Omani Penal Law and other laws in force. Such acts held the doers liable before the law.

The Public Prosecution calls up on all citizens to cooperation and not to be hesitant in notifying the respective authority of any acts that jeopardize Law and order to risk.

May Allah safeguard Oman and His Majesty the Sultan and the Omani people wellbeing.

----Ends/MS/FS

Photo: Where it all started - the Globe roundabout several weeks ago

Breaking news

I'm told that the ROP last night forceably cleared the Sohar roundabout of protesters. Not a lot of details, but talk of multiple arrests.

The protests in Oman continue to get international news coverage, especially the focus on corruption.

This may indicate that there is an urge in the leadership to start drawing the line at what has, in many places, seemed to become effectively mob rule. Any updates from readers?

Meanwhile, there are various groups organising for all sorts of things, from free phones to nationalisation of Petroleum Development Oman.

More on that soon.

PS In support of His Majesty someone just uploaded this clip of HM firing a rifle in celebration at a previous rally. As a soldier, he knows how to handle a weapon.

PDO unveils its response to the striking/protesting Oil and gas workers; PDO staff form new Trade Union and secure regular meets with Minister Rumhy

Petroleum Development Oman - the dominant producer of oil and gas in the Sultanate and 60% owned by the Government - sent an email to all staff a few days ago detailing the managers' and shareholders' response to the protesting and striking employees: Yep, you guessed it, lots of new benefits! (These benefits will, of course, be paid by the people of Oman through immediately reduced oil and gas income, BTW.)

The protesters also got the annulment of the previous (and pathetic) 'Trade Union' and will elect a new one. AND HE Dr Rumhy, Minister of Oil and Gas, agreed to meet their representatives for a personal chat on a quarterly basis.

I was sent a few copies of the email, and thought it would be of interest to readers to see what the details were of the 'EVP' revamp [that's Employee Value Proposition in management speak].

The email is typical of why Oman has done so well getting a partnership with Shell at PDO, and why so many other businesses in the Sultanate have been stealing senior Omani PDO employees for years - quality talent. The EVP improvement plan is clear, specific, and gives a transparent timeline of the way forward. A good solid engineering approach chaps. If only the rest of the country could have such clarity...

The email's failing IMHO is that it says precious little about what the employees will do in return for such largesses: I would have recommended the removal of the right to strike as a pre-condition. As discussed earlier, PDO is the life blood of Oman's entire economy, and the ability to hold the nation hostage to blackmail your way into additional perks should not be acceptable.

The danger is that this may set a high bar for similar negotiations at other places in Oman. OIB (Oman International Bank), owned by the rich and mysterious Omani businessman Dr Omar Zawawi, for example, has effectively shut down for more than a week and staff there are in danger of killing off the very business they are employed in.

The Omani owners of businesses comprised of Indian staff must be laughing: so far there is no sign of the subcontinent workforce protesting nor of getting proper Trade Unions. No EVP revamp for the vast majority of Oman's workers then. Benefits like those below will simply make hiring an Omani even more of a stupid idea for businesses. It will, as now, be seen by many business owners as yet more red tape and tax to burden the business with, while most of the work gets done by expats. This will therefore further strengthen the big companies of the Oligarchs and hammer another barrier onto the SMEs that are the only hope Oman has of working itself out of oil and gas dependency.

Hey, but the PDO staff are OK, so that's alright. Hopefully they will be also be able to get petrol, as no-one else can with the tanker drivers on strike and rationing in effect...

Here's that goodie bag:


Photo: Not Santa, but Mr Raoul Restucci, Managing Director of Petroleum Development Oman. While he is an expat on secondment from Shell, his managing executive committee are all Omani, BTW.

MDC [UD: Managing Directors' Committee] Update on EVP Commitments

Dear Colleagues,
Recently, the MDC and I have had a number of staff engagements with you and have taken on board your feedback and demands to us. And today, we are pleased to outline our commitment, and timeline, to address your issues and a number of immediate improvements to staff members’ Employee Value Proposition (EVP).

Today
The HD Circular PDO.HD.09.11 will be issued concurrently to this note and will provide greater detail to these EVP improvements that we are providing staff:

EVP Improvement
1. Consistent with Government directives, all Omani staff will receive an increase of RO 50 for Salary Group (SG) 1 & 2; RO 60 for SG3 - SG6; RO 80 for SG7 - SG10; RO 100 for SG11 - SG15, as a cost of living adjustment effective 1st April 2011.

2. All Omani female employees can take the option of retiring at the earlier age of 55 years with a reduced discount of 2% per annum as requested;

3. TOPs trainees [UD: young operators of the oil field equipment], during their field training, will move to a “2 weeks on / 2 weeks off” shift cycle, inclusive of current holiday leave entitlement;

4. The hardship loan that staff can draw on once every three years will increase to RO 3,000;

5. PDO will pay 100% of Government hospital accommodation in private rooms for all employees;

6. Operating field staff attending HLD trainings during their rest days will receive days in lieu and accommodation in MAF camp will be provided for those travelling from our operating fields to attend a coastal-based training.


In addition to the above, today we also confirm the following:

· The MDC has set up a working team to engage with various groups to support the formation and elections of a representative PDO Trade Union. Those members include: Amran Marhubi, Ibtisam al Riyami, and Salim al Aufi, including HRR5 members Saif Shuaily and Ismail Raisi.

· In addition to the recently advertised 200 scholarships that PDO will be awarding to communities in our operating areas, PDO will also increase secondary school leaver scholarships to 50 in support of the country’s development.

· We have agreed to increase the number of technical college graduates from the current level of 90 to 180 per year for our TOP programme. This will help to accelerate our Omanisation plan and support business needs. We will also add a number of trainers to support this programme.

· We will continue to strengthen the participation and involvement of key operating staff in project design reviews as required.

· There will be a cross-PDO/Contractor team led by Saif al Hinai who will work to ensure that there is the right and consistent level of service and quality of life in all camps. This team will also work with OPAL to ensure that minimum standards are established across our industry and especially across the sub-contracting community, under our Duty of Care and value for Oman vision.

Further details of these initiatives will be communicated in due course on the PDO Intranet.

We are also actively working towards progressing additional improvements and changes. This is what you can expect from the MDC and I before the summer.


By the end of next week, we will:
· Complete the review of our operating field car fleet and provide (best estimate) replacement vehicle timings and targets to our staff;

· Provide details of the MDC Staff Engagement Plan in order to provide staff with greater transparency and increased engagement with all the MDC members. The goal of this engagement plan is to enhance discussion on key issues and opportunities and to improve the consultation process ahead of developing and communicating changes in company policies. The MDC and I will share market survey results, promotion process and outcomes, training aspirations, selection and outcomes with Trade Union staff elected and representative of PDO employees, as and when this information is available and representative bodies are established. Additionally, all emails/queries to the MD web-page will also be copied to Trade Union representatives so that they are aware of all submissions and associated replies.


By the end of April, we will:
· Review all proposals concerning the housing loan and where appropriate submit recommendations for approval by the PDO Board;

· Publish the Subject Matter Experts (SME) and Technical Expert (TE) roadmap, identifying and progressing targets in each function, and communicate the recognition package;

· Create a new web page within PDO Intranet featuring the roles and responsibilities of each MDC member, showcasing the corporate and functional committees, and communicating the State Audit plans. This website content will develop based on additional and appropriate requests for transparency;

· Strengthen the “Whistle Blowing” process, establishing investigation teams that will report directly to the MD and we will share (non-personal) matters and outcomes with the PDO Trade Union representatives and across the organisation where key learnings are identified.


By the end of May, we will:
· Complete the post-implementation review of the Improved Medical Benefit and launch agreed further improvements, including any applicable coverage for eligible family members.


Let me repeat that the MDC and I are dedicated to supporting excellence in our people and creating value for our stakeholders and Oman. We do this by engaging with you, our staff, as well as engaging with our communities, our contractors, the Ministries, and our shareholders. The result of these engagements is not time wasted nor words lost, it results into actions and plans that help us progress towards a sustainable future. We’re all in this journey together and in times of difficulty, we need to continue to set the role model across our industry and for Oman.

Rest assured that we will continue to seek your suggestions for improvement; for example, through MD lunches, MDC engagements and Trade Union representatives. We will also continue to assess our competitive position in the market to review and adjust base salaries and other terms where appropriate.

Later today, the MDC and I will engage with a very large number of contractor CEOs with the aim to resolve the debilitating industrial action which has resulted in production deferment and to progress in an aligned fashion in order to realise our goal of an additional 1,000 Omani jobs per annum. We will also aim to address salary and working condition improvements for over 20,000 contracting staff working in our operating fields and we have invited all upstream operators to join us.

In closing, let me restate that I need your help and commitment to support Oman, no more than at this time, and to fulfil our privileged position to produce Oil & Gas in support of the Nation’s prosperity and ambitions.

Early in the year we commenced on our journey to make PDO the one and only place to be. Together with our contractors, MoG, MoM, and the PDO Trade Union, we will address how best to realize this to support Omanisation, the excellence in our people and value creation for Oman.

The MDC and I remain steadfast that we must all work together – as one PDO – to continuously improve our business performance and to deliver on the promises to stakeholders and Oman.

Regards,
Raoul Restucci
Managing Director

They just don't get it.

Quick post.

Still no signs of a frank call for national unity from HM.

'Gimme more' protests continue apace, while the non-hydrocarbon exporting parts of the economy crumble... "A nice (albeit pricy) holiday in 'sleepyExotic Oman' this winter dear?"

"I think not - aren't they rioting?" will be the typical answer.

This news release from Oman's official news agency seems - at least to me - to highlight the generation gap affecting the political dialog not just in Oman, but the region at large.

State Council's Social Committee Meets

Muscat, March 22 (ONA) --- The State Council's Social Committee today held its 6th meeting of the 4th annual sitting for the 4th term under the chair of honorable Dr. Su'aad bint Mohammed bin Ali Sulaiman, Head of the Social Committee in the presence of honorable members of the committee and the Assistant Secretary General for Sessions and Committees Affairs.

The meeting approved minutes of the previous meeting and viewed the report of following up procedures of implementing its decisions. The committee also continued discussing its study's topic "Contemporary Youth Issues in the Sultanate of Oman," which aims at addressing the status of contemporary youth issues and their needs, as well as, reviewing the role of the governmental and local institutions and departments in solving these issues, highlighting their most important challenges and proposing the appropriate recommendations to face them.


The committee reviewed other items listed on its agenda upon which it took the appropriate decisions.

--- Ends/AH/KH

Oh yes, lots of talk of agendas, and committees, and taking "the appropriate actions", with no description of any of the issues, points for and against, decisions taken or actions agreed.

What a load of bullshit.

Photo: 'Generation Gap' ripped from MadinahVision.com's photostream


A committee of old men discussing right now "Contemporary Youth Issues in the Sultanate of Oman"?

How about:
- Unemployment
- Inability to get married (and thus have sex, regular sex, with a member of the opposite sex, before the age of 35)
- The perceived inequity of seeing the young relatives of Oman's rich and powerful oligarchs cruising in their Porsches and Lexi (?) with an apparently well funded stipend from on high
- Wasta, especially in Government or Government owned and/or supported companies
- No freedom to discuss these issues in the media, especially print media
- Voting and how the elected people can actually be responsible and accountable for legislation

And the default setting - of everyone - it that it's up to the Government to fix these problems, rather than as is often the case, how it's the Government policies that are causing them in the first place. And protecting the precious dears from reality is high on the list.

More soon.

Yet more protests. Oman's Oil by the numbers is just 150 rials a month. Grand Mufti calls for complete ban on booze and gyms

Feeling lonely? Hold a strike!
More strikes, more concessions...

And speaking of useless, Omantel subsidiary WorldCall also successfully got their $35 million loan thanks to a guarantee by parent Omantel. Worldcall losses more than tripled to Rs1.51 billion (US$18 million)with revenues falling to just $88mln in 2010, compared with a loss of Rs490 million in the preceding year. It's shares remain priced at less than 10% of what Omantel paid for them 3 years ago. The loan is partially to be used for 'debt consolidation'. I'd love to know who owned the debt that the Omani overnment's money is being used to repay...

It will be interesting to see how the assignment of some legislative power to the Majlis A'Shura will actually work. Note that 7 of the newly appointed Ministers were current or ex- A'Shura members. This is probably the best thing to come out of the protests, if it's done properly, although they haven't had time to update their website yet. It implies massive constitutional change. But what use is an elected legislative body if there can be no public debate of Government policy, and no political parties? And will the elected Majlis be able to over-rule the HM appointed Majlis A'Dawla? It's worth noting that under current law the President of the Majlis is... appointed by HM.


Just say 'No' kids...
On a lighter note. In a further blow to Omani employment opportunities in what was the growing tourist sector, Oman's Grand Mufti Sheikh Ahmed bin Hamad al-Khalili, appearing on Oman's riveting state television channel last Tuesday, called for a total ban on Alcohol.

The announcement was met with delight by the many (Omani!) purveyors of illicit alcohol, who pointed out that they would welcome the opportunity to sell more of their premium 'Clan of the Glen' [note: made-in-India] whiskey flavoured beverage at even higher extortionate prices than they already do. "We're just a phone call away, and we deliver!" mentioned one of the sellers, speaking on condition of anonimity.

Bulk sales of alcohol, currently allowed on Oman's military bases, and over the counter sales in the many dedicated Royal Oman Police bars (yes folks, and even during Ramadan) would not be affected, a spokesman for African and Eastern confirmed. Senior members of the ROP, who would have to enforce any ban, almost spilled their pints on hearing of the call from HE Sh. Al-Khalili.

Photo: His Eminence Shaikh Ahmed bin Hamad al Khalili, Grand Mufti of the Sultanate. No fan of the demon drink or happy endings.


The Grand Mufti also denounced Oman's burgeoning brothel & steroids business gyms as 'dens of vice', which is a fair call. I guess the on-demand massage business in Oman will have to go on-line to facebook and twitter, as the sex trade has done in Dubai. It's progress I guess, and e-commerce is, afterall, seen by the Government as a growth area.

Speaking of growth...


Oman's Oil & Gas by the numbers
PDO staff continued to protest for ridiculous amounts of money and benefits above what are already top notch salaries compared to most Omanis. The prospect of a strike among oil workers in the field is really making foreign investors nervous, but I doubt there will be any significant impact at all on Oman's short term oil exports even if they do.

All these demands, including the new unemployment benefit and lashings of fresh faced ROP officers, will need to be paid for of course. And right now, most Omanis (and expats) seem to assume that Oman makes loads of money from its oil and gas exports, as if we were like Abu Dhabi.

So, how much is Oman's oil and gas worth?

The easy way is to look at the Government's own 2011 budget. You can see an official summary here and a good commercial one by OAB here. The budget assumes an oil price of $58/bbl, and states 'net oil revenue' as $12.8bln. Costs (operational and investment) in the oil sector are counted seperately under expenditure, at around $2.4bln. There are many summaries of the oil production for 2011, and the official estimate is 897,000 bbl/d. Gas adds just $640mln net to the Government coffers, which seems very low.

So according to the Government there's around $11bln in net oil & gas revenue in 2011 assuming $58/bbl.

What I can't make add up are those 3 official numbers: the estimate of 897kb/d, the price assumption of $58 and the net revenue of $12.8bln. This is because 897,000bbl/d * 365 days * $58/bbl = $19bln, vs a net revenue of $12.8 bln (not counting costs remember - they are accounted separately). The Government seems to be 'missing' a whopping $6.2bln! This delta can be mostly explained, give or take a billion, if we try to work it out independently (see below).

Anyway, Oman's population is around 2.45 million (excluding Expats). I think it's quite interesting that dividing $11 billion in net oil and gas income by 2.45 million gives ~US$4500 per annum, which is just about exactly OR 150/month, the unemployment benefit HM just announced. Coincidence?


Photo: It's just a fact - Oman is not oil rich.

Bottom line folks: Oman is NOT oil rich. Your country's imports last year cost $19 billion, more than actual net oil revenue even at $80/bbl. True, your debt level is low at just 4% of GDP (after HM spent the past 12 years paying it down), and you have net positive foreign assets of about $5 billion.

While the headline figures put oil and gas at 80% of Government revenue and around 15% of GDP, almost all of the rest of the foreign-exchange earning exporting economy is re-labled oil and gas: methanol exports (based on free gas); aluminum smelting (based on free gas as Oman produces no bauxite); steel (yep, yet more free gas and no decent domestic iron ore either). And all the industrial activity around servicing the oil and gas sector plus the Government multiplies to make GDP look much better than it really is.

Remember this OR150 per person per month has to pay for everything: the military & ROP*, the free schools & hospitals, all the Government salaries, the infrastructure investments, and the subsidised power (cost: $0.5bln) and petrol (cost: $1.5bln).

Al Jazeera ..."We want to see the benefit of our oil wealth distributed evenly to the population," one protester yelled over a loudhailer near the port.

"We want to see a scale-down of expatriates in Oman so more jobs can be created for Omanis."

I'm afraid these people asking for free stuff, big salaries, leave, etc are misguided: the Omani people are already getting the oil money and then some. It's OR150/mnth. If the country is to survive the current 2%+ population growth rate, the non-oil real economy has to grow exponentially, and this means Omanis working hard in real jobs that create value in the international market place as well as replacing the imported service and construction sector labour markets.

A few dates and fish won't buy very many Lexus.

The Expats are, 95% (?99%?) of them I'd guess, all doing jobs that Omanis:
1/ won't do (house maids, construction, massage)
2/ won't do for anything close to OR100 rial a month (tourism, retail, Ruwi light industrial)
3/ mainly can't do (skilled labour), or might do but generally at a far worse performance level for more money

Wholesale short-term replacement of such people by Omanis will devastate those few parts of the economy that are not oil and gas dominated.



*In 2007 Oman was
ranked #1 in the world for Military expenditure as a % of GDP. (#2 was Qatar, #3 Saudi, BTW)


Bottom's up Oil revenue estimates
According to Raoul Restucci, Petroleum Development Oman's Managing Director, in his 2011 media brief in February, PDO produced around 650,000 bbls per day in 2010. Adding production from Occidental and a few small payers, Oman in total produces around 870,000 bbls/d, and the Minister of Oil and Gas, Dr. Rumhi recently forecast continued production growth in 2011 to 900k.

But this is gross production, and is not all exported. Oman consumes around 80,000 bbls per day, according to industry analysts Business Monitor International and the CIA factbook. And let's assume 5,000bbl/d is consumed by producers as fuel oil.

So this brings crude exports down to 815k/d.

Plus, it's safe to assume Oman's foreign partners take a piece of the exports too, at least 10% (although they have a 40% shareholding in PDO, and 80% of Oxy's Mukhaisna development, the Government applies heavy additional taxes on this production, probably at a rate of over 80%). So I'll assume a net foreign take for 2011 of 90k/d.

This brings Oman's share to around 725k/d. Of this, around 130,000 bbl/d is refined in Sohar and exported as refined product, but international 'crack spreads' (the difference between crude cost and product prices) are pretty low and the refinery is not working as well as the best, so a $5/bbl spread seems reasonable. This then only 'adds' around 2.5% to the 150k/d, bringing net Omani exports up to 729k/d.

But the oil is not produced for free remember. According to the 2011 Government Budget, RO943mln is budgeted for oil production costs. Assuming a 60% government share, this means 2011 expenditure of $4.1bln. While the foreign interests will pay the remaining 40% in 2011, remember that eventually they will recover these costs, so we may as well assume for our purposes that the entire $4.1bln is the cost to Oman of the oil.

Assuming an average price of $80 this means Oman would get 729k/d * 365 days * $80 per bbl - $4.1bln (costs) = $17.2bln. But at the Government $58 oil price, this = $11.3 bln Still about $1bln more than the net Government figure less costs.

End Note for dedicated readers:

Photo: His Majesty Sultan Qaboos.


I'm told His Majesty gets a % of oil from the foreign take, rumoured to be around 15% of the 90kb/d, so a nice $400mln or so per annum at $80/bbl, from which he pays most of his own expenses. That's just OR5 rial per person per month, which I think most Omanis would say is a bargain.


Coming soon: Oman's Industrial-lead growth strategy

Things start to get out of hand in Oman and the region... Saudi sends troops to Bahrain while Omanis focus on throwing benefit tantrums

As predicted, more and more Omanis are now 'protesting' to get more money, easier work, more time off, longer maternity leave, bigger bonuses, personal debt cancellation, a different boss, promotions, exams that the neighbourhood cat could pass, etc etc etc. Protests seemed to multiply to include OIB, various Ministries, The Intercon and Al Bustan hotels, nurses, Universities... It's hard to see where this ends. Money (and knowledge worth having) has to be earned in the real world.

Do most Omanis actually want their doctors, nurses, pilots, air traffic controllers and engineers to be given a degree without being able to demonstrate that they know their discipline? Protesting will never make any of these subjects easy. It's like protesting to be given the ability to play the piano. In a child, such behaviour is described as Tantrums.

But in a place where 'unlimited' money is viewed as flowing effortlessly out of the ground all this can apparently be given away to the beneficiaries for no effort. In Ibri, violence was again to the fore as bored, idiotic male youths with no money, no jobs and even less regular sex "vandals" again resorted to arson, now augmented with kidnapping.

In my opinion it's about time for His Majesty to explain to the public directly why all this has to stop, and provide a high level philosophical framework for the way forward, instead of just issuing Royal decrees like a machine gun. A line in the sand that has vast popular agreement needs to be drawn, with the rule of law firmly on the other side of it. Spoiled teenagers must be made to realise that attempts to burn buildings, disrupt industry and hold people hostage will experience the big downside of such illegality - resistance, arrest and trial - from adults who are better trained and heavily armed.

Its time for a grown up discussion, and a clear articulation of the carrot and the stick.


GCC support Saudi Troops entering Bahrain
Of greater concern than more strikes and 'gimme more' behaviour in Oman, Saudi have just sent troops into Bahrain, albeit at the invitation of the ruling Bahraini Royal family.

Photo (from API): At least 1000 Saudi troops cross the causeway into Bahrain.

In an insightful article today, the FT notes that this is a very slippery slope and could make things a lot worse. Saudi have their own problems with a majority of Shia in the eastern province and see the Bahrain situation os the thin end of the wedge all driven by Iran.

It was ironic how the GCC conference of Foreign Ministers could decry interference in a nation's affairs by outsiders [read: Iran boosting Shia discontent] whilst calling for a no-fly zone to be enforced over the skies of Libya. Of course, bat-shit crazy Col. Ghadaffi was no friend of the GCC leaders even before he started shelling his own population with heavy artillery and air power. The Arab league are, as usual, unwilling to actually do any work, but prefer to just ask for someone to do their work for them. As the Europeans can't even make a decision, it again comes down to the USA. Having spent the past decade being criticised by all these same people for interfering in Iraq and Afganistan, President Obama is perhaps understandably hesitant to unilaterally invade yet another MENA country.

Ministers sacked wholesale. HM feeds the Entitlement culture and new (peaceful) protests confirm a sea change in Omani politics

More demands, yet more acquiescence
Protests in Oman have now calmed down to the level of 'sit-ins', with no further violence and a deliberate & explicit expression of support for His Majesty. The focus of demands has crystalised upon more jobs & higher salaries, more Government welfare, action against (high level) corruption, free(er) speech, and significant expansion of the powers of the elected Majlis Al Shura.

The calls for 'give me free stuff' are not going to do anything to reduce the already huge dependency culture. The price of a paternalistic government is that the population then expects big daddy government to solve all problems and be an endless source of cash. Many Omani youngsters seem to approach their long suffering patriarchs the same way, like a personal ATM machine, as if money doesn't have to be earned or loans paid back.

Still, the protesters have started to get their way in an almost breathtaking way - many Ministers were replaced a few days ago on 'the night of the long Khanjars', with even the entire Ministry of National Economy [MONE] dissolved. The fate of its official leader, Minister HE Macki, is yet to be seen.

Meanwhile the protesters continue to press their case for even more Ministers to go, or join the ranks of 'advisors' (usually they stay on a Minister level salary - they are hardly joining the ranks of the unemployed lining up for their newly announced dole of 150 rials a month). It's still to be seen if any high level corruption trials will be held.

The head of the central bank denied rumours of large money transfers out of the country.

Be careful what you wish for...
However, we are starting to see the downside of what happens when such behaviour is encouraged and previous laws making such protests illegal are ignored, with scenes more reminiscent of old school Western 'Trades Union' at Bahwan, Oman Air, Omantel, Towel and even Petroleum Development Oman.

Photo (Gulf News): Protesters at Petroleum Development Oman [PDO] climb on the 'give me even more money' bandwagon

I doubt many Omanis will have too much sympathy for PDO staff. The workers at PDO are probably amongst the most well paid in the nation, with generous pensions too, and the company's Omanisation level is probably well over 80%. The oil company is, after all, majority owned by the Government. It is also the one company in Oman that could most justify having a requirement for skilled foreign workers, as at the end of the day PDO is the source of the life blood that runs through the entire Oman economy - oil and gas production & export. Last year PDO produced about 650,000 bbl/d, plus around 400,000 boe of gas, around 80% of the entire country's production. (more on the implications of this later).

Omantel workers were also sticking their hands out for more money and free loans, despite a history of bureaucratic incompetence, exploitative prices and poor service. Omantel probably exemplifies the argument for why Governments should preferably not run businesses.

So what exactly is illegal these days?
Where will this end? Now that the populace have apparently lost any fear of retribution for striking, protesting, or unlicensed public assembly, where are the new boundaries? There are a load of laws being broken right now, (even if we ignore the clearly illegal burning of private and state property or physically threatening the ROP).

Clarification of what the new laws are would be a boon. Can oil workers or other critical services legally strike? Can the Government now be publicly criticised? Is a call to make the Majlis a legislative body, defacto requiring a new constitution and a radically different philosophy of governance, also now legal? I'm told a blogger who posted photos showing the death certificates of the young Omanis killed in Sohar had his site quickly blocked by Omantel. How will the recent reporting of dramatic events change the laws on media and the press?

Right now the chaotic impact of allowing (and rewarding) previous transgressions seems obvious. Want more money? Think your boss or CEO should be replaced? Heard a rumour that such-and-such a senior Government official is on the take? Hey! Then grab some firends, have a protest and go on strike! Get your unemployed friends to help!

As all these new (and often highly inexperienced) Ministers will not be the fastest when it comes to making decisions, I don't expect much clarification in a legal sense soon.

The spread of protests to oil workers has already spooked the international markets, with Oman's international credit rating put on notice and the Muscat stock exchange plunging 5% in a day. Tourists are cancelling holidays. Foreign investment plans will be put on hold. This could increase Oman's interest payments and make the economy even more dependent on oil. Across the board wage and benefits increases will feed inflation and make Omanis even less competitive in the labour market, hardly what's needed.


Next: How much money is Oman earning from oil and gas? Is there enough money to go around?

Middle East populist 'Contagion' reaches Oman - Violence is without popular support. Sultan Qaboos retains confidence.

Wow. What a week since February 26th. (Note: I've been on the road, little access to the 'net, so apologies for the delay getting back to you!)

The protests that started in Sohar (with some idiotic and pointless violence by some of those 'idle hands') have expanded rapidly, encouraged by the immediate response it got from HM, and it has certainly rattled not just Oman's ruling clique, but also our neighbours to the West ("if it can happen in Oman, no-one is safe"). As a result, Abu Dhabi, Kuwait and Saudi are even offering Bahrain and Oman aid money to throw at the population.

The foreign press is also variable. Foreign Policy noted that HM Sultan Qaboos, "Oman's renaissance man", shouldn't even be mentioned in the same sentence as the butcher of Tripoli Ghadaffi.The FT's Simeon Kerr posted a great article on his time as "an honoured guest of the Oman military". It sooo captures the spirit of Oman!

Photo: The now infamous Globe roundabout in Sohar. Pic ripped shamelessly from the blog of Dan & Jillian

Note: For up to date info on Oman's riots, as I'm only blogging remotely, please check out Muscat Mutterings. In Sohar: the excellent blog of expat couple Dan & Jillian; in Salalah: Ever reliable Dhofari Gucci. Tourists should not cancel their holidays, by the way. All accounts indicate the country is safe, although actually visiting the sites of the protests should be undertaken carefully.

I have little sympathy for those killed in Sohar while attempting to storm a police station - what did they think was going to happen? It's not something that should have cost Al Mamari his job, IMHO.


Meanwhile,
As you will have read all over the net, Tunisian(?)-style riots were happening in Oman over the past week. It seems there were enough bored youngsters combined with a significant number of those suffering with low salaries to get out and wave plackards. But unlike the other riots in the regions there are a few key differences:

1/ There is no popular support at all for anything against His Majesty.
These riots, especially those with any violence or that show disrespect to the Sultan, are not supported by most adults in Oman. In fact, there is a general disbelief that violent protesters are even 'true Omani'. They're apparently either Emiratis, or 'Baluchis'. Or ... well, anyone else. Afterall, burning a Lulu hypermarket is really, really dumb. They were one of the few sources of unskilled Omani employment they had!

2/ No coherent organisation.
The demands are legion, and often both self serving and facile. 'Forgive all private debts', 'reduce the prices of things' etc. There is also a smattering of Saudi-style religious extremism 'segregate the schools'. As a result, some of the more potent messages, such as turning the Majlis Al Shura into a true legislative body, are being diluted. But the generally accepted demands are: jobs, more action for getting rid of corruption, more power to the Majlis Al Shura.

3/ Mainly stupid unemployed youngsters with nothing better to do.
Other movements have been broad based: including the middle class, military, academics, exiled leaders, women, etc. The ones in Sohar seem to be just ignorant youth with a desire to emulate the other countries and a message mainly involving 'give me stuff for free, especially cash'. How else to explain the total stupidity of trying to attack a police station with stones and molitof cocktails? This is changing however, as protests spread and are increasingly seen to be successful in getting results from the Government - especially in Salalah and now to Petroleum Development Oman staff near Haima.

4/ No agenda of 'regime change'
Even the violent protests have supported His Majesty and the core principles of benign dictatorship. Yes, there are compliants about corruption, but it's all within a general acceptance of the current system. Muscat Mutterer reported a demand for a new constitution however.

As other bloggers on the scene have indicated, there is no danger to the general populace as long as you don't go hanging around the site of a protest (and probably not even then).

The Omani Government's response, however, has been lacklustre.
Come on guys. Since the protest movement spread to Egypt, and certainly Bahrain, could you not have done some thinking in advance about how you would respond if it happened here too?

The announcements so far are unfortunately characteristic of the general ineptitude of the Omani Government of late: poorly thought through, knee-jerk reactions & top down statements of intent with no description of the 'how' or even the underlying principles (perhaps with the one possible exception of the desire to seperate puplic prosecution from the Police). The royal decree to 'create 50,000 jobs' was a classic example: this could have come as a school project from the very high schools that are pumping out these idiotic rioters. Where are 50,000 jobs supposed to come from? Doing what exactly?

As in Saudi, the urge is to throw money at the problem and try putting on a bandaid to cover up the core problems. Announcing a universal unemployment benefit of 150 rials will just make things worse - if anything creating a larger disinsentive to avoid work, and subsiding idleness. And I'm sure the chance of a private business firing an Omani will now become (if this was possible) even more difficult, again, exactly the opposite of what's needed! The general uselessness of the unemployed youth to do anything that generates a profit, combined with their poor education, lack of work ethic, and an overwhelming sense of entitlement already serve to make imported labour (cheaper, smarter, work harder, and essentially bonded to their employer) the way to go.

So, as I watch the Reuters and FT reports, my expectations are low. [Note to foreign journos - please find another adjective to describe Oman than 'sleepy'] All signs are that the system will trundle on, a reshuffle here, a study there, a lot more public money thrown at the squeeky wheels.


What would I do?
OK. Here's some ideas. I'd love to hear what you think. What ideas do you have?

Allow a free media & crack down on mysterious income sources.
Encourage debate of public policy alternatives & allow the exposure of poor government outcomes. Have public trials for corruption cases and name them in the papers. Insist Senior Government figures and their immediate families publish the sources of income, and setting up income tax above say, 50,000 rials per year. Institute a wealth tax for assets (including international assets) above 200k (with an excemption for 1 domestic house up to 500k) at around 1% per annum. Punish tax evasion severely. Put term limits on Ministers so they can only be in power a maximum of 8 years. People should note that even saying the Government system is not perfect is currently illegal in Oman. A lot of these poorly defined and potentially highly draconian laws restricting the media and civil society need to be axed.

Change the political system.
Establish a new constitution that puts the Majlis on a path to take charge of legislation, along with accountability for results. Allow political parties. Ensure the religious extremists cannot overturn the rights of women. Allow real unions, especially for the underclass of manual imported labour.

Improve Educational meaningfulness.
Establish a University dedicated to the study of the business of Government. Ban degrees from useless 'paper mill Universities'. Seperate the delivery of education from its testing, to try and get students actually learning rather than 'passing' fake exams while being allowed to plagiarise and cheat.

Level the employment playing field.
Start to break up the oligarchs by taxing all imported labour at a flat minimum rate, say 30 rials per month, plus a % of their salary above that. At the same time, allow Omani's to be fired much more easily (even if they can only be replaced by another Omani). Over time, crank up the minimum rate and the %. The objective is to make it a lot more expensive to hire a non-Omani, and certainly more than the minimum wage for an Omani employee. Once this is done, make it easier to hire foreign workers to ensure businesses that need specialised labour from overseas can get them.

Stimulate the SME private sector.
Encourage SMEs that actually do something by allowing home run businesses below 50k per year with minimal regulation beyond basic HSE & public health related issues. Make it easy to register and run a business by cutting most of the red tape required by the Municipalities and Ministries. Get lots of low cost Small Claims courts established for matters below 5k. Start to break up the monopolies of the Zubairs, Bahwans, Kimjis, et al.

Bring in Compulsory pseudo-military service.
Start giving all these unemployed youth a job for 18 months between high school and University that brings discipline and on the job training in life skills. Get them building infrastructure projects, helping in orphanages, picking up trash, building housing for the poor, ... anything to get them off their fat asses. Do not allow unemployment benefit to be paid unless they have done this. And make sure any unemployment benefit is time limited - it should be temporary (no more than 6 months).

Widen the tax base.
Bring in a Value Added Tax (not just a sales tax). Compensate lower income earners by increasing the minimum wage. Increase the tax on imports (currently just 5%) to the maximum extent the World Trade Organisation allows and apply to anything that could be made/grown in Oman.

Reduce population growth
The place can't sustain 3rd world birth rates combined with the modern medical care that ensures they survive. Have a child allowance for 1 or 2 kids per male, that then is taken away at 3 or more. Make education free for the first 2, then charge after that (again, by reducing Government handouts).

Reduce tribalism.
Yes, subsidise weddings (as they do in the UAE), but double the subsidy if the couple are from different tribes. Conversely, if the couple are first cousins, there should be no subsidy. There is no reason we should be encouraging further in-breeding.

OK. That's it for now.

Postscript:
Her Majesty the Queen of the Netherlands is coming to visit (a 'personal' visit at that) after all. It seems the Queen was worried that cancelling would give people the mistaken impression that she was siding with the protesters...