Sunday, November 30, 2008

1 year Anniversary

I just realised it's been a year of Muscat Confidential. I've enjoyed it a lot more than I thought I would. And thanks for reading.

You're here in this traffic chart below somewhere I bet. And IMHO, you make a difference. Thanks for stopping by.

If you invert the graph there is a scary similarity to world stock markets over the same period. This is entirely coincidental.

Saturday, November 29, 2008

The Wahiba Challenge Desert Adventure gets really hard core

For many years the Expats of Muscat have assembled complex pieces of engineered steel and rubber, and blasted - as only hydrocarbon man can -

across the steep desert dunes of the Sharkiya sands, traveling across the barren sand expanse, East to West [aka the hard way], in just 2 days.

2 days.

That always necessitates a night camped beneath the stars, and the ability to take with you the essentials of survival.

And for many years, one of the best parties IMHO, dare I say it, on the planet I have attended (fortunately many times), is the party that happens in the middle of the Wahiba challenge.

It's awesome. The cars, the raw beauty, the success, the comradeship, the stars, the music and yes, the beer, all combined with the fantastic place Oman is to explore and camp in, and that always made it special. And the event was rapidly getting almost semi-pro, with over 100 people in lots of 4x4s, professional catering, and of late even mainstream sponsorship [google it. I've read Blue Chi's article]. By now, competitors include many Omani's.

Someone even did it this year on an NRI Gardener's 124cc street bike, as a normal bike was insufficient challenge, and he made it. [google that yourself too. Its worth it. Hint: Wahiba Challenge Gardener].

However, this year, it was somewhat novel that someone decided it would be a great idea to play a movie at the camp site, on a big screen with a beamer, in the middle of the desert, that was hard core. And I'm talking about sand and off-tarmac hard-pounding action.

Beach volleyball players. Female beach volley ball players, in bikinis. And then, after 5 mins, it apparently got ...a little steamier. (Lucky they weren't Malaysian, I thought.)

For the next few minutes at least, the Sharkiya sands have undoubtedly never before seen such a display of sexy things occurring between girls that would be illegal in so many countries (including Malaysia, and I think this one... Blue Chi? Legal Consult?), especially when publicly displayed (even in the USA).

[I know, how often do you get to actually legitimately blog about "lesbian sex in Oman" twice in a week??? First Essa in Times of Oman, now this! I'm always honoured to take a lead from the Times Of Oman].

Honestly, I'm not making this up. On the Wahiba Challenge a couple of weeks ago, someone played girl on girl porn, on a big screen, openly enough for someone to get offended enough to complain. And big enough that lots of people are talking about it and sending public emails around.

Now, I'm a big fan of such things in their place, don't get me wrong. But here in Oman,... it was a long way too far past what would ever be acceptable if someone was going to get offended. And there were so many people that someone was bound to get offended. I mean, at least booze is legal somewhere here. So this porn thing was really... stupid.

Hopefully it will all blow over I guess. The Wahiba Challenge is a wonderful Oman Institution. I don't think it deserves a red card because of some insensitive and regrettable decisions made by a few individuals. I'm not shocked that someone broadcast porn. But I'm disappointed that they did it in such an idiotic way and got caught.

I did ask a member of the organising group, the Ras Al Hamra Off-Road Adventure Club RAH-ORAC, what was going on, and he very kindly shared the story. Yes, a team on the challenge, called Dirty Sanchez, did play a short segment of X rated movie, some distance from everyone else, that few saw (but enough witnessed and complained about, I guess. What ever happened to discretion?). Here's the apology from the team Captain, which pretty much sums it up...
“First of all I want to sincerely apologize that the … team members have upset people in the camp by showing a short part of an adult movie.We should have never done that. There is no excuse for that.

I would like to emphasize that we should have never shown parts of an adult movie (not even for a short while) during an event which was organized by ORAC. And I'd like to emphasize that we never had the intention to upset people; we understand that we've done so and we're very sorry for that.”

And they've been given the red card.

Dear Captains and Delegates,

The Wahiba Challenge is a tradition that unites people from many backgrounds in the simple pursuit of adventure, comradeship, and a sense of achievement. It is a test of man and machine against the pristine and beguiling beauty of one of Oman’s greatest treasures, the Wahiba desert. This year, the unspoken code of honor and respect that defines this event was seriously breached.

One of the teams engaged in an activity at the campsite that was wholly outside the envelope of acceptable, and expected, behavior. The activity in question showed enormous disrespect for the spirit of the Challenge in general, and our Omani hosts in particular. It was, quite simply, wrong.

All participants canvassed have expressed universal opprobrium at the team’s activity, combined with a mixture incredulity and sadness that it occurred in such a beautiful place and during such a great event.

As a measure of our concern for the respect we show our hosts, and the reputation of the Club and its members, the ORAC Committee has decided not to invite the team involved to participate in any future ORAC events. The team members’ names will be removed immediately from the ORAC membership list.

Please forward this message to the members of your teams as you deem appropriate.

Off-Road Adventure Club
Wahiba Challenge 2008 Committee

'Nuf said then.
Nudge nudge, wink wink, on the Q T...

[don't bother, I asked. No copies were available, even for the press!]

Dubai Property meltdown commences...

In a worrying sign for Dubai and perhaps for other nearby countries with big real estate ambitions, London and Dubai-based property wealth manager MiNC, developer of Prodigy 1 in Dubai's Jumeirah Village South, with almost 80% of the money collected up front on a property development that is underway, is now effectively blackmailing purchasers to either immediately pay an extra AED313,000, almost doubing the original price to AED688,000, or they won't finish the building and purchasers will loose 30% of what they've already paid. Ouch.

Photo: Generic Dubai hi-rise buildings now

Photo: Is this Dubai's hi-rise future?

Wow. The Developers blame the situation on all sorts of things, excluding their own project management incompetence and greed. IE: Apparently 2 banks have withdrawn project financing that they had agreed to provide. Oh really? Without penalty? I guess the original credit line agreement was drawn up on the back of a swarma wrapper. Oh, and the property was handed over late, and costs have gone up, and the cat ate his homework, and its not fair because they were supposed to be the ones coining serious money, not loosing it. So meanwhile they've stopped paying the builder, who naturally has now stopped building. And there is no cash.

This is just a taste of what is to come. The banks have simply stopped providing finance, to builders, developers and to most purchasers. In fact, apparently UAE banks now won't even give you a credit card if you work for a developer. The problems may well destroy the whole business model throughout the region, of selling off plan and funding construction through pre-payments, and get us back to where it actually takes a company with some serious financial muscle and project mamangement skills to do a big development. In the current situation, anyone buying 'off plan' IMHO need their head examined.

Its also nice to see some of these young, Expat (esp British), and terribly loud and annoying Dubai real estate swindlers getting laid off too. Getting space at the bar in the pubs in the Irish Village and Jumeirah may soon be a little easier.

I wonder when we'll start seeing similar letters from some of Oman's real estate developments... (In fact, a bond & Trading Update from Blue City is about due I seem to recall...)

Here's the letter. Note how long it takes to get to the important part! See for the full discussion.

RE: Prodigy 1/Jumeirah Executive, Jumeirah Village South
Given the current economic climate and the impact on the property sector, including MiNC, I am writing to provide an update on our strategy and plans going forward in relation to the Prodigy 1 building. The purpose of this letter is to highlight the issues we face in completing this building and proposed solutions. We need your assistance in achieving these plans.

As you will be aware, we have been experiencing delays in completing this project. I would like to assure you that the successful completion of this project has been, and remains, our most critical business priority. We are absolutely committed to making sure we deliver on our promise. However, we have faced a number of challenges since the start of the project, and we are being further challenged by the fall-out from the economic crisis in the region. There follows a summary of the challenges and our proposal for overcoming these:
• We launched the Prodigy 1 project in October 2006, following the purchase of land from Nakheel. Having been promised immediate hand-over of the land, Nakheel actually delivered the land for construction in May 2008. Even though the apartments in Prodigy 1 had substantially been sold, the delay in receiving the land from Nakheel had a significant negative impact on the project;
• Construction prices doubled during the time we waited for the land to be handed over, with a significant negative effect on the viability of the project;
• We also witnessed a doubling of construction-related professional fees and a large increase in government-imposed costs during this period;
• The introduction of new regulations by the Government of Dubai, although welcome in concept, made it extremely difficult for us to proceed with the project. This was because our financial model was different to that imposed by the Government of Dubai; whereas we had envisaged funding the construction of Prodigy 1 with cash flow from the overall Prodigy project cash flow (six buildings), this was no longer allowed;
• The arrival of the global financial crisis has had a severe impact on the monies MiNC has available to build Prodigy 1. We are no longer able to subsidise construction of the project; the project needs to be self-funded as originally intended;
• Additionally, the liquidity squeeze in local banks has recently caused two of our local banks to withdraw project finance for Prodigy 1, having originally agreed to provide this funding.

The following is the status of the project as a result of the above:
• The vast majority of apartments in the project have been sold.
• The project is no longer financially viable; costs have increased to the extent that MiNC would make a significant and material loss if it were to build this project. MiNC can no longer afford to subsidise this loss;
• Construction had commenced on the project; however, progress has been halted, as the contractor has not been paid due to the withdrawal of project funding by the bank. The project has a severe cash flow shortage.

In short the project has stalled and we do not see it progressing any further in the current economic climate unless we are able to inject cash in to this project as a matter of urgency. We are determined to see this project through to the finish despite these uncontrollable events.

Our proposal
In order to ensure that we are able to construct the Prodigy 1 building and deliver your unit to you, we need you to pay an additional AED 313,000 for your apartment. Given current trading conditions, we believe that this is the only viable option available. We will need all of this additional payment up-front in order to continue with construction. The other installments will remain as per the original schedule.
Your new price would be AED 688,000.
This equates to AED 1,000 per square foot.
In exchange for this, we will be able to instruct our contractors to re-commence construction of this building immediately. Clearly this will be dependent on all buyers accepting this offer, otherwise your money will not be utilised. We recognise that our valued customers will not be pleased with an increase in the cost of the unit. We hope that some of your displeasure will be mitigated by the fact that the ultimate price you will have paid for your unit will ultimately be significantly below market value at time of completion. We estimate that your revised cost will be at least 25% below market value. We also believe that rental yields will remain firm at 8-10% of current values and much higher than this on purchase price. Should you agree to our proposal, we will of course increase our rental guarantee to 8% of your increased purchase price.

I would like to assure you that we have seriously considered every option to arrive at the proposal presented above, and that we sincerely regret the changes to our original agreement.

The current economic climate and the impact on the property sector are certainly 'unique' and thus require 'unique' thinking, analysis and action. The proposal outlined above is something that MiNC would never consider under normal circumstances. Events outside of our control have forced us to make difficult decisions such as these. In light of the current market dynamics in Dubai, we believe that this is a positive step in achieving a successful completion of this project. We hope that you feel the same way, remaining enthusiastic and positive in achieving this goal with us.

We sincerely apologise for the inconvenience this communication and subsequent actions required of you have caused.

To reiterate my sentiments above, I and everyone at MiNC is absolutely committed to building Prodigy 1 so that we can deliver your unit no later than June 2010. We believe that our proposed course of action will ensure we meet this target. Failing this, we fear that the project will be suspended, possibly permanently.
A sales representative from our office will be contacting you imminently to discuss this further and address any concerns you may have. In the meantime, if you have any questions in regard to the above, please do not hesitate to contact:
Sales Customer Service
Mr. Muawia Khalil | Tel: +971 50 453 8652 Ms. Pooja Lal | Tel: +971 50 658 7667
If you agree to the proposal outlined above, could you please signify your acceptance by signing and dating the Appendix attached, returning it to this office by fax or scanned copy via email at your earliest possible convenience. I look forward to providing you more updates following the positive outcome of this proposal.

Yours sincerely,
Haroon Mahmood
Chief Executive Officer, Dubai

GCC rumour, & Muslims banned from doing Yoga in Malaysia

GCC date change due to Saudi's?
I was talking to my contacts in the Al Bustan about how the refurbishment was going, and we talked about the recent GCC date change and hotel grabbing. They were adament that the Al Bustan would have been ready for the earlier planned date last week or so, and that the word they had reeceived was the reason for the change was to accomodate the Saudi's, who said they couldn't make the earlier date after all.

Also, they commented that the pricipal driver for pretty much everything will be security, given the high profile gathering will offer an obvious target for terrorist nutcases. Thats why the whole hotel will be taken, even if they don't need all the rooms. Plus cancelling the plans of the tourists at that time will actually make it easier for the security services - because there will be less people to keep an eye on.

The bill for the refurbishment is over 150 million rials. Sweet. As an aside, the famous '9th floor' of the Al Bustan is guarded 24/7 - even from the main refurbishment contractors of the rest of the hotel. The super-royal suites are apparently being redone by a separate contractor and is totally top secret.

And from Malaysia: Stretching limbs and aligning chakras damages religious faith.
In another example of Islamo-silliness, a story from Malaysia about banning Muslims from practicing yoga. Earlier they finally got around to banning women practicing lesbian sex and dressing 'like a man'.

Its not too often you get to read the words 'lesbian sex' in an Omani newspaper, but I like the trend Essa - keep it up.

Photo: Not allowed in Malaysia, especially if you're a lesbian

Times of Oman
Yoga forbidden for Muslims in Malaysia
AFP Saturday, November 22, 2008

KUALA LUMPUR: Muslims in Malaysia should not practice yoga because it will erode their faith in Islam, a senior Islamic cleric said Saturday.

"Yoga is forbidden for Muslims. The practice will erode their faith in the religion," Abdul Shukor Husin, chairman of the government-backed National Fatwa Council, told reporters. "We advice Muslims not to practice yoga. It does not conform with Islam," he said in response to a call to ban Muslims from doing yoga.

Islam is the official religion of Malaysia, where more than 60 percent of the population of 27 million are Muslim Malays who practice a conservative brand of the religion.

Yoga, an ancient Indian aid to meditation dating back thousands of years, is a popular stress-buster in Kuala Lumpur. Zakaria Stapa, a professor at the Islamic faculty of the National University of Malaysia, recently called on Muslims to stop doing yoga as it could cause them to "deviate from their faith".

Abdul Shukor said yoga involved physical and religious elements of Hinduism including the recitation of mantras. He could not say how many Muslims were practising yoga but called on state authorities to punish those who do.

The fatwa council, one of Malaysia's highest Islamic bodies, recently banned women from dressing or behaving like men and engaging in lesbian sex, saying it was forbidden by the religion.

Friday, November 28, 2008

A typical case of human trafficking in UAE

For those who thing this whole human trafficking thing is a figment of some do-gooder's imagination, here's a nice tale of modern slavery in the UAE that was reported yesterday.
Gulf News

Could this happen in Oman?

Italian visitor denies charges of rape

By Bassam Za'za', Senior Reporter
Published: November 27, 2008, 23:28
Dubai: An Italian visitor has argued that he only massaged a Filipina and denied her accusation that he imprisoned her in a hotel apartment and raped her twice over a period of three days.
The Filipina claimed that she left her husband and son in the Philippines and flew in to Ras Al Khaimah where she had been promised work as a maid.

"Four days after my arrival the labour agency handed me over to the Iraqi suspect who promised to recruit me as a waitress," said V.S.

"Instead he brought me to Dubai and locked me up in the apartment. Shortly afterwards the Italian walked into the room and raped me in the bedroom during the first day. They locked me up for three days and I.M. also raped me the second day," she added.

She claimed in her statement that she was unable to fight off her abusers and that she failed in her attempts to cry for help and run away from the apartment.

"I cried for three days and repeatedly insisted on the suspects to take me back to RAK. When they took me down to the parking lot, I saw a compatriot and cried out for help," she alleged.

An employee at the hotel confirmed her statement. The trial continues.

Thursday, November 27, 2008

Advice for someone moving to Muscat.

E mail Query from someone who has just been offered a job in Muscat. What do you think readers? I appreciate a little help on this one, esp living costs.

Dear Undercover Dragon
I'm a 28 year old guy who always felt attracted to Arabic cultures (I studied Arabic for 6 months some years ago) and had always considered the idea of spending some years in the Gulf. However, it wasn't until now that I had a real opportunity to go there.

I would be earning EUR 35,000 a year [equiv about 1400 rials/month - UD] and would like to know if that's enough money to live well-off (flat for one person, daily expenses, travel...). I don't drink any alcohol (not much, at least) but I'm a social animal and need to live in an environment with numerous (or some) leisure and culture offers (theatres, movies, art exhibitions...). Besides, I am gay and don't know if that would be a big issue over there or if there is some gay community in Muscat.

Also, I would like to know if Oman is a place where you can get around in English. I could speak some basic Arabic and if I eventually move there I plan on studying it properly, but I'd need English for my first steps there (finding a flat, buying a car, etc.).

A Reader

First, the salary. 1400 rial/mnth... I'm probably not a good one to ask on this, as to be frank that would hardly cover my bills for oysters, champagne, pets and staff.
But I'd guess a bachelor could live on say... 1000 a month, with the remainder as disposable income?

Entertainment and Culture. Well, if you like forts, I guess... To be fair, there really isn't that much. Movies, yes. And an Opera house is being built. A few good museums. A few local arty-type gatherings. Hope you like camping, and the ocean.

Gay Scene. There definitely is a vibrant one (probably more than 1). How to meet up, I'm not too sure. But there are so few places to go, you could easily visit all of the main pubs and clubs in a month and see where your instincts lead you. Technically illegal, very much a case of don't ask/don't tell/don't get caught.

English, yes, its all English in the coastal areas. But learning some Arabic would help a lot. Even if just to be polite.

Wednesday, November 26, 2008

The way rich people meet women in Muscat?

I couldn't resist bringing to your attention the ad (as spotted by omnipresent Muscati) for a... part-time, female, very personal assistant for an occasionally visiting CEO. Wow. What a guy! Can you picture that conversation?

'Hey Frank. Get those recruitment boys to fix me up with some little hottie for when I'm in Muscat, will ya?' ... 'Yeah, on the company payrole, obviously. We'll call her my personal assistant as usual. I'll want her with me on the private jet later too, if she works out, OK? '

Job Ad for young, charming and accommodating little hottie. Would any readers thinking of applying, please copy me on the email, especially the pictures.

Date: Sunday, November 23, 2008
Category: Jobs Offered
Region: Oman

Description: We are looking for a young & charming female PA / Companion for our CEO, who visits Oman, from time to time. She should be positive thinker, competent in her job as an executive PA, attractive personality and stays cheerful.
She will be required to stay at the selected five star hotel, along with the CEO.
Attractive Salary will be offered to the right candidate.
We are a Dubai based multi-national company, and this assignment may lead to permanent employment in our Dubai office, with possibilities of global travel to accompany the CEO.
Please send your CV + picture to; .

CEO of Sohar Steel reported as saying Oman's gas is relatively cheap and abundant. Really?

Nice article, widely read Steel Guru talks about the great plan to build a big steel industry in Oman.

I find it a very nice article too. The last quote below sums it up.
Mr Suresh K Goswami CEO of Sohar Steel said that "Steel production is an energy intensive industry, so the availability of relatively cheap gas in Oman contributes to the location's attractiveness."

I sometimes wish I was able to understand the Oman gas market. With gas prices contracted to the big 'export/diversification/regional development' industry seeming to be below the marginal cost of gas supply (both imported and domestic) or the unrealised profit of LNG export equivalent; while 'true' domestic gas consumption is used increasingly to produce heavily subsidised electricity and water. Its difficult to see the detail, but there must be effective cross-subsidisation, certainly of the LNG, but perhaps by taking into account the domestic condensate production (about 15% of Oman's daily 'oil' production comes from Government Gas fields)?

The difficulty with the gas market is that it is both a short and long term industry where upstream (supply) and downstream (customers) are interdependent, and much more so than the oil business which is treated as a commodity. Gas is effectively sold forward in Gas supply agreements [GSAs] that last up to 20 or 25 years. Thus, you could say that gas in the ground has been sold (and its never easy to know accurately what is in the ground, or how much will be produced).

Installation of the capacity to deliver gas often requires significant over-capacity, so as to maintain essential supply if case of the unexpected and to meet peak, not average, demand. That means there is always the temptation to produce tomorrow's gas today, and let tomorrow look after itself. Either find more gas, or increase imports, and meanwhile cut back the LNG supply to contractual minimum.

So the underlying costs/benefits of gas supply all depend on how you want account for it. Do you take into account the whole value chain, from all gas supply compared to profits from all sales, tax, % interests owned by the State anyhow, income to locals + muliplier effect, etc? Or do you treat new projects as truly incremental, stand alone decisions based on marginal costs?

And over what time period? 1 yr? 5 yr? or 30 years? Your answer will be different, depending on all these key assumptions. And the uncertainty becomes huge. What's the potential impact of Iranian imports? Or a big increase in Oman gas discoveries and production from existing and big marginal fields at a low enough price? Do we factor in coal for replacing domestic gas demand increases for electricity? You would hardly want to commit to a long term high investment high cost take or pay supply deal with say, the Iranians, only to find that you had more than enough gas of your own all along. Doh!

So for the long term economics of the Oman gas market, timing is everything. The strategic decisions that rapidly loom ahead for the Oman Gas market and the Government, are:
- Coal. Yes or no? This will be a long term commitment, once done, very hard to undo. Yet the decision has to be made 5-8 years ahead of when the power capacity will be required, a sizable gamble. And associated with coal is the choice of gasification (clean, expensive) vs traditional (cheap and dirty) design. But it will save you gas.
- The quantity and terms of new long term gas import contracts from Qatar, Iran, or perhaps even Saudi. Plus the associated political and strategic ramifications of these investments and the pipeline grid/supply dependency that results.
- Making medium term contracts for increased domestic gas production (and investment), as just announced for the Oxy/UAE consortium.
- What to do wrt Kyoto, CO2 and greenhouse gas emissions?
- Do we produce gas at the expense of oil production?

The short term brings questions like:
- How much should be allocated to use the 20% spare LNG export capacity?
- How much gas to forward sell and at what price, to big industries?
- How much gas will be allocated to big existing customers, like PDO and cement companies?
- How to increase the price of electricity without causing domestic customer riots or limiting new SME business growth, and adhering to privatisation/liberalisation?

All these decisions are inter-related, and cut across Ministries. This is not an easy problem. But I'm sure the Majlis and the Energy council are right on top of it, making sure these decisions are made well, with eyes open to the risks, implications and economics. A pity that that assessment has to based on trust, as all discussions are (perhaps as expected), done in camera. It will be interesting to see what path unfurls over the coming years as Oman tries to solve these strategic issues.

Steel Guru
Oman to invest USD 5 billion in steel

Oman Economic Review has hailed the announcement that Oman is set to invest USD 5 billion in building up its steel industry by saying that it looks a wise move. The focus on a growing sector in which Oman has some particular strategic advantages could prove an important part of the Sultanate's diversification program.

Earlier on September 29th 2008, the authorities outlined the investment package, part of broader plan to expand the manufacturing sector that it will eventually account for 15% of GDP by 2020. The export orientation of the steel production program fits well with the broader industrial program. The government has classified most steel products including tubes and bars as medium value, the second of its four export categories. This indicates that the sector is likely to grow rapidly and has been targeted for potential support initiatives.
Furthermore, Oman has several competitive advantages on which it aims to capitalize. Not least amongst these are a very favorable business climate and a growing pool of skilled labor. Also important is the abundance of energy resources.

Mr Suresh K Goswami CEO of Sohar Steel said that "Steel production is an energy intensive industry, so the availability of relatively cheap gas in Oman contributes to the location's attractiveness."

Tuesday, November 25, 2008

National Day Holiday period, slow times in Muscat

Its been hard to find any real news lately, as Oman settles down for a long period of holidays (National Day and Eid coming in early December).

First: Occidental and the Abu Dhabi government's Development investment company Mubadala were awarded rights to a piece of Oman to explore and produce gas. The Omani Government took a 20% percentage via Oman Oil Company. The deal is good for Oman, especially in these tight credit times, because it will provide an effective loan of $500 million to fund development, money that will only be liable to be repaid from gas production. The area already contains some small undeveloped gas fields previously discovered for the Government by Petroleum Development Oman, and the area excludes fields already found and developed by the Government (like the Kauther field).

Haven't heard if OOC's 20% piece is 'carried' (ie if they will have to pay their share of the costs or not), but as with all such deals for gas in Oman the key question is: who will pay market price for the gas? Another 2 more similar deals are being lined up for next year, one with Malaysian state oil company Petronas and another with a small US company called Hertitage Oil and Gas. [post press correction: that's Harvest Oil and Gas, not Heritage. Mis-remembered!] The terms of these deals are still being negotiated apparently. And word from my fiends in the Ministry is that the Occidental deal will be expanded to include oil, but the terms couldn't be finalised in time for National Day so only a gas deal was inked.

NEW YORK, Nov 24 (Reuters) - Occidental Petroleum Corp (OXY.N: Quote, Profile, Research, Stock Buzz) and Abu Dhabi investment firm Mubadala Development Co have signed an exploration and production sharing agreement with the Sultanate of Oman, the companies said in a joint release on Monday.

The agreement allows the parties to develop four existing gas fields and explore for new discoveries in a newly formed contract area in Northern Oman. The 20-year agreement covers an area of 2,269 square kilometers (876 square miles).

Occidental will serve as operator under the agreement and hold a 48 percent interest, with Mubadala holding 32 percent and the Oman Oil Company holding the remaining 20 percent.

Total capital investment in the contract area is expected to be about $500 million over the next four years.

Second, the infamous rape at PDO viral-email flurry.
I've been trying to track down any actual facts on the email, alleging a serious sexual attack in PDO on the fireworks night of Nov 6th, that ripped around the Muscat expat community. The email and PDO's official statement were posted on comments to an earlier post of mine on PDO. I had received the emails as well of course, from many sources, but I hadn't posted the story because, well, it was highly inflamatory and there was no independent evidence at all of such an attack, plus the email talked of a cover up by Senior Managers at PDO which did not ring true at all.

That lack of evidence continues to be the status. My sources tell me that there has been no actual complaint made, and no comment from the supposed source of the original email despite emails and public appeals, there remains just that original email. So, for now, my verdict is that its probably not true, and the email was either a case of Chinese whispers gone wrong, perhaps based on some real or imagined teenage underage sexual adventures, or a deliberate hoax. There are now hybrid rumours circulating, such as one I was forwarded that talked of the event being captured on CCTV. There are no CCTV cameras at PDO cub, BTW.

I'll keep a watch out, but the signs are not good for any more actual facts in this case.

Lastly, the mighty brain trust that is Oman's Majlis Al Shura apparently rubber stamped the 2009 budget drafted by HE Mr. Macki, Minister of the National Economy. The story is almost comical. The idea that the Majlis can effectively challenge someone as smart and well supported as HE Macki on something this important is a joke. Not only are the Majlis members elected mostly on local tribal grounds and are banned from forming political parties, but they have no effective independent civil service to back them up. As a result, they are as effective a challenge as a moist towelette to someone as well prepared as HE Macki. See Times of Oman story.

They do, however, serve as an important source of patronage and 'wasta' within Government for low level things. As a result of their close contacts within the Government, and their ability to kick up a fuss, they have bypassed the previously powerful system of local Walli. So if your drains are a problem, or your roads full of potholes, a complaint to your Majlis member is of more use than the Walli.

Majlis okays economic panel’s report on draft of 2009 budget
Monday, November 24, 2008
MUSCAT — The Majlis Al Shura yesterday held its second session of the second annual sitting of the sixth term under the chairmanship of Sheikh Ahmed bin Mohammed Al Isa’ee.

The Majlis discussed the report of the economic committee on its study on the state general draft budget for 2009 in the presence of Ahmed bin Abdulnabi Macki, minister of national economy and deputy chairman of the Financial Affairs and Energy Resources Council and a number of senior officials at the national economy and financial sectors. The Majlis approved the committee’s report on the draft budget, and decided to refer it to the Council of Ministers, in accordance with the Majlis internal regulation, issued by Royal Decree No. 71/2004 on principles of reviewing the state’s general budgets and plans.

Sheikh Isa’ee underlined the importance of cooperation between the Majlis and the government to achieve the national development goals at all levels and sectors. Macki briefed the Majlis on major aspects of the state’s general draft budget for 2009.

Sunday, November 23, 2008

Times of Oman bangs away on the Nationalist drum against Oman's Tier 3 rating

Yes, I'm not too surprised, but in his gripping Times of Oman Viewpoint column this week, our favorite local editor Essa Al Zedjali spends his opinion piece saying 'told you so' about the Tier 3 saga. While it might be what you like to read if you are Omani, its not quite consistent with the actualité, shall we say.

As usual, he accessorizes this pompous nationalism with references everyone in Oman would like to agree with, such as how great HM is.

Here are a few exerpts:

... A few days ago, a decision by the US president led to the cancellation of what was said about the Sultanate in the US State Department's report on human trafficking as well as the removal of the Sultanate from the third category in the report.

This has indeed reaffirmed the truthfulness of the Sultanate against such baseless allegations. This has also vindicated what I have repeatedly stated in my column that “we do not need to defend ourselves before anyone”. In the protest note handed over to the US ambassador, the Sultanate had stated that it had been well-known for its cooperation with the international community in combating crime in all its forms.

... In the official response to the cancellation of the alleged remark in the report, the Sultanate told the US that just as it had rejected the allegations contained in the report, it welcomed the corrective measure.

Well, this is just not true. The report, at the time it was issued, said that countries in Tier 3 had 60 days to make actions to get back to Tier 2, and the US State Dept even gave them a few suggestions about what to do. The new report merely follows through on that 'warning' (as the original report said it would) by saying which countries have done something new (and enough to change rating), and those that didn't. This is because being on Tier 3 after the 60 days also means the President must suggest appropriate sactions, recommended to Congress, for those countries that didn't improve and remained Tier 3.

So, I suggest readers consider a combination of sensible reasons for the upgrade, such as:
- just in time delivery by Oman of some police recruits and a human rights bill, and an acknowledgment from Oman that they got the message, (hence forth known as the fig leaf), plus
- Oman's obvious hysterical posturing over-reaction in the press, and
- the fact that in an absolute sense Oman has only small HT problems, on the scale of things, plus
- that the US would rather keep Oman sweet, as its one of the few not-totally-bat-shit crazy places in the whole region, and
- that the Congress and Senate is now Democratic controlled, and they still need the FTO ratified,...

that the US Executive subsequently moved Oman up to Tier 2 watch list. They aren't 'cancelling' or 'apologising' nor are they 'saying the original report was baseless' or 'untrue'.

Its called real politic. Kissinger would be proud of them. They are acknowledging that you are regionally important and they are surprised you had such a hissy fit about it. And if they were THAT fussy, would the UAE be Tier 2??

More drivel continued.

The Sultanate spares no effort in arresting and punishing criminals of all types. The various institutions in the Sultanate provide the necessary care and comfort for the victims of crimes, taking into consideration the humanitarian dimension of the issue and help them get over the trauma in a way that squares with the traditions, customs and morality of the Omani society.

Like, I presume, arresting, imprisoning and deporting prostitutes; oh, and all those prosecutions we've seen for sponsors who mistreat their housemaids; and enforcement of reasonable Health and Safety on consruction workers; and ....

Note how the pre-emptive comment in this statement by the Government is accepted as the fact.
the Sultanate [ie Government - UD] had stated to the effect that the US decision in this regard was ... in agreement with the views and objections raised by it regarding the report.

Yeah. Right.

Saturday, November 22, 2008

HM investing in 'Omagine' real estate development near Muscat Airport

You'd think the development of more coastal tourist and housing developments right now would be a bad idea, but a publicly traded US company are still pressing for their Omagine project, and claiming that because the other investors include the Royal Court (and state they are acting for His Majesty) that this project will be OK. Muscati blogged about it more than 2 years ago here. The credit crisis and the drop in their share price has prompted a press release about how much cash it'll generate, with project finance and economics being lead by Bank Muscat. As their share price is down about 75% from the peak, its sounds like the release didn't work too well - their shares plunged another 20% yesterday.

You should have a look at their promo video - the script is so totally OTT. The development will take a 250 acre piece of land with 1 km of waterfront next to the Wave, and create some kind of high-tech set of info-tainment video globe things based on Oman.

NEW YORK, Nov. 20, 2008 (GLOBE NEWSWIRE) -- In a continuing effort to keep its shareholders and the investment community fully informed, Omagine, Inc. (OTCBB:OMAG) (the "Company") is providing the following update information regarding the status of its proposed Omagine Project in Oman:

The Omagine Project will be located on over 245 acres of prime beach front property just minutes from Muscat International Airport and downtown Muscat. It is an elegant and sophisticated blending of entertainment, hospitality, cultural, retail and residential components. Omagine's jewel-like architecture will mark the place and set new standards. The Project is set in an incomparable location and includes retail, hotel, commercial offices and several million square feet of distinctive residences for sale.
The Company will own 50.5% of the Project Company and has arranged -- for an aggregate of $110 million U.S. Dollars -- several minority equity interest sales totaling 49.5% of the Project Company to Consolidated Contractors International Company, SA, a $5 billion international company and the general contractor for the Omagine Project ("CCC"),
and to several prominent Omani citizens and entities including the office of Royal Court Affairs ("RCA"), which represents the personal interests of His Majesty Sultan Qaboos bin Said, the ruler of Oman.

Omagine's president, Frank Drohan remarked: "We are gratified by the continued strong support of the Royal Court, CCC and our local Omani partners. These strong strategic investor partners will serve the Project Company well in these unsettled financial and economic times.
It is the opinion of OMAG management that it would be difficult to find higher quality shareholders for the Project Company than the Royal Court, CCC and our local Omani partners. There is at any rate no shortage of qualified and willing investors in Oman and its surrounding countries (the "Gulf Region") who are ready, willing and able to invest in the Project Company on terms very financially favorable to the Project Company. Indeed, management has already declined several offers from such investors including leading financial institutions, as management now believes that sufficient capital has been arranged for the Project Company. Management believes that since Omagine is such a high profile project in Oman and since financial resources remain extremely high in the Gulf Region, that money simply isn't an issue. Given this situation, management focused on securing investor shareholders for the Project Company that bring more qualities to the Project Company than simply money -- qualities like superior knowledge of the local market, exceptional skills and the ability to execute.

And from their website:

Omagine, Inc. (the "Company") is publically traded on the OTC-BB (Stock Symbol: OMAG). The Company has proposed to the Government of the Sultanate of Oman (the "Government") the development in Oman of a USD $1.5 billion real-estate and tourism project (the "Omagine Project"). In May 2008, the Omagine Project was approved by the Government for development on a one million square meter site provided by the Government. The Company's management has raised $110 million of capital for the project from investors in Oman, including the office of Royal Court Affairs which represents the personal interests of His Majesty Sultan Qaboos bin Said, the ruler of Oman. The Company's financial advisor is Bank Muscat (the "Bank"), the largest financial institution in Oman. Management's internal financial model for the Omagine Project predicts approximately USD $600 million of free cash flow over the five year period subsequent to signing the "Development Agreement" with the Government of which 50.5% will flow to the Company. In July 2008 a draft Development Agreement, incorporating all of the commercial and other terms as agreed with and approved by the Government and accepted by the Company, was delivered to the Government. As required the draft Development Agreement is presently being reviewed by The Ministry of Tourism; The Ministry of Legal Affairs; and The Ministry of Finance. The Company anticipates that the Development Agreement will be signed in August or September 2008.

The Project Company
The Company is a real-estate development, entertainment and hospitality company focusing on development opportunities in the Middle East and North Africa (MENA) resulting from the aggressive growth strategies adopted by governments in the hyper-wealthy MENA region. These governments are seeking to diversify their economies through mega-projects that create tourist destination hot spots. Recent increases in the price of crude oil have only added to the already impressive amount of liquidity in the MENA region and have exerted enormous upwards pressure on the selling prices of real estate in the region.

The Omagine Project will be developed by Omagine SAOC (the "Project Company"), an Omani company presently under formation by the Company. The "Founder Shareholders" of the Project Company are the Company and Consolidated Contractors International Company, SA ("CCC"), a USD $5 billion company with worldwide operations and approximately 150,000 employees (see: As presently contemplated the Company will own 50.5% of the Project Company and CCC will own 12%. The remaining 37.5% of the Project Company will be owned by highly prominent Omani investors, including His Majesty the Sultan. The Project Company will be capitalized at approximately USD $110 million and will have the financial capacity to begin development of the Omagine Project almost immediately after the signing of the Development Agreement with the Government. Bank Muscat has agreed to arrange the necessary construction and other financing for the Project Company.

The $ 1.5 + Billion Omagine Project
The Company's planned Omagine Project is an integration of cultural, heritage, educational, entertainment and residential components. The development site (the "Omagine Site") is an amazingly pristine coastal stretch of beachfront approx. 20 kilometers northwest of Muscat and only 4 kilometers from Oman's International Airport. The one million (1,000,000) square meter Omagine Site (equal to approx. 245 acres) has one kilometer of beach frontage but will be developed to have over seven km. of water frontage of which 1.8 km. will be beach-front. The Omagine Project also includes several hundred thousand square meters of residential housing units that will be developed and sold by the Project Company. Significant commercial, retail and hospitality elements are also included. The Omagine Project is expected to take between 4 to 5 years to complete.

Management is aware that due to market conditions the value of the Omagine Site has increased sharply over the past 2 years and, provided such values are sustained, this increased value will have a materially positive effect on the Project Company's future cash flows as well as its financing activities. The Omagine Project's construction and capital cost is presently estimated at approximately U.S. $1.6 billion.

The Project Company's financial model which has been reviewed by Bank Muscat presently predicts an internal rate of return ("IRR") for the Omagine Project in excess of 20% and net positive cash flow in excess of approximately USD $600 million (the "Projected Cash Flow") over the five year period immediately subsequent to the signing of the Development Agreement.

Pursuant to the terms agreed in writing with the Government, the Omani investors and CCC, the Project Company will be owned fifty and one-half percent (50.5%) percent by the Company (the "Company Equity") and the Company Equity will remain the majority equity stake in the Project Company and the Government will not own any equity of the Project Company.

In May 2008 the Company announced that it received an official letter from the Government of Oman formally approving the terms by which the Omagine Project will be developed (the "Approval Letter"). As required by the Approval Letter, the Company formally notified the Government in writing on May 31, 2008 of its approval and acceptance of the Approval Letter and furnished the Government with various confirmations relating to the Omani and other shareholders of the Project Company and elements of the Omagine Project.

Friday, November 21, 2008

Oman decides to use state funds to support the MSM stock market

With over a 50% decline in the Muscat market in the past 6 months, and investors screaming, Oman's Minister of Commerce and Industry has decided to invest 150 million rials in a so-called market stabilisation fund to act as effectively a buyer of last resort for Oman's publicly traded company shares. See article in the Financial Times today.


Yes, Kuwait have also done it recently following huge investor protests, and other Asian countries did it in the aftermath of the Asian Crisis in 1998. You can read the sycophantic arguments supporting the Government's move in, where else?, the Times of Oman.

However the Oman Government will now be under pressure to buy all sorts of crap to support the portfolios of the well off or ill-informed investor. As long as the fund is properly controlled, and only buy on the basis of solid business performance, long term there is little downside. But if they get too involved, it will lead to market distortion - at what price will they buy, and even more important when will they sell? What will they do if the money runs out? 150 million is not a lot compared to the overall market capitalisation, but then again, a lot of the shares are already owned by the Government in one form or another via direct holdings [Omantel] and pension funds [more than 40% of Bank Muscat].

What do people think? Do you want to see the Government throwing money into the mouth of the local stock market right now?

Oman sets up fund to stabilise stock market
By Reuters
Oman’s government said on Thursday it would set up an OR150m ($389.6m) market-maker fund with the private sector to help stabilise the Gulf Arab country’s bourse as the financial crisis bites.

The government would provide 60 per cent of the fund, or OR90m, while the private sector and pension funds would contribute the remaining 40 per cent, it said in a statement on the bourse website.

”The fund will be managed by a special administration operating on market fundamentals to provide protection from the sharp and unjustified volatility that the financial markets are being exposed to and also work towards balancing supply and demand factors in the market,” the statement said.

”The government hopes the creation of this fund will return confidence in the investment climate,” it said.

The fund will be involved in both buying and selling shares on the Omani bourse in an effort to increase liquidity and smooth the volatility that has gripped Gulf Arab bourses over the past two months.

A trader said it was expected start operations in December.

Kuwait, which has been the worst hit of the Gulf countries in the financial crisis, has had its sovereign wealth fund buy up plummeting shares for weeks in a bid to shore up stocks and confidence.

On Tuesday, the government said it had asked its investment arm to set up a fund to invest in the bourse to shore up confidence after a brief halt to trading following weeks of declines.

Is Dubai about to crash and burn?

Dubai's business model has always worried me - build lots of big buildings and hotels, create expensive artificial islands and cram them with shoddily built houses... but its been hard for me to see where the underlying real value generation is. Sure, there is some logistics (port, airlines), some outsourcing based on imported Indians and more reliable infrastructure than in India itself, and financial services and regional offices for multinationals. But is that enough to generate the earnings needed to fund the massive investments long term?

Most of the people coming to Dubai seem to be people selling services to each other, and to the people building the buildings. Sure, they all need places to live, something to eat, booze, but then what? The construction workers are mostly there to export whatever meager earnings they can save back to India and Pakistan. Dubai comes across as the world's biggest pyramid scheme - everything's OK as long as the influx of new arrivals continues to grow and the cheap loans are available.

But the current financial crisis and world recession has exposed these fundamental risks to that model. The credit Dubai has relied on to fund all that construction is gone. The people in Europe buying second houses on the Palm are retrenching their spending, fast. Tourists are spending less, and looking to stay closer to home.

And the buyers who were intending to sell their off-plan deposit purchased properties to make a quick buck are now facing a huge drop in market prices and no-one to sell the properties to.

It is now reported that Dubai is asking for emergency loans from the UAE Government, in other words - Abu Dhabi. This was perhaps expected, but it has happened a lot quicker than analysts thought.

Abu Dhabi's financial power is based on robust oil production of over 2 million bbls a day of oil. With a small local population, Abu Dhabi are rolling in cash with the recent high oil prices. Meanwhile, Dubai has been a net oil importer for years. That's one reason why their debt is running over 120% of GDP.

In many ways, Dubai has a similar model to Singapore. But Singapore has many many more advantages: surrounded by Asian tigers, big foreign reserves, solid high tech manufacturing, and a population of highly educated locals who all work their asses off and save a huge proportion of their earnings. And even Singapore is struggling somewhat right now. If Singapore - with a history of fantastic development - is in a bit of trouble, how can Dubai be sound? I don't buy it.

I predict in a few years Dubai will be exposed as the mega-tulip bulb bubble / Ponzi scheme it really is. No matter how many fireworks they let off. The big party last night at the Atlantis Hotel on the Palm strikes me as a desperate frenzy of champagne drinking denial on the deck of the Titanic.

Financial Times Article
Dubai in UAE talks over state funds
Financial Times
November 18 2008

Dubai is in talks with the United Arab Emirates government over a loan facility that would make state funds available to companies as international sources of capital dry up.

The plan, one of several options under discussion by the authorities, would draw on support from the cash-rich federal government, bankrolled by Abu Dhabi, the capital that also owns 90 per cent of UAE oil wealth.

Dubai, which derives its wealth from its role as a port and trading centre, is at the tail end of almost a decade of strong growth but now faces declining real estate and stock markets, clogged credit markets and a collapse of oil prices, the main barometer of the region’s economic health.

The emirate’s ability to engineer a soft landing is vital for companies betting on the Gulf as a heaven of stability and a source of growth amid the global downturn.

The plan, which could be unveiled next week, would establish a facility for state-owned companies similar to a Dh120bn ($33bn, €26bn, £22bn) liquidity package for UAE banks announced in October.

According to officials in Dubai, the terms of the facility have yet to be defined but it would be likely to lend to companies that need help refinancing existing debt.

The economic crisis has highlighted the inter-dependence of the seven emirates that make up the UAE, and the crucial role of the federal government, which has at times been overshadowed by the rivalry between the trade and commerce hub of Dubai and Abu Dhabi, the oil town that now has its own ambitions to diversify its economy away from oil.

Concern over Dubai’s high level of debt has fuelled talk that stakes in companies will be sold to Abu Dhabi. Fitch Rating Agency says Dubai’s debt is at $70bn, more than 100 per cent of gross domestic product.

Citi said Dubai’s exposure to real estate and debt made it the Gulf economy most vulnerable to the global economic downturn. The bank expects consolidation among Dubai’s state-owned companies, rather than significant financial aid from Abu Dhabi, but says it will “pull through with some help”.

Dubai officials insist that the emirate has enough internal cash resources to refinance the more than $20bn worth of debt due over the next couple of years. But merging Dubai companies or launching initial public offerings to raise cash, are also options being explored.

Dubai has also set up a high-level committee to steer the emirate through the crisis, and is expected to introduce measures to reassure investors in the property market, which is beginning to decline after years of steep price increases.

The first test for the restructuring of Dubai’s debt will come with maturing loans for Dubai International Financial Centre, the emirate’s financial district and Borse Dubai, the holding company for the emirate’s two stock exchanges, which has a larger loan maturing in February.

The DIFC says it is comfortable about meeting its commitments for a $500m loan maturing in the next few weeks. An official close to the DIFC say it could pay off the loan if a refinancing is not completed in time.

Borse Dubai officials said the company was selecting a lead manager for the refinancing of its $3.5bn loan, raised to fund its acquisition with Nasdaq of Nordic exchanges group OMX. The loan matures in February.

Borse Dubai said the rising cost of borrowing should be cancelled out by falling interest rates. “Even if Borse Dubai pays plus 300 basis points on the loan, the cost will be about the same,” said an official involved in the refinancing discussions.

Wednesday, November 19, 2008

GW Bush clarifies why Oman was taken off Human Trafficking Tier 3

Following up on the infamous Tier 3 rating Oman received from the original US State Dept Human Trafficking report, and the subsequent amendment made this week by the US placing Oman on Tier 2 watch list, here's GW's official explanation, as leaked by the Oman's Ambassador in the released letter (and thanks for the link provided in earlier comments Lurkiloo). It is not an admission of error in the original rating, nor a 'cancelation' of Tier 3, but an update to Tier 2 Watch List based on new progress (apparently).

Interesting. Essentially the efforts made by Oman (both administrative and diplomatic) were considered enough to lift the country to an official 'OK, we see a bit of progress, so even though you are still non complaint with the act we'll cut you some slack and expect to see more progress next year' type of argument.See the full US President's report here.

I hope we will see a follow-up of actual action and results in the 9 month breathing space afforded by HM's diplomatic wasta, sorry, I mean the US Administration's re-evaluation following the slight actions taken by Oman since the report was published. And by that I do not mean more laws, more training, a few awareness campaigns, and the '3 monkey' approach to such serious issues, etc etc etc, but instead:
- actual trafficked persons like enslaved prostitutes (who do exist in Oman) rescued and cared for (and not prosecuted),
- the criminals (and their Omani sponsors and customers) arrested, tried, punished and publicly identified in line with the law,
- inhuman exploiters of manual laborers and housemaids also dealt with by the full force of the law.

Please Oman. It's not hard - because I agree that you do not, on the scale of things, have a huge problem with human trafficking in an absolute sense. But you must demonstrably place the rights of these exploited people ahead of those of the expat and Omani who commit these crimes.

Presidential Determination With Respect to Foreign Governments' Efforts Regarding Trafficking in Persons

Memorandum for the Secretary of State
SUBJECT: Presidential Determination with Respect to Foreign Governments' Efforts Regarding Trafficking in Persons
October 17, 2008
Presidential Determination No. 2009-5

Consistent with section 110 of the Trafficking Victims Protection Act of 2000 (Division A of Public Law 106‑386), as amended, (the "Act"), I hereby:
- Make the determination provided in section 110(d)(3) of the Act, concerning the determination of the Secretary of State with respect to Moldova and Oman;

On the basis of positive actions undertaken by the Government of Oman since March 2008, the Secretary of State has determined that the Government of Oman does not yet fully comply with the minimum standards in the Trafficking Victims Protection Act (TVPA) for the elimination of trafficking, but is making significant efforts to bring itself into compliance. This is the standard for placement on Tier 2 of the State Department’s Trafficking in Persons Report.

The Secretary of State has placed Oman on the Special Watch List because the determination that the Government of Oman is making significant efforts is based, in part, on our expectations of additional future steps over the next year.

Since the June 2008 release of the TIP Report, the Government of Oman has adopted significant measures to prevent trafficking in persons for the purpose of forced labor by addressing abusive work conditions. Such measures include its recruitment of a total of 94 additional labor inspectors (male and female) – as well as 7 legal researchers – to strengthen enforcement of Oman labor laws and punish acts of trafficking for labor exploitation. In August, labor inspectors received training in collaboration with the International Labor Organization that, among other topics, highlighted their role in combating human trafficking and best practices against trafficking in persons. Oman’s Ministry of Manpower has publicly admonished the poor performance and excessive fees charged to workers by some Omani labor recruiting firms, and it has pledged to conduct more regular inspections of their operations.

Tuesday, November 18, 2008

Congratulations Oman, on another National Day!

Yes, Oman this week celebrates their 38th National Day, as it's 38 years since His Majesty Sultan Qaboos took power from his father and started the task of taking Oman from what was then an unknown backwater stuck in the Middle Ages, to the modern developing country it is today.

I'd like to add my congratulations too.

May His Majesty continue to rule his country with success and wisdom for many, many, more years to come.

Enjoy the fireworks, parades, soak up the pride in your country, and during the holiday next week perhaps think about what you can do to make things better. Its not like HM can do it on his own.

I know some of my Omani readers think that sometimes I'm a bit too carping and critical about Oman's occasional foibles and problems, but I believe in the principal of an honorable opposition and in the value of criticism to lead to improvement. Sometimes a third party can see things that those blinded by nationalism cannot.

It was perhaps a nice present to read that Merrill Lynch thinks Oman's economy is the most robust in the GCC, and is among the world’s 10 least vulnerable economies. Although that's an opinion to be somewhat tempered by the fact that
(a) it's written by Merrill Lynch [hardly "one of the world’s leading financial management and advisory companies" any more], and
(b) contains places like Nigeria.

But still, better than our regional neighbors and certainly one of the nicest in the list too.

Happy National Day everyone. Try not to get too caught in the traffic!!

Merrill Lynch list of the world’s 10 least vulnerable economies
Oman has one of the world’s ten least vulnerable economies
Times News Service
Monday, November 17, 2008

MUSCAT — A major boost was given to Oman’s quest for foreign investment inflow at the weekend as the country was named among the least vulnerable economies in the world, according to a report, Global Economics, compiled by a team of experts from Merrill Lynch.

Oman is the only country from the AGCC which makes it to the elite list. Merrill Lynch is one of the world’s leading financial management and advisory companies, providing financial advice and investment banking services.

The report was compiled following several data requests from clients of the investment bank for key risk indicators for all major economies including Europe, the Middle East and Africa (EMEA).

According to the statistics, the world’s 10 least vulnerable economies are Nigeria, Mexico, the Philippines, Colombia, Egypt, Oman, Indonesia, Peru, China and Russia. Also, the report identified Australia, Switzerland, Korea, Romania, Hungary, Sweden, Bulgaria, Euro area, the United Kingdom and the United States of America as the highest risk economies in the world.

The risk ranking was based on seven indicators and they are — current account financing gap, foreign exchange reserves/short-term external debt ratio, private credit-to-Gross Domestic Product (GDP) ratio, and private credit growth, loans to deposits and banks capital-to-assets ratio.

Merrill Lynch said the report also addressed all the requests in 62 indicators of the 60 world economies.

Massive sell-offs in the regional stock markets early this week triggered panic selling on the Muscat Securities Market (MSM) as well.

“The MSM is oversold and the fall is overdone. Oil price crash is the reason behind the negative sentiment in the region. Oil price has fallen below $55 which has led to panic selling in the markets,” said Sunil Dhall, vice-president of Gulf Bader Capital Markets.

“The sentiment was completely negative across the board with all sellers and few buyers,” Dhall said. “Any fall below $50 will see a massive production cut by Opec and that level will be defendant,” he said.

Experts, however, continue to believe that the Omani macro story remains intact and the fundamentals are sound even with oil at the current price.

“We expect foreign inflows to resume once the stock markets worldwide stabilise. This is being witnessed in the stock market today where selective enquiries in stocks like Oman Cables, Voltamp Energy is being witnessed from overseas investors while bargain hunters continue to buy in frontline stocks like BankMuscat and Galfar Engineering,” industry experts say.

Monday, November 17, 2008

US Government caves to political pressure on Human Rights report

You may recall recently that Oman received a Tier 3 (the lowest ranking) on the US Government's State Dept report on human trafficking, released in June. This was followed by a well organised campaign of howling complaints from the Foreign Ministry, the local press, and multitude of other Government controlled or influenced bodies, on how unfair and incorrect such rating was.

It seems that the US Government has agreed to undo that, as reported in the Oman Tribune and Observer.
Sultanate hails US on trafficking list move
WASHINGTON The Sultanate has welcomed the US decision to remove it from a certain list in the report on human trafficking by the State Department.

Deputy US Secretary of State John Negroponte has received a written message from HE Sayyid Badr Bin Hamad Bin Hamoud Al Busaidi, Secretary-General at the Foreign Ministry, that included the Sultanate’s welcoming of the US president’s decision to cancel the statement about the Sultanate cited in the US Department of State’s report on human trafficking and removing its name from the third category in that report.

The message was delivered by Haneenah Bint Sultan Al Mughaireyah, the Sultanate’s Ambassador to the US, when she was received by the US deputy secretary of state in Washington.

While the full Tribune article tries to take all the credit for the revision for the Tribune [really, read the full article for a good example of OTT reporting], there is no mention on the US State Dept website I could find. Readers should note the article is quoting the wording contained in a letter send by Oman to the US, rather than a proactive statement by the US.

Presumably this is an official 'follow up' to place in the official written record something from a verbal statement made by the US, and therefore more probably related to the recent visit of dep. Sec State Negroponte last month when he met HM.

So, yes, I think its pure politics, and just because of HM's involvement, and probably due to a loose verbal statement made by Negroponte to HM, possibly combined with the continuing battle in the US to get full implementation of the US/Oman free trade agreement ahead of the new administration. It's also one of those moments when no-one mentions that it's something good for Oman coming from the so-called 'authority' of the hated GW Bush. It is not a technical revision from the civil servants who drafted the original report, but Omanis will probably not care about this subtle difference.

I think it merely shows the real politic of the US Administration in response to a personal appeal from HM, and not so much that the original rating was actually flawed.

I'm sorry Oman that you felt insulted, and yes I totally agree the UAE did not deserve at all to be Tier 2 while you were Tier 3. But I stick with my original opinion that Oman should concentrate on real effective change in their actual enforcement and establishment of institutions to support and protect vulnerable women expats from the third world, make some prosecutions, and not just complain that good intentions were not apparently enough.

And yet another reason to see the end of this terrible Bush administration...

Friday, November 14, 2008

Omani pay in the private sector dominated by very low paying jobs - Muscati post

As the global economy keeps stutering, Muscati has posted (finally!! ;-) ) and lists some data on the base salary excluding allowances of Omani in the Oman economy.

To conclude: out of 131,000 Omanis in the private sector, 110,000 of them are on pay of RO. 200 [~$500] a month or less. That's about 84%. ...
Salary over RO. 2000 [~US$5000] a month: only 470 employees.

The most shocking are the really low McJob nature shown by the stats.

A more sensible set of data to put the previous post on the press 'analysis' (and I agree way too optimistic).

Thanks Muscati - glad you're back. I trust you are one of the 470...

Thursday, November 13, 2008

Good press for Oman: a summary of the Oman economy

In a surprisingly positive general article on Oman’s economy has been published by the Standard Chartered bank in their regular economic report, and suggests a solid ‘Grade A‘ for Oman’s efforts on economic diversification away from oil.

A very positive spin perhaps, and nice to see the good press, although it gets a bit preachy towards the end.

Generally, economically speaking, it helps that Oman is being compared to the other GCC countries, esp. the likes of UAE and Qatar.

However, there are some key factoids I just don’t agree with:
The article says that Oman’s Government debt is just 8% of GDP, second lowest in the GCC to RSA. Maybe so, but there is a lot of ‘pseudo-Government’ debt. (By that I mean debt that is supposedly in private projects but effectively relies on a Governmental backing). I have not figured out what those various commitments add up to, but its a hell of a lot more than 8% of GDP.

Unemployment is supposedly less than 5% in 2007, and down from 14% in 2006. All I have the energy to say to that is: Bollocks.

Another one:
The share of Omani workers in the private sector rose above 15% in 2007 to around 131,775, according to Institutes of International Finance (IIF) figures. Based on this, it is estimated that the private-sector workforce surpassed the public-sector workforce in size. This bodes well for Oman’s long-term prospects.

Well, its much better than the rest of the GCC, but I'm not convinced it reaches 'bodes well' in an absolute evaluation...

And Oil production is supposedly declining rapidly:
“ …before its hydrocarbon revenues – on which it still overwhelmingly depends – evaporate… Oman’s oil production is in terminal decline”.

A total hysterical exaggeration. Oman has at least 20 yrs of oil production around its current level or greater (see prev posts). And even production vs reserves is a comfortable 20 yrs. OK, perhaps not good when compared to Abu Dhabi, Saudi and Kuwait, but that is hardly a fair comparison! And while arguably a race against time, it's a very long, long race.

That Oman’s current account surplus is the lowest in the GCC at 10% is hardly surprising, but that the surge in imports (+30% since 2006) is mainly due to a rise in capital investment goods and construction equipment. That is a very promising thing. It's not like they are blowing it all on consumption.

Well done Oman, and HE Mackie. Oil prices may have saved our collective arses, but it is mainly being spent somewhat wisely, especially compared to the rest of the GCC.

Note, I’m not convinced having Oman spend GBP1.4 Billion on the Eurofighter is really a priority given the current global financial situation tho… but I guess, if they are willing to long term finance it, they may get an awesome deal from the Brits.

No connection to Gordon Brown's recent visit, naturally.

Middle East Business Intelligence article, based on Standard Chartered report, with totally stupid headline.

Oman racing against time with depleting oil reserves
Source: BI-ME , Author: Moussa Ahmad

Oman has shown strong political will in driving its strategic diversification. Encouraging results have been seen in recent years, yet the country faces the tough challenge of evaporating credit and hydrocarbon revenues.

Oman has achieved a lot in recent years: aggressive diversification policies, improved techniques to recover oil from its declining oil fields, and a strong commitment to boosting private-sector employment. The main issue facing the Sultanate is its ability to speed up its transformation before its hydrocarbon revenues – on which it still overwhelmingly depends – evaporate.

Strong political will has brought encouraging results, but Oman's reliance on exports is relatively low,and in many ways it has different challenges from the other GCC states, according to a new Standard Chartered economic report.

Oman has embarked on an economic diversification strategy along with its neighbours. The small country of 3 million people has been quite successful. Its GDP breakdown shows a certain degree of balance. It is the least reliant country in the Gulf Cooperation Council (GCC) on exports: 44% of its GDP comes from consumption (versus 17% for Qatar and 29% for Saudi Arabia), while the remainder is roughly evenly split between investment (17%), government expenditure (21%), and net exports (18%).

Interestingly, Oman’s recent growth has not been based as much on credit, which has dried up dramatically in the region. Commercial banks increased personal lending by 29% in first half 2008, according to central bank figures, compared to 50% in the UAE. And Oman’s government debt-to-GDP ratio is the lowest in the GCC after Saudi Arabia, at around 8%.

IIn the rest of the GCC, 90% of exports, on average, are made up of hydrocarbons (this excludes the UAE, an obvious outlier in this category at 53%). By contrast, hydrocarbons account for 75% of Oman’s exports, down from 81% in 2006, indicating Oman’s relatively lower dependence on the commodity. This falling dependence on oil export proceeds is all the more remarkable in the context of much higher oil prices. In terms of direct contribution to GDP, Oman has also reduced its dependence on oil, whose contribution fell from 48% in 2006 to 45% in 2007.

A good measure of the openness of any economy is its exports-to-GDP ratio. In Oman exports represented about 58% 2007 GDP, compared to 90% for the neighbouring UAE. While this openness could become a major weakness in an environment of global slowing demand, Oman is able to rely more heavily on its domestic market as a backup.

Oman’s diversification strategy has spanned over various sectors of the economy, including large-scale industrial projects, tourism, real estate development, gas-based industry development, and incentives for private-sector development.

Gas-based industries (power generation, aluminium) will get a strong boost from the implementation of the Dolphin Energy project, which began in early November 2008. The region’s first cross-border gas project is pumping gas directly from the Qatar North Field in partnership with the UAE, through which the pipeline runs (and which it serves). The recent arrival of this new feedstock will ensure access to cheap energy to fuel the country’s future development.

Certain non-hydrocarbon sectors have shown impressive growth, according to the latest available figures (2007). In line with the regional trend, the country saw a 38% boom in its construction industry and 50% growth in the manufacturing sector, which now constitutes 10% of GDP. Services, meanwhile, also grew very fast, reaching almost 13% of GDP; financial services increased 46%. We expect this trend to be confirmed in the 2008 figures.

At the same time, Oman is focussing on leveraging its maritime position through the development of fisheries (16 fishing ports in operation, four in development, and new infrastructure additions in this area). Like Dubai, Oman is also betting on the re-export sector: its overall re-exports rose 31% in 2007, helping to boost the total export figure to a record-high US$25 billion.

The country has also made an aggressive push to expand private-sector employment of Omani nationals in order to ensure a future beyond lavish government spending on public-sector salaries. A growing private sector will also enable Oman to absorb a growing local workforce in the coming years, as almost half of its population is under 15 years old. The government has recently placed a strong emphasis on education and skills training in order to better adapt the workforce to labour-market needs.

The Sultanate is in the middle of its seventh Five Year Development Plan, which includes the goal of having the number of private-sector employees surpass the number of public-sector workers. The share of Omani workers in the private sector rose above 15% in 2007 to around 131,775, according to Institutes of International Finance (IIF) figures. Based on this, it is estimated that the private-sector workforce surpassed the public-sector workforce in size. This bodes well for Oman’s long-term prospects.

There are no official unemployment statistics, but estimates suggest that the unemployment rate fell substantially from around 14% in 2006 to less than 5% in 2007, a trend that should be confirmed this year.

Cyclical headwinds
While Oman’s government has shown a strong political will to transform the country, a few challenges remain.

In 2008 in particular, Oman has not been immune to the global commodity price shock. Combined with a constrained currency regime, this has led to the highest inflation figure in the region, on par with Qatar, and inflation peaked at 13.7% in June and stayed above 13% over the Summer.

Some 50% of the CPI basket is comprised of the food and rent categories. Food costs have been directly impacted by higher commodity prices and a weakening currency, while the rent increase is a consequence of fast economic growth and the inevitable bottlenecks in the real estate supply-demand equilibrium.

Standard Chartered has forecast average inflation of just below 10% for the whole of 2008. The figure should ease substantially in 2009 on the back of more favourable external conditions (for inflationary pressures, at least) and an easing of the strains on domestic demand.

Declining oil reserves
These cyclical challenges are not as great as the structural one facing Oman, namely the race against the end of domestic oil production as reserves decline. The prevailing view is that Oman’s oil production is in terminal decline. Its 5.6 billion barrels of reserves (official 2007 figure) constitute 0.5% of global oil reserves. Oman’s production peaked at 0.96 million bpd in 2001, and is currently at 0.72 million bpd. Domestic consumption represents about one-tenth of total production. Oman’s reserves-to-production ratio is at around two decades, which means that time is a pressing consideration.

What is worse, especially in the current context of softening oil prices, is that Oman has the highest fiscal break-even price for oil in the GCC and the second-highest in the OPEC. In this environment, the strategies laid out and implemented by the government are going in the right direction.

First, Oman has invested heavily in trying to delay the end date of oil exploitation. Investments in oil recovery techniques have led to substantial improvements. In 2007, condensate output grew by 70%. 2007 was also the first full year of production at the new Sohar refinery plant, which led to 149% growth in refined product output.

Second, it appears that long-term investments are being made. Oman’s current account surplus as a percentage of GDP is much lower than in the rest of the GCC. This is partly due to Oman’s lower oil proceeds, but it also reflects growing imports (up 30% during 2006-2008). The biggest constituent of imports today is machinery and transport equipment, at 50% of the total, while manufactured goods, mainly construction-related materials, are the number two item.

With the current account surplus hovering at 'only' around 10% of GDP, the breakdown of Oman’s imports shows that they are driven mostly by long-term investment in development projects. The difference with the UAE in this regard is that Oman’s construction boom has been mostly driven by long-term diversification into areas such as tourism, infrastructure (such as harbours and airports), and manufacturing development.

Oman is acting resolutely to counter the impending disappearance of its main revenue generator. So far, its actions have shown strong determination and have already yielded impressive results in terms of diversification. But the clock has started to tick, and the Sultanate cannot afford any deviation from its current plan if it is to beat the odds.

PS I haven't been bothered to correct the spelling and grammatical errors in the article...