Tuesday, May 27, 2014

New visa laws causing a stir - impact will be chaotic

While corruption may be making the news overseas, here in Oman amongst the chattering expat class the scuttlebutt is all about those new visa laws.

Blogger of all things social in the english speaking community, Muscat Mutterings great summary of the new laws and their application in practice here.

Essentially,  while the law is made to look reasonable, the Ministry of Manpower have ensured no-one will be given a no objection certificate, the magic NOC, as required by the law to change jobs to a new employer.

So, if you want to change jobs, you can't even if you've been working for years, because your employer will refuse an NOC. To change jobs you have to leave the country for 2 years.

Ostensibly this is an attempt to bolster Omanisation. By forcing expats to leave through withdrawing visas from employers, the theory is that employers will replace them with Omani new hires. Yeah right.

I wonder what will really happen? Employers will retain expats even more than usual, because they know they won't get a visa to replace them. Salaries for expats will rise,  as their scarce resource means fewer of them. Plus, employers who do loose visas will fail to find qualified Omanis, will either reduce business, or find ways around the system, by employing on the black market and bribing officials to issue visas or to look the other way when the inspectors visit. The big oligarchs will as usual be exempted, by being in roles we all accept cannot be omanised, like construction ,or can afford enough sleeping Omani employees to meet the % required.

As usual with these sort of top down, outcome specifying laws, they will fail and only create unintended consequences. Well done Ministry of Manpower!

In other news, it was nice to see His Majesty greeting a visitor from Europe at the palace. I was getting concerned that he was out of the country. He has been busy getting things in order for the corruption trials:
- prisons up to agreed international specifications? check, issued decree 25/2014 ratifying Arab prison agreement.
- money laundering up to date and international standards? check, issued decree 27/2014, ratifying the 2010 Cairo Arab convention on anti- money laundering and terrorism financing.
- corruption laws being applied not arbitrary, but fair and international standard? check, issued decree 28/2014 ratifying Arab anti-corruption convention, plus already finally signed up for the UN anti-corruption standards too.

Whew. I wouldn't be too confident of those appeals succeeding.

Saturday, May 24, 2014

Dodgy deal suggestions the new Anti-Corruption investigators could look into...

As the corruption prosecutions continue, I noticed how recent the events being used in evidence were. Juma Al Hinai, ex-head of Petroleum Development Oman's major tender board, was the Ministry of Finance's representative who chaired the tender board. Ostensibly there to provide independent oversight of the operator of most of Oman's oil production, instead he was caught with over $2 million in cash in his house and convicted of accepting a bribe from Galfar in 2011.


Mr Al Hinai ran that tenderboard for years. Are we to imagine that this was his first indiscretion? Yeah, right.
it turns out that Juma Al Hinai also took money from OHI, a huge contractor, since the CEO Behram Divecha was just sentenced to 17 years and fined 1.2 million rials, for allegedly bunging old Juma a few 100k for each OHI contract he got through. Sweet deal. At the time. But where does this rabbit hole go? How could you be a director of a company paying massive amounts in bribes, in cash, and not know about it? Are we to believe a lifetime expat employee independently was withdrawing huge amounts of cash and noone noticed? And who in the banks facilitated these transactions? Interesting lines of inquiry indeed officer!
Equally, that an Ex-Minister gave a $1 million bribe to an undersecretary for the airport contract (see previous post), suggests the practice of bribing government officials involved with big construction projects was pervasive and accepted. So, looking back through the Dragon's archives, here are just a few deals that Muscat Confidential reckon the ISS and Government prosecutors could be looking into, because they really don't (and never did) look right:

1 - Omantel's purchase of WorldCall Pakistan.
In 2008, Omantel, a publicly traded company but still majority Government owned at the time, spent $200 million buying 65% of a small telcom company in Pakistan from a reclusive Omani businessman Sheikh Sulieman Ahmad Said Al Hoqani. This, even at the time, represented a huge premium on the traded share price - Omantel paid 25 PKR rupee per share, when a few months earlier it had been at around 10 PKR. Meanwhile, Omantel have pumped in an extra $70 million in cash, as the company continues to bleed cash since the first day of purchase.
As of yesterday, these shares were trading at 2.4 KPR, less than 10% of the purchase price, not including the 40% depreiation in the value of the PKR in US$ from 2008 until now. Market cap of Worldcall is now just US$20 million, with operating losses last year of about US$16 million. All metrics look terrible (negative and increasingly negative EPS, total debt is about 5 x market cap...) Why did Omantel's then CEO, Mohammed bin Ali Al Wahaibi, buy this useless, endebted, loss making company for a huge premium from an Omani businessman? Just coincidence, I'm sure.

The commercial arm of the Ministry of Tourism, Omraan has been playing as an Integrated Tourist Development project developer for quite a while. In the rush to get a venue acceptable to host the Asian Beach games, the usual tender procedures were suspended and OMRAAN got to spend as much as it liked getting things ready. In addition, the highly dubious attempts by MoT and Omraan to try and aquire the beautiful Capital Area Yacht Centre (CAYC) by apparently any means - bullying, threats, multiple legal action, refusal to accept the deed to the land signed by His Majesty Sultan Qaboos.

As far as I can see, they have done precious little except launch project after project [Yeti, anyone?] that are pretty much all either uselessly stalled after masses of money spent, or, badly built white elephants in the middle of nowhere, or, stealing real estate worth gazzillions and effectively turning public space into private and gov/oligarch Joint Ventures.

As it was not, strictly, a government department, Omraan could bypass normal government tender board procedures, and we know how strict those were, dont we? Oh, and the head of Omraan was a close relative of the then Minister ( now deceased).

And don't forget that disaster that was and is the high speed ferry . I know, they supposedly have a secret military capabilty if required, after a quick conversion, but still. What a turkey. Executed in the most bungled cock up way imaginable, with unsuitable ferries that burn fuel and can't dock anywhere 3 years after buying them. I'd laugh, but this is where the oil money is being poured down the drain. Now why would anyone do that?

3 - Blue City
Although a private company, the Omani Blue City partners who owned Cyclone LLC, 'HE' Anees Issa Mohamed al Zadjali (a newspaper editor working for his Dad's paper Times Of Oman) & His Royal Highness Sayyid Haitham bin Tariq al Said (His Majesty's cousin and Minister of Heritage and Culture), cost the country a heap of money. The way they got the land from the Government for almost nothing (on paper they paid around $80 million, for prime land that was later valued at almost $1 billion, plus a few extra prime km2 they kept apart from the development for themselves). The Government, via the Omani Investment Fund, eventually repurchased the secured bonds of the bankrupt company at 65 cents in the dollar from international investors, paying around $400 million to avoid an embarrassing claim on the land by Japanese investors.

If HH Sayyid Haitham really is on the official short list of those few Al Said males eligible to succeed His Majesty Sultan Qaboos, I hope he has had a big improvement in his judgement since the Blue City debacle. Let's all hope he would leave running the economy to someone actually qualified to do so...
but guys, ignore the private sector financial stuff. Focus on the original smoking gun: the initial land transactions. There's investigational gold in them there abandoned villas by the beach.

Wednesday, May 21, 2014

Momentum builds in anti-corruption convictions: Ex Minister confesses to massive bribery

Well, well, well.

There must be a lot of very nervous important people in Muscat right now. The corruption trials are rolling out the "Guilty" verdicts faster than a shwarma shop on a Thursday night, and big people are being sentenced to real jail time. Oman doesn't do nice prisons.*

The latest to fall is a very tall tree indeed - Mohammed bin Nasir Al-Khusaibi was found guilty (he confessed and expressed remorse) of paying bribes worth US$1 million to the (now ex-)undersecretary of the Ministry of Transport and Communication for civil aviation, to win a contract for his company employer CCC- plus likely as local partner himself a big bonus - the first phase of the Muscat International Airport. Mr Al-Khusaibi was (briefly) a Minister, and before that a very powerful figure in the now disbanded but once omnipotent Ministry of National Economy. He's now bunking next to big abdullah the axe murder for 3 years.

Mohammed Al-Amri, who served as said undersecretary of the Ministry of Transport and Communication, was jailed for three years, fined 1.2 million rials and barred from public office for 30 years. The court also sentenced Fathi Alaaiddin, the managing director of aforementioned Consolidated Contractors Company (CCC Oman), to six months in jail and fined him 400,000 rials.

This February, Muscat’s Court of First Instance threw the book at the CEO of state-owned Oman Oil Company, Ahmad al-Wahaibi, a scion of one of the big families very close to the Sultan from the 1970s coup d'etat days, giving him jail sentences totaling 23 years after convicting him of accepting bribes, money laundering and abuse of office. It seems the palaces, sports cars, huge salary and the life of privilege wasn't enough, and young Al Wahaibi felt he needed a few million stashed away. Yanni, you know how it is.

Now, these are just the verdicts issued by Muscat's Court of First Instance, and are still subject to appeal, so who knows what might happen there. If the convictions and sentences are upheld in the first appeals, people will be really looking over their shoulders. Now that the prosecutors are getting successes and confessions, the list of others facing solid evidence of them pocketing the envelopes stuffed with rials will skyrocket as many of those implicated at all levels confess and in turn offer to turn State's Evidence. And Omani courts love a good confession.

As more people talk, and more cell phones and emails are searched, the evidence will mount and the anti-corruption net will inevitably be cast wider and wider, gaining more informants looking to save themselves by confession and implicating others. Say what you like about the internal security boys and girls, but give them this sort of trail to follow and they will be pretty damn efficient, if that's what the person giving the marching orders, er, orders.

And person who gives the ISS those orders is HM, directly. Don't think for a second that the ISS is like the Ministry of Manpower. They get first dibs on recruitment and get shit done when required, especially a special assignment for His Majesty. It is amazing how talkative people get when assisting the ISS and ROP with their enquiries.

Where will it end? Clearly the current crop of prosecutions has the full support of His Majesty. The public verdict against Mohammed bin Nasir Al-Khusaibi is unprecedented both here and abroad. The ripples from this conviction - of someone recently so very very close to absolute power - are causing waves in nearby shorelines: UAE, The Kingdom, Kuwait and Bahrain are all experiencing similar corruption issues, if anything writ much larger.

But His Majesty must be aware of the danger of this becoming a witch hunt driven solely through absolute power as Sultan and direct administrative and executive power too. Much like a run on a bank, if the herd of capital and talent feel that this is going to be 'everyone', or in other words, 'them' rather than someone else, then the herd will panic and stampede for the exits. There's a reason all those palaces on the coast have big ocean going boats in sheds beneath. And private jets. And bank accounts outside Switzerland, if they know whats good for them I guess! Most of these guys are running so much leverage and debt anyway, net capital employed allowing for depreciation over the years is probably 9/10s of fuck-all. So they can split guys. If it gets to the point when you are selectively culling people for relatively minor criminal acts everyone was doing as a matter of common knowledge just to do business, be careful. Yet right now, HM Sultan Qaboos, Prime Minister, Minister of Foreign Affairs and commander of Oman's Armed Services, Police and Internal Security services is sending a pretty damn crystal clear message. Por encourage les autresSo a few more heads are going to roll. A benign dictatorship may not be how things are being described in the prison exercise yard right now. Your view on the benign part may depend on your perspective, but I reckon 99% of Omanis and residents are more than happy to see a few more heads in the basket right now. Metaphorically speaking.

Email me with any tips. I'm back in the saddle for a while. Lets see where this goes.

* Note. The Americans a few years ago issued Oman a formal complaint at the state of their prison system and the conditions people were held in. When the Americans, people who run an international gulag of secret prisons and who imprison more % of their population than anyone else, are lecturing you on your prison service, you have a pretty shitty prison service. Perhaps the delay in the trials vs the 'Arab Spring' kickoff was not to assemble an independent prosecutors office and gather evidence, but to build the new VIP wing at the prison... wonder who the contractor was, Galfar or CCC? Just an idea chaps, better check that new wing for secret tunnels eh? Not that you could bribe anyone to do that, obviously.

Monday, May 19, 2014

Undercover Dragon on Omanisation

Well, its been a nice slow weekend here in the castle. And I was pleasantly surprised by the email alert that famous Oman blogger Suburban had revisited the sleepy sultanate and was reporting on progress with Omanisation in her inimitable style. Heck it even drew old Jet Driver out of the woodwork. Wonderful!

Much to the disappointment of many of my ... readers... I am not writing this from the bowels of an Omani gulag. But I did sneak in for a visit recently as well. Immigration were very welcoming, bought some champagne on the way in, and headed for the hotel. More on that later perhaps.

But first I'd like to weigh in on this Omanisation issue. Suburban has already nailed point one - the Ministries. Far too large an employer wrt the economy, it encourages red tape, and means the bar is set so low, it drains motivation and competition from the local job market. It also feeds low level corruption and wasta, by empowering the mid level permit stampers to issue visas, permits for construction, plan and develop public infrastructure in partnership with the big wastafarians, etc etc etc.

So what can be done? Ok, apart from the ministry reforms everyone says is impossible, here are some ideas wrt policy.

1. Get rid of the sponsorship system. Phase it out if necessary. But this modern codification of (low wage) slavery is disgraceful. Get proper visas issued, in a public and transparent way instead of behind closed doors. The current system encourages and enables a culture of the rentier economy, where it's all "I dont need to work, I'll just (buy) a few indians and filipinos and they will do all the work. Then I'll get them to each earn an extra sum each month and pay it to me. I'll take their passports so they will have no recourse but to work for me". Go kids! While it may work for a while, a target business model for an entire society based on parasitising a vast underclass of exploited and enslaved people from another country, sufficient to supply all daily needs,... yuck. It may work for Dubai, but it shouldn't be a future to aspire to for Oman I think.

2. Citizenship. There should be a path to citizenship for long term non omani.

3. Minimum wage, enforced, for all employees, even 1 employee. Effectively raise the cost of hiring an expat for low level low skill jobs, such that its more doable for an omani. If the mcdonalds francise has to increase prices a tad, so be it. We eat too much of that shit anyway.

4. Make it easier to hire and fire omanis, albeit that you must replace them with an other omani. 2 weeks notice. 1 week per year employed as severance. Have a national pension fund system that you only can buy into via employment, but it moves with you from job to job. Do not let this be taken over by the ministry employees.

5. Encourage employment to be more flexible. Omanis seem to need a lot of time off during the day. Ok. Set things up more flexibly, so they can work different hours, or work part time and get paid less. Flex days, strict medical leave limits, days off without pay, etc etc. Imposing a western 9-5, 5 days a week, is not working.

6. Do more to get omani women into business and starting SMEs. We need more female entrepreneurial talent. Slap back any of this Saudi or Iranian influenced bullshit that women should be cloaked and locked away. In my experience, omani women were smarter, more dedicated, paid more attention to detail, got stuff done with less excuses, on time and more reliable, and generally were by far the better employee than the average omani male. Just saying.

7. Do more to get omanis into the oil field services businesses. Have more dedicated trade schools, run and administered by business segments, starting at high school. Target 'villages' that can effectively supply all the labour for certain businesses and installations: ports, factories, etc. Go with the grain on our tribalism and family, by having 'company towns' where the schooling, home life, and education are focused on the village trade/factory/product.

8. Increase use of automation and advanced capital machinery. Ie instead of having 25 Afghanistan workers dig a trench with 18th century picks and shovels, have an omani in a modern, air conditioned beast of a machine made in Korea or even China these days. Do more prefab construction in big air conditioned factories, where omanis and robots could make prefab wall panels, housing modules, even complete housing effectively, probably more efficiently and making construction more like a real inside industrial job.

9. Do more on tourism, especially within the middle east, China and Africa. Have tourist resorts that are 'dry' and ones that are not. Stop sitting on the fence. Have some resorts that are halal, and the rest for the rest. I've always liked the idea of a casino in the Omani enclave within the UAE. It would make an absolute killing. Do what singapore does, and charge omanis 100 rials to go to reduce locals gambling. But focus on the uae. It would employ loads and loads of omanis. Find a way around the religion thing. And please let me be a partner. Or a few catering concessions...

10. Have a solidly independent administered and graded entrance exam to be a gov employee. Freeze government numbers wrt full time employees.

11. Allow a broader civil society, with think tanks working on policy options. Most oman laws, especially from the disaster that is the ministry of manpower, seem to be written in a hurry, and are badly and broadly crafted mainly with a view to dictating outcomes with a legislative magic wand, rather than proactively enabling those positive outcomes through first principals. Free the media and the inline media. They are the means by which the government is held accountable. Media must be far more de-expatised. At the moment, the cowering indian staff of most media outlets are so afraid of pissing someone off and being deported and criminalised they are useless as a true 4th estate. And the omanis in charge are so entwined with the government, they are pliant in supplying the propaganda and the advertising money.

Look at how poor Andy in Oman, possibly the most genuinely nice person I've seen online in the omani bloggosphere, is being attacked and vilified in the national press. Disgraceful. (I do wonder Andy, why the Al Zedjalis have developed this weird pathological hatred of bloggers and online opinions... it is very peculiar. )

So, there we go. Must get back to the pool and the champagne. It looks like Ms Dragon needs some lotion applied.

But Suburban is right. If Omanisation keeps going the way it is, oman will go down the tubes. Far too much of the economy is totally based on oil and gas, and the income from these depleting resources are not growing in line with the population. You do the math.