Oman to set up new unit to develop water and energy strategy

Ahhh, don't you love Eid + National Day? A whole week off work and the weather's perfect. One of the reasons Oman is a nice place to live.

The Ministry of National Economy is forming a new high powered analysis unit to study the economics of the nation's water and energy provision, and to develop a national strategy for energy [aka subsidised and increasingly unreliable electricity], fuel [ever increasing cost of subsidising petrol and diesel] and desalination/dams.

Perhaps a highly experienced expat leading such a team can stop this madness of building a $1bln coal fired power station in the middle of nowhere running on imported coal...


Oman continues to plan a coal fired power station in Duqm even though Oman has no useful coal deposits to run it



Oman needs to do a lot more to:
- stop subsidising electricity
- encourage electricity efficiency (double glazing and insulation?)
- stop subsidising petrol
- stop wasting water
- develop solar electricity
- reduce requirements for more and more desalination

The current incentives and subsidies present a huge distortion in pricing compared to true costs and therefore not only allow too much waste of natural gas. The subsidising of power and gas acts to discourage any real private investment in power generation and infrastructure, or in additional gas production and alternative energy.


In other news,

Oman cracks down on hard working poor foreigners
Oman's fabulous Ministry of Manpower is cracking down on... poor subcontinent workers who have a visa with one employer but actually work on building sites for others. Oman changed the law to supposedly allow the employers to be fined, but naturally its the poor workers who are paying the price. The reported increases in the suicides of such unfortunates will only increase as a result. Once again a cheap and ill-thought out law is being used to try and fix a deep-seated problem by diktat. The claim by Salim Bin Saeed Al Badi, a DG with the Ministry, that as a result more Omani will be employed working on building sites is pure delusional fantasy that might sound good in the comfort of an air-conditioned Ministry tea-room but has precious little to do with the reality of the labour market.

Meanwhile, speaking of delusional fantasies, Dubai has still to resolve the Dubai World debt problem and the world wide panic it started last Wednesday. Markets have woken up to the fear of a second global meltdown as the debts in Dubai Inc, and the related CDS derivatives, are suspected of having the potential to become the new sub-prime crisis triggering more liquidy freeze. Royal Bank of Scotland, for example, appear to have more than $2bln in exposure to financial genius Sh. Maktoum's various money pits, and HSBC are reported to have loaned him almost $16bln. LMAOFOFL.

Oil price continues to plummet - Omani crude $36. Central Bank injects $700 mln of liquidity into Omani banks

As the world recession hits, oil demand falls, speculative cash goes bear, and OPEC fails to act decisively to cut production, the usual is happening - a crash in oil prices, now at their lowest since 2004. And it seems to keep getting worse; see a great (but depressing) article in The Market Oracle.



As I have said all along, Oman was fine as long as oil stayed above $60. But that ain't happening. As it goes now, next month could see $25/bbl or less, albeit only temporarily. Oman already cut their 2009 budget assumption to $45. So, expect some serious belt tightening from HE Mr Macki in 2009, at least on the Government Fiscal spending front, if oil stays this low or lower for the next 60 days. Government budgets are being reduced as we speak, but there will be a big battle within the Cabinet to claw back Ministry budget already approved. The big money made over the past few years has been channeled into repaying debt and recapitalising the Sovereign wealth fund, along with allowing a huge increase in Government spending - some of it good infrastructure stuff, some of it pretty optional if real spending is to now be slashed - did we really need an Opera House, for example?

Meanwhile, Hamood Sangour Al Zadjali announced that the Oman Central Bank has relaxed the reserve requirements for Oman's banking system, now allowing them to count cash on hand and short-term certificates of deposit held with the central bank towards their 8% reserve, thereby allowing a significant boost in their ability to lend into the domestic market by making $700 million extra available. The bank had previously reigned in the banks earlier this year as credit soared by over 50% and inflation hit over 15%. This will help ensure project financing can be kept up for the Galfars and Renaissance type companies. Oman has already posted a (rather small) promise of a fund with 150 mln rials to underpin shares in the stock market, which perhaps fortuitously seems to have been announced when the world markets paused on their downward trend.

Oman always has a problem during lower oil price times: how to maintain adequate Government cash flow from the oil and gas sector vs taking counter-cyclical opportunities to make sound longer term investments as costs drop? Steel and cement, for example, are now expected to be a lot cheaper next year as world demand drops and before inflation appears.

How much can and should the Government borrow in 2009? It seems strange that the Government seems to allow off-balance sheet project borrowing for the Sohar projects, but keeps funding their domestic oil and gas investments from day to day production cash flows. One way out for Mr Macki would be to ring-fence, at least in part, the Government's shareholdings in the upstream oil and gas business, and allow some of the significant long-term production investments currently underway and planned (such as the massive multi-billion dollar Harweel project, which won't start to flow any extra crude until at the earliest 2010) to be financed by borrowing.

HE Rumhy, Minister of Oil and Gas, has done well recently to leverage high oil prices and get big spending commitments from new entrant IOCs - they spend their money now, take most of the risk, and are rewarded by higher returns later (the Government is essentially borrowing this investment against future payments from their oil and gas production). The deal he did with BP was excellent in that regard, getting British Petroleum to commit $600 mln without a commercial deal for production. But with a few others subsequent the Ministry was too slow, and so recent deals are not as good, nor are they getting anything like the number of bids they did just 12 months ago.

Time for a garage sale?
The Government will also need to look at asset sales, even in the current climate, there may be deals to be done. The State's shares in Omantel, for a start, are a long term strategic liability due to technology risk. The electricity and water infrastructure too should be substantially sold off - control can be mmaintained by smart regulation. And the older hotels the Government still owns, such as the Intercon and Crown Plaza, that are soon in need a major overhaul. The land they occupy could just be leased long term if selling that is politically impossible.

Crude prices collapse 25% in the last week
By Dalton Garis, Special to Gulf News
Published: December 06, 2008, 23:53

Abu Dhabi: The New York Mercantile Exchanges benchmark West Texas Intermediate light sweet crude contract finished last week at $40.81 per barrel, a 25 per cent decline from the previous week's $54.43. Now, no back month price is above $81 per barrel, even for delivery in December 2015.

Brent, against which 60 per cent of the world's crude is priced, closed the week at $39.74, down from the previous week's $54.41. The local Dubai Mercantile Exchange's Oman heavy sour nearby future closed the week at $36.60, a 28 per cent fall from the previous week's $50.88.

Adding to the gloom, the basket of the Organisation of Petroleum Exporting Countries (Opec) hit $40.75, further pressuring Middle East and North African (Mena) economies that rely heavily on crude exports.

Last week's broad-based market sentiment that a local bottom at $50 per barrel had been reached failed to support prices after the worst jobs report in 34 years in the US was released on Friday.
...
The crude market supply price insensitivity is exacerbated by Opec's seeming inability to discipline its members to cut production. Possibly, that was the reason last week's quasi-meeting announced no new cuts. It needed to assure enforcement of its last announced production cuts before imposing new cuts. So any cut announcements were pushed back to mid-Dec-ember.

...

Oman to pump 270m riyals into banking system
Reuters
Published: December 04, 2008, 23:35

Dubai: The Central Bank of Oman on Thursady said it had amended bank reserve requirement rules to release 270 million riyals (Dh2.57 billion) into the banking system to help lenders cope with the financial crisis.
...The Omani central bank, tackling record inflation rates above 13 per cent this year, had raised reserve requirements in August to eight per cent from five per cent in an effort to curtail credit growth. ...Oman has since "effectively" reduced the reserve requirement back to five per cent to prevent any indirect effects on liquidity from the global credit squeeze, Central Bank Executive President Hamood Sangour Al Zadjali said.

"The central bank decided to effectively reduce the reserve requirement, which as a result injected about 270 million riyals back into the banking system," Zadjali said.

Under new rules, banks are allowed to hold up to three per cent of deposits "in the form of currency held in banks vaults and or investments in certificates of deposit issued by the central bank", he said. The eight per cent official reserve requirement remained intact, he said.

"Since all banks would have cash on hand and almost all banks have interest-bearing central bank CDs as part of their portfolio, it is considered an effective reduction in the reserve ratio," Al Zadjali said. The central bank chief said there was "no evidence of any major liquidity problem" in Oman, where credit growth hit 52.7 per cent in October.

Still, the central bank allocated about $2 billion to local banks to provide them with dollar liquidity, while the government set up a 150 million riyal market-maker fund with the private sector to help stabilise the country's bourse.

Interbank rates have moderated to less than one per cent from 2.6 per cent in the first week of October, Al Zadjali said.

"The year 2008 as a whole... could end up with very high growth in credit, even if one presumes some moderation in November and December," he said.

Inflation - which has almost doubled in the last year - could "moderate significantly" in 2009 as price pressures decline in developed countries, food and non-oil commodity prices ease and the US dollar appreciates, he added.

"These favourable effects could be imported to Oman, and thereby create sobering influence on the inflation," Al Zadjali said. "Because of the fall in oil prices, despite fiscal stabilisation, there could be some moderation in domestic demand, which may ease pressure on supply constraints, helping thereby to improve the inflation situation."

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
ONA
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.

The ferry saga continued – Business Consultant Essa to the rescue!

I should have done a post on this last week, but, ah, work sometimes gets too crazy.

Essa Al Zedjali, Editor of the hard-hitting Times of Oman, and (according to the Times of Oman) one of Oman’s most eminent intellectuals and authors, took issue last week with the pricing of the infamous new ferries, saying they were far too expensive and should cut their prices, and effectively asking for public money to subsidise the ferries even more than they are already... (see below). I actually agree with him.

I’d have preferred he comment on the lack of jetties, the half-assed decision to buy them in the first place, the lack of trained Omanis to run it, and who's actually paying for all this, but let’s get the financials right first!

The details are below, but the bottom line is:
- Almost no matter what they charge, the ferries are highly uneconomic. The cheapest way to operate the boats is to, er, not operate them at all.
- The most likely face saving 'solution' is to write-off the capital investment of the boats and jetties, and then try to cover the visible running costs through fares. Thats what the NFC is for, and is trying to do at least on paper. Even then, the Government is effectively subsiding the tickets by a HUGE amount.
- By my estimate, the true cost to the Government of a return ticket is around 400 rials per person if they only run 3 times a week and get some money from transporting cars eventually. Not counting the 90% fuel subsidy, the cost is around 140 rials per person per trip.
- To break even just on running costs, with generous assumptions on occupancy and cheap fuel, prices would need to be ~twice what the NCA currently charge.

Taking account of the true value of diesel, running the trip only 3.5 times a week, the Government will need to provide an effective annual subsidy of ~12-13 million rials a year, mostly through cheap fuel and providing the boats for free.

Ignoring the cost for the boats and jetties, and the fuel subsidy, the Government will still have to subsidise operations to the tune of 1.5 to 2 million rials per year.

Countries all over the world subsidise their ferry’s for social benefit reasons. Its obvious from the basic calculations below that Oman will have to do the same. I think the real answer is that the subsidy should be transparent, so people are aware that it is NOT an economic business. And you have to avoid giving the ferry company principals a blank cheque to pay themselves a fortune for running a money losing business.

At current fares, they will only pull in at most about 1 million a year, and with Essa’s suggested prices about half that. Compared to the costs, it makes no real difference to the real subsidy either way.

So, as I said on this blog previously, this is a great trip, mostly paid for by the Ministry of National Economy. And I’m almost afraid to say, I amazingly find myself agreeing with Essa. (I know, I find it hard to believe too. That’s why I had to run the numbers myself!) The subsidy needed is so high, that the price of the tickets is almost immaterial. Better to make them as cheap as you can, at least for Omani’s or residents, and fill the boat. Make up some of the money in the Khasab hotels, and on food and booze.

Personally, I’d take the second ferry and turn it into a floating Casino, based out of Khasab. And maybe think about running the ferry to Dubai and or Iran, as well as the Muscat-Khasab route.

I'm just glad I don't own the ferries... But I wish I was able to be Chairman of the company that does, and pay myself heaps of Government money for running a loss making business. Nice work if you can get it.

Picture: One of Oman's ferries in its most economic setting: out of the water, unused.

Details
I decided to try and guestimate the breakeven price for the tickets.
Capital Costs
2 Ferries: reported purchase price ~26 million rials
Jetties: I dunno, but lets say another 5 million
Assuming a 6% discount rate (seeing as how the Government effectively owns them and can borrow the money pretty cheaply), and a 20 year life, that means you need 2.6 million rials per year to pay all that off.

Operating Cost
Crew of 12 x 2 ferries, manpower to run the jetties, some marketing people, … Probably about 1 million rial per year at least
Maintenance: Those ferries are pretty high tech: say 200k per year
One Ferry return trip Muscat to Kasab burns about 60,000 litres of diesel. Even at Government subsidized rates of 130 biaisa per litre, that’s 7,800 rials per return trip. (You should note, at current international rates for diesel, the Government could instead sell that same diesel for ~60,000 rials!).

If we do a trip every day (just to try and get the investment back by working the ferries as much as possible) that’s 2.8 million rials worth of subsidised fuel per year.

So, combining the above, it means every trip costs the owners ~18,000 rials. Just to break even. Running on highly subsidized fuel. What a deal.

Now, the income side.
The boats seat ~200 people. I don’t have the exact numbers, but lets say 10 VIPs, 20 1st Class, and 170 Tourist class. At the current rates from NFC, assuming VIPs don’t pay, and a 90% capacity, they receive ~8,300 rials in fares if they fill the boat. At Essa’s suggested rates they would take in at most ~3,700 rials.

So, even with current NFC rates they lose at least 10,000 rials per trip, 3.6 million rials a year. If they cut them further as suggested by Essa you’d lose around 15,000 rials a trip, or 5.3 million a year. (Note: If they had to pay real prices for the fuel though, that would amount to annual losses of ~27 million rials a year, and they may as well give away the seats it makes so little difference).

Of course, if the boats are empty at current prices, Essa’s absolutely right that you are probably better of cutting prices to fill the boat. The NCA’s original prices seem to be designed to roughly cover visible running costs based on subsidized fuel and assuming almost full occupancy. Their latest fare cut is probably just to try and lose less money and get more than 5 passengers a day. And of course the last thing you actually want to do is run the boat at all, because it just burns more cash!

Opinion: Times of Oman 5th October 2008

Two giant ferries in the Gulf of Oman!
Essa bin Mohammed Al Zedjali
Sunday, October 05, 2008 11:57:50 PM Oman Time

A FEW weeks ago I had read a news item in local papers that the second ferry named ‘Hormuz’ had joined the fleet of the government-owned National Ferry Company (NFC). A few days ago the local papers reported that the NFC has reduced the Muscat-Khasab-Muscat ticket price from RO74 to RO44 for the economy class and to RO85 for the first class.

The news item has been warmly received by the citizens. But we still demand that the company offers further reductions which are more in line with the income of the citizens and take into account the cost of living and the price hike that has affected people from all walks of life. This reduction is demanded because the two-way air ticket costs only RO49 for the 45-minute flight while it takes 6 hours by ferry.

A committee comprising representatives of the Ministry of Tourism, the Ministry of Transport and Communications, the Ministry of Commerce and Industry, the Ministry of National Economy and Oman Chamber of Commerce and Industry should have been formed before the launch of the ferries to determine the right prices of tickets. But it seems the board of the National Ferry Company has fixed the prices without taking into account the opinion of the said authorities.

This shows that the decision to fix the prices of tickets is taken randomly by the NFC board, without any consultation or coordination with the government authorities concerned, which has shocked and upset the citizens and made this issue the talk of the town during the last two months.

This project is of vital significance and aimed at facilitating the movement of citizens and residents to and from the northern coastal areas as part of the government’s wise policy of boosting domestic tourism. For this purpose, the NFC should have financial support from the government in order to enable it to run such a project safely and efficiently. The company could, at present, reconsider the prices of tickets, though it may increase them gradually later on.

We once again appeal to the National Ferry Company to reconsider the ticket prices and suggest a two-way ticket of RO20 for adults and RO10 for children for the economy class provided the ticket price does not include provision of food and drinks. We also suggest that the two-way first class ticket should not cost more than RO50 and should not include food and drinks. The passengers could have their meals at the coffee shops on the ferry.

By doing this, the NFC could rightly achieve the objectives of its logo "navigation in nature" as many people will prefer to travel within the country by two of the fastest ferries in the world in complete comfort and safety.

Oman Ferries loosing money like crazy - take one of the most subsidised trips in the world today!

Word is the vaunted car/passenger ferries Oman purchased earlier this year - the car ferry without any jetties to load cars - are loosing money fast.

I heard that the average number of passengers on the Muscat - Kasab ferry run at the moment is 5 people. 5. Unfortunately, the ferry burns fuel like there's no tomorrow - 30,000 litres of diesel per trip. Plus the ferries were designed down in terms of weight to save money, and are therefore apparently more suitable for short, 1-2 hr type trips rather than the long 6hr+ run being used here. This means the maintainence programme is greater than anticipated, plus they are pretty high tech, so the work has to be done by expensive mechanics from Australia. So not only is the money being poured down its throat, the bills to keep it running are huge too.


Now, don't get me wrong. There's no doubt these are beautiful, world class, state of the art boats. The second ferry Hormuz just successfully broke the world speed record of its sister Shinas in July. However, as anyone who owns a boat knows, big engines and high speeds on water take 1 thing: lots and lots of hydrocarbons.

The organisational and business capability to ensure the boats are used efficiently and economically here in Oman has been a total unmitigated cock-up. Despite ordering the ferries 3 years ago, no jetties were built, nor Omani crew pre-trained. The demand for the service is obviously not great (especially as they can't put cars on them), plus there has been precious little marketing of the service either. The pricing structure is also a disaster - too expensive to come close to filling the boat or compete with going by air, but not enough to actually pay even the running costs, let alone getting capital and interest payments back. As a result, the things are just burning through the cash at a rate of knots, if you'll excuse the pun. I don't know who is responsible for the project, but he's damn lucky he's not working for me or investing my money.

I'd recommend taking a 3 day trip to Kasab as soon as possible, while you can. It'll be like having your own private multi-million dollar boat cruise. (although pack a nice lunch - food is apparently pretty spartan, and there isn't a bar either, so think about taking some magic masafi). The boats are beautiful, the trip is great, and the Ministry of National economy is paying most of your bill, so go for it!

Austal Ferry - Hormuz

Second Oman Ferry Betters Sister's Speed Record

The second of Austal’s two 65 metre vehicle-passenger ferries built for the Sultanate of Oman has become the first diesel-powered vehicle ferry to reach a speed of 56 knots. “Hormuz” recorded a maximum speed of 56 knots (103.7km/h) and a service speed of 52 knots during sea trials held near Henderson in Western Australia yesterday.

The feat makes it the fastest diesel-powered vehicle passenger ferry in the world – a title previously held by its sister vessel “Shinas”, which recorded a maximum speed of 55.9 knots last year.

The vessel is scheduled for delivery to Oman next month, where it will join “Shinas” in providing a new tourism service to Oman’s spectacular Musandam Peninsular as flagships of the Sultanate’s expanded marine transport network.

The unrivalled performance of the two 65 metre vehicle-passenger catamaran ferries showcases the world-class ability of the Austal design team, who successfully developed a new, customised, high efficiency hull design capable of delivering record-breaking performance, while Austal’s construction team managed to meet demanding weight targets.

Macki gets the cheque book out in Libya

In more local news, Oman agreed to form a $500 million joint investment company with Libya during the visit by His Majesty and senior Omani Government officials.

Hey, why not? Its obviously not proving easy to spend all the money Oman is currently coining with the high oil prices. The Government is already spending as much, if not more, than it sensibly can in Oman without the economy running white hot with inflation and running out of materials (and opportunities). And the main Government investment funds are also straining to find investment opportunities that meet the criteria.

So, this offers a quick spend of $250mln, a source of leverage and opportunity in a country with strong prospects for long-term growth, and a nice diplomatic coup for HM. There will undoubtedly also be opportunities for investments in Libya's upstream oil and gas sector, as the spending and exploration programs of the newly re-invited oil majors start to seek traction. Thus, I'd expect a potential follow through in Libya for companies like Renaissance Services, MB Petroleum, Galfar and Al Turki, as well as perhaps opportunities in pipe supply, real estate development, tourism etc.

Nice one.
S

ultanate, Libya ink MoU on joint venture
TRIPOLI As part of His Majesty Sultan Qaboos Bin Said’s visit to Libya, the Sultanate's government and the Libyan government signed a Memora-ndum of Understanding (MoU) on Wednesday to establish a joint holding company with a capital of $500 million at its headquarters in Tripoli.

The agreement was signed on behalf of the Sultanate's government by HE Ahmed Bin Abdul nabi Macki, Minister of National Economy and Supervisor of the Ministry of Finance, and Dr Ali Abdul Aziz Al Isawi, Secretary of the General People's Committee for Economy, Trade and Investment on behalf of the Libyan government. The ceremony was attended by Dr Al Baghdadi Ali Al Mahmoudi, Secretary-General of the General People's Committee.

"The MoU comes as crown and translation of His Majesty Sultan Qaboos Bin Said's visit to Libya and desire of the two countries to enhance and develop the existing cooperation in different domains, especially in economic and joint investment fields, said Macki.

"The aim of the joint holding company is to explore investment opportunities in industry, trade, tourism, real estate and banking institutions in both countries,” he added.

"The incorporation of a multi-purpose company is aimed at exploring investment opportunities that can develop economy in both countries,” he added.

The two sides agreed to establish a joint committee that will prepare the incorporation agreement of the holding company and explore the potential investment opportunities that can be undertaken by the proposed company.
...

Minister of Tourism Extends Her House onto Oil Company land?

A few of my contacts work at Petroleum Development Oman, the big pseudo-National oil and gas company in Oman. Talking over the amber nectar with them recently, they mentioned the big house extension being done in Qurm, right next to the Oil Company camp. Curiously, the house is being extended significantly into the PDO camp area land, and there was an issue with the construction crew working 24/7 and disturbing the residents nearby with their jack hammering and general banging.

The disturbing work going on at all times of the night has now been controlled, but the contractor apparently wasn't too keen to slow down the pace of work. Why? Because the house being extended belongs to Rajha bint Abdulameer bin Ali, the Omani Minister of Tourism .

There was some scuttlebutt from the PDO chaps about this somehow being related to the well advertised ambitions the Ministry of Tourism have to get their hands on the beautiful PDO prime real estate. Naturally, they want to build the usual few 5 star hotels and a massive housing development, golf course, etc. At present, the site is pretty sparsely populated with relatively old houses, occupied by the Expat and Senior Omani staff who work for PDO, which is handily situated just around the corner from the camp. [By the way, the low density, the sidewalks, and the generally more careful driving attitude is perhaps why it is one of the few residential areas in Muscat that is safe and pleasant for an evening stroll, safe for kids to play in, OK for bicycles, etc]. Anyhow, the land has always been owned by the Government, while the Oil Company just has an exclusive license to use it.

There doesn't seem to be any truth what-so-ever to this rumored connection to the MoT redevelopment plans, however, nor to the fact that Rajha is a Minister.

Dragon can reveal the Minister actually obtained the land some 10+ years ago, when she was not a Minister, and long before it was valued at some 1000+ rials per square m. She has owned the house for a long time, and I guess has always wanted to extend.

Interestingly, at the time Her Excellency got permission to take the land, she was a member of PDO’s Board of Directors, and just a humble Undersecretary at the Ministry of National Economy.

So that’s all right then.

Ministry of National Economy likely to weigh in soon

Yes, the Ministry of Commerce and Industry, through its puppet the Oman Chamber of Commerce and Industry, continue to fiddle while Oman's economy runs hotter and hotter. Khalil bin Abdullah al Khonji, Chairman of the Oman Chamber of Commerce and Industry (OCCI), met more 'representatives of private companies' and construction companies on how to deal with the inflation problem, this time in construction. See the hard-hitting journalistic excellence of the Times of Oman article .

Meanwhile, Oman has (again) run out of cement. Pretty ridiculous for a country blessed with large quantities of all the required ingredients: i.e. limestone, clay, and natural gas. Its not rocket science. And you'd think a Ministry with the word 'Industry' in it would be quick to claim responsibility for a country in the midst of a construction boom running out of the no. 1 thing you need to build industry with, wouldn't you? Hmm. Don't hold your breath.

Last week at a meeting with the OCCI, businessmen dealing with building materials had called for a collective import of steel and cement and urged the government to simplify the procedures for imports as construction in a number of projects had come to a standstill mainly due to non-availability of cement.

Notice how its made out to be the poor Custom's fault, and not MCI? Clever huh.

So, instead of fixing real problems, The Ministry of C & I continues with its King Canute-like approach to dealing with inflation, urging people to basically just buy cheap things, arm-twisting retailers to provide staples like flour and oil at below market prices, and importing fish from India. I guess it’s all they can do. IE Try as hard as they can to be seen to be 'doing something', with the press helping as much as they can.

Meanwhile, the real power is biding his time. Mr Mackie, Minister in charge of the Ministry of National Economy, is the only one with the authority and intellectual horsepower to actually do something about the problem. My friends say options are still being studied and finalised for presentation to MONE for decisions. So, expect something soon. The ineffectiveness of the MCI & OCCI must be a source of worry, however. Instead of keeping the public content by seeing something being done, and thus buy some time for preparation of some actual policies, it seems it is just emphasizing the perceived helplessness of the Government.

Time is short, Gentlemen. Get moving on those powerpoint slides.

As the clock ticks away, the dollar continues to fall, the demand within the economy raises almost exponentially, and inflation must be well above 15% right now. Although his Majesty’s recent instruction to raise salaries in the public sector, by up to 43% at the lowest grades, bought some time, the actual base salaries are so low that even such a dramatic looking raise doesn’t mean much more rials in the pocket. Most of their income comes from allowances, which aren’t counted in the pay raise.

Mackie infamously declined to increase Public Sector pay a couple of months ago, noting that it would just make the problem worse, and was then over-ruled by HM (or so it seemed, but maybe this overrule was by design to underline the principal role of guardian to the people HM still plays in Oman).

The Dragon looks forward to seeing what the response of MONE will be to what is rapidly becoming a very significant problem. And demonstrably too improtant to leave in the hands of the Chamber of Commerce.