Oman's $100 million joint investment with Vietnam
Ahmed bin Abdulnabi al-Macki's trip to the Far East appears to have been fruitful. Macki is Oman's Minister of National Economy. Aside from his launching of the giant crude oil tanker Mirbat in South Korea, he also wrapped up a deal in Vietnam on the 18th April.
The report of the meetings in the Times of Oman was couched strangely in diplomatic rather than commercial language. Macki and Vietnamese Finance Minister Vu Van Ninh were reported to have held talks, in which, "they discussed a number of issues that positively affect and further promote the joint cooperation in the field of commerce and economy between the two countries."
A year ago, Oman Oil Company (OOC) and PetroVietnam signed a memorandum of understanding in Muscat for joint cooperation in production and refining operations, exchange of expertise and joint investment, when Maqbool bin Ali Sultan, Oman’s minister of commerce and industry and OOC chairman, said that the MoU with PetroVietnam was part of OOC’s effort to widen its investments. Vietnam's production of crude oil is estimated at 350,000 barrels per day. The country has gas reserves of about 70 trillion cubic feet.
Vietnam's Deputy Prime Minister Nguyen Sinh Hung travelled to Muscat in December 2007. Macki announced then that in addition to the PetroVietnam agreement, Oman Oil, Oman Shipping and Omani Fund for Investment would start joint ventures in Vietnam.
In talks with Sayyid Fahd bin Mahmoud Al Said, Deputy Prime Minister of the Council of Ministers, "Hung also called for Oman to open its doors to more Vietnamese migrant workers, saying the country's well trained and experienced computer engineers, health workers and construction workers could help meet the sultanate's needs for skilled labour. This could be beneficial for the sultanate, which has been experiencing a shortage of manpower as well-trained employees leaving the country for better paying jobs elsewhere. [ ] A memorandum of understanding was signed [to this effect] on December 9 between Oman's manpower ministry and the Vietnamese social affairs ministry setting out the initial steps to allow for the exchange of labour between the two countries." from Oxford Business Group, 11th December 2007.
In 2006, Oman’s imports from Vietnam amounted to $ 5 million, while Oman’s exports to Vietnam stood at $ 2 million.
The signing of the trade deal last week was presumably an outcome of last year's consultations in Hanoi and Muscat.
Macki was reported to have said that "Oman wants to cooperate with Vietnam in finance-banking, oil and gas, coal, real estate and resort building. Oman is also willing to train and receive Vietnamese guest workers."
The Vietnamese News Media have been more forthcoming. Unspecified Omani companies signed an agreement to form a joint-venture company backed by $100 million, with Oman contributing 75% of the funds and the balance coming from Vietnam's State Capital Investment Corporation. Oman's State General Reserve, Oman's sovereign wealth fund, was named as an investor in Vinaconex Tourist Development (Vietnam Construction & Import - Export Corp), possibly through the Oman Investment Fund.
The World Travel and Tourism Council (WTTC) predicts that Vietnam has the world's fourth fastest growing tourist demand over the next ten years, certainly beating Oman.
Remarks by Philip Atkinson, Regional Director of Dubai-based Limitless, the international real estate arm of Dubai World, indicate that a lot of work is needed first to transform Vietnam's transport infrastructure before investing heavily in tourist development. Even so, the country has a policy similar to Oman in preferring to attract high-income tourists. As in Muscat, rooms in Ho Chi Minh City can come at a premium. Large stretches of pristine coastline could be transformed, not altogether for the better in my view, into prime waterfront real estate. See a report on Vietnam in this week's Economist.
The two countries also signed an agreement on double taxation avoidance and income tax evasion prevention.
The agreement provides for 1,000 Vietnamese labourers to come and train in Oman, presumably in the gas and oil sector. Furthermore, the report said that Oman also wanted to import 40,000-50,000 tonnes of Vietnamese rice.
Oman would be favoured if it received rice imports. The price of rice has risen 42% in the first quarter of 2008 as well as doubling last year. Vietnam is one of those countries that have imposed export restrictions on the grain thus contributing to the rocketing price of rice.
Thus in one stroke, the minister for national economy has alleviated labour supply and food shortage problems in Oman. How effectively remains to be seen.
NB. My apologies to anyone who read this item thinking that it really was a $1 billion deal. It's just that earlier reports had speculated that the amount COULD be $1 billion. Check the Vietnamese News Agency report for confirmation.
The report of the meetings in the Times of Oman was couched strangely in diplomatic rather than commercial language. Macki and Vietnamese Finance Minister Vu Van Ninh were reported to have held talks, in which, "they discussed a number of issues that positively affect and further promote the joint cooperation in the field of commerce and economy between the two countries."
A year ago, Oman Oil Company (OOC) and PetroVietnam signed a memorandum of understanding in Muscat for joint cooperation in production and refining operations, exchange of expertise and joint investment, when Maqbool bin Ali Sultan, Oman’s minister of commerce and industry and OOC chairman, said that the MoU with PetroVietnam was part of OOC’s effort to widen its investments. Vietnam's production of crude oil is estimated at 350,000 barrels per day. The country has gas reserves of about 70 trillion cubic feet.
Vietnam's Deputy Prime Minister Nguyen Sinh Hung travelled to Muscat in December 2007. Macki announced then that in addition to the PetroVietnam agreement, Oman Oil, Oman Shipping and Omani Fund for Investment would start joint ventures in Vietnam.
In talks with Sayyid Fahd bin Mahmoud Al Said, Deputy Prime Minister of the Council of Ministers, "Hung also called for Oman to open its doors to more Vietnamese migrant workers, saying the country's well trained and experienced computer engineers, health workers and construction workers could help meet the sultanate's needs for skilled labour. This could be beneficial for the sultanate, which has been experiencing a shortage of manpower as well-trained employees leaving the country for better paying jobs elsewhere. [ ] A memorandum of understanding was signed [to this effect] on December 9 between Oman's manpower ministry and the Vietnamese social affairs ministry setting out the initial steps to allow for the exchange of labour between the two countries." from Oxford Business Group, 11th December 2007.
In 2006, Oman’s imports from Vietnam amounted to $ 5 million, while Oman’s exports to Vietnam stood at $ 2 million.
The signing of the trade deal last week was presumably an outcome of last year's consultations in Hanoi and Muscat.
Macki was reported to have said that "Oman wants to cooperate with Vietnam in finance-banking, oil and gas, coal, real estate and resort building. Oman is also willing to train and receive Vietnamese guest workers."
The Vietnamese News Media have been more forthcoming. Unspecified Omani companies signed an agreement to form a joint-venture company backed by $100 million, with Oman contributing 75% of the funds and the balance coming from Vietnam's State Capital Investment Corporation. Oman's State General Reserve, Oman's sovereign wealth fund, was named as an investor in Vinaconex Tourist Development (Vietnam Construction & Import - Export Corp), possibly through the Oman Investment Fund.
The World Travel and Tourism Council (WTTC) predicts that Vietnam has the world's fourth fastest growing tourist demand over the next ten years, certainly beating Oman.
Remarks by Philip Atkinson, Regional Director of Dubai-based Limitless, the international real estate arm of Dubai World, indicate that a lot of work is needed first to transform Vietnam's transport infrastructure before investing heavily in tourist development. Even so, the country has a policy similar to Oman in preferring to attract high-income tourists. As in Muscat, rooms in Ho Chi Minh City can come at a premium. Large stretches of pristine coastline could be transformed, not altogether for the better in my view, into prime waterfront real estate. See a report on Vietnam in this week's Economist.
The two countries also signed an agreement on double taxation avoidance and income tax evasion prevention.
The agreement provides for 1,000 Vietnamese labourers to come and train in Oman, presumably in the gas and oil sector. Furthermore, the report said that Oman also wanted to import 40,000-50,000 tonnes of Vietnamese rice.
Oman would be favoured if it received rice imports. The price of rice has risen 42% in the first quarter of 2008 as well as doubling last year. Vietnam is one of those countries that have imposed export restrictions on the grain thus contributing to the rocketing price of rice.
Thus in one stroke, the minister for national economy has alleviated labour supply and food shortage problems in Oman. How effectively remains to be seen.
NB. My apologies to anyone who read this item thinking that it really was a $1 billion deal. It's just that earlier reports had speculated that the amount COULD be $1 billion. Check the Vietnamese News Agency report for confirmation.
No light yet at the end of the tunnel - inflation in Oman
Oman held a global economic forum this week. But the main news that reached the international press was that inflation had risen in the country by 11 % in February following a 10% rise in January. The rate of inflation has doubled within the last eight months. Basic foodstuffs have increased in price by 24-50% while rents have risen 14.1%.
The forum gave journalists the opportunity to question senior government and banking figures on the sidelines of the presentations.
Reuters, reported in the Khaleej Times, quoted the governor of the Central Bank of Oman, Hamood Sangour al-Zadjali as saying “Oman needs to slow economic expansion, on money we spend on big projects.”
This is easier said than done. Higher oil prices have lubricated the Sultanate's money supply. The projects to which Mr Al Zadjali was presumably alluding, have been underway for some years now. Since the CBO has been obliged to follow American monetary policy, it can't even raise interest rates to deter investment and spending.
The only anti-inflation measure that the CBO has been able to adopt has been to increase bank reserve requirements to five percent, thereby cutting the amount of money available for loans.
Numerous luxury real estate developments are in the pipeline. I don't read about developers building modest homes for people who haven't got the funds to snap up prime waterfront duplexes.
Still, in order to promote the Sultanate's avowed upmarket tourism policy, the country needs to build more luxury accommodation and hotel rooms, the price of cement and steel notwithstanding.
Mr al-Zadjali's other remark, that 'For private people like you and I, we need to reduce our personal spending and save more money, [so that] we can reduce consumption demand and reduce inflation. There is no other way.' was vaguely reminiscent of Queen Marie-Antoinette's response to being told that the people could not buy bread. 'Let them eat cake,' she replied.
Even when I was waiting in bank queues in Muscat eight years or so ago, friendly people told me of how they were in hock to the banks at high interest rates. Everybody seemed to be in debt.
His Majesty's generous gesture of a 43% pay rise to government employees in February, was really a gesture long overdue. It wasn't a universal pay hike. Senior civil servants at higher wage bands got just five percent. Salary scales had not altered in years. It would be more appropriate in future to make annual reviews and to raise pay scales accordingly.
On top of this, expatriates grumble about the diminishing value of their wages, since the Omani Riyal is linked to the US dollar. Where 70% of the national population is in government employ, there is a significant structural imbalance in the labour market.
I rather think that the consequences of aspiring to higher living standards while paying Asian labour rates, is catching up with the Gulf countries as a whole.
National Economy Minister Ahmad bin Abdul-Nabi Macki's statement that “There is no quick fix. [ ] Inflation will take its natural course in 2008," concurs with The Economist's view that the Gulf States are prepared to sit out the blip, in their estimate that the dollar will revive. After all, they have been down this road before with economic cycles of boom and retrenchments being caused by fluctuations in the price of oil. Except that this time, the price of oil shows no sign of stabilising at all soon.
And that was all Macki had to say on the matter, apparently, other than remarking that 'We took measures of reducing imports and we also we requested wholesalers to reduce prices.'
Government measures to control food and rent prices are well-intentioned but actually interfere with market processes. Where demand is high and supply is scarce, the 'laws' of economics indicate that prices will rise inexorably.
Well, it's not as if the country is broke.
Some light reading: The Subprime Crisis - and the Middle East from Zawya.
The forum gave journalists the opportunity to question senior government and banking figures on the sidelines of the presentations.
Reuters, reported in the Khaleej Times, quoted the governor of the Central Bank of Oman, Hamood Sangour al-Zadjali as saying “Oman needs to slow economic expansion, on money we spend on big projects.”
This is easier said than done. Higher oil prices have lubricated the Sultanate's money supply. The projects to which Mr Al Zadjali was presumably alluding, have been underway for some years now. Since the CBO has been obliged to follow American monetary policy, it can't even raise interest rates to deter investment and spending.
The only anti-inflation measure that the CBO has been able to adopt has been to increase bank reserve requirements to five percent, thereby cutting the amount of money available for loans.
Numerous luxury real estate developments are in the pipeline. I don't read about developers building modest homes for people who haven't got the funds to snap up prime waterfront duplexes.
Still, in order to promote the Sultanate's avowed upmarket tourism policy, the country needs to build more luxury accommodation and hotel rooms, the price of cement and steel notwithstanding.
Mr al-Zadjali's other remark, that 'For private people like you and I, we need to reduce our personal spending and save more money, [so that] we can reduce consumption demand and reduce inflation. There is no other way.' was vaguely reminiscent of Queen Marie-Antoinette's response to being told that the people could not buy bread. 'Let them eat cake,' she replied.
Even when I was waiting in bank queues in Muscat eight years or so ago, friendly people told me of how they were in hock to the banks at high interest rates. Everybody seemed to be in debt.
His Majesty's generous gesture of a 43% pay rise to government employees in February, was really a gesture long overdue. It wasn't a universal pay hike. Senior civil servants at higher wage bands got just five percent. Salary scales had not altered in years. It would be more appropriate in future to make annual reviews and to raise pay scales accordingly.
On top of this, expatriates grumble about the diminishing value of their wages, since the Omani Riyal is linked to the US dollar. Where 70% of the national population is in government employ, there is a significant structural imbalance in the labour market.
I rather think that the consequences of aspiring to higher living standards while paying Asian labour rates, is catching up with the Gulf countries as a whole.
National Economy Minister Ahmad bin Abdul-Nabi Macki's statement that “There is no quick fix. [ ] Inflation will take its natural course in 2008," concurs with The Economist's view that the Gulf States are prepared to sit out the blip, in their estimate that the dollar will revive. After all, they have been down this road before with economic cycles of boom and retrenchments being caused by fluctuations in the price of oil. Except that this time, the price of oil shows no sign of stabilising at all soon.
And that was all Macki had to say on the matter, apparently, other than remarking that 'We took measures of reducing imports and we also we requested wholesalers to reduce prices.'
Government measures to control food and rent prices are well-intentioned but actually interfere with market processes. Where demand is high and supply is scarce, the 'laws' of economics indicate that prices will rise inexorably.
Well, it's not as if the country is broke.
Some light reading: The Subprime Crisis - and the Middle East from Zawya.
Majlis al-Djinn cave closed
I read a couple of weeks ago of the closure of the Majlis al-Djinn cave (Chamber of the Genie, in translation) to the public. It was discovered by Don Davison, an American hydrogeologist mapping the limestone plateau of Sharquiyah for the then Public Authority for Water Resources, in 1983. The PAWR published a full-colour brochure about the cave illustrating its immensity.
If you are able to track down a copy, the reference to this brochure is:
Davison Jr, W. Don 1985 Majlis Al Jinn Cave, Sultanate of Oman Public Authority for Water Resources, Report PAWR-20, October 1985
Adventure and ecotourism companies are irked, apparently, because they can no longer take paying visitors to go and see the site. I have some sympathy with the authorities over this. It's far more clear-cut to issue a total ban, rather than a permissive one when rangers might not be able to argue over permits and safety measures with persuasive guides. The location of the cave is relatively remote. Should a rescue operation be required, I suspect the public cost and logistics would be deemed untenable.
No such foibles seem to deter trekkers on the Snake Gorge challenge in Wadi bani Awf, which carves through the Al Hajar mountains south of Rustaq. You will note a warning on the page that the walk is dangerous. A friend of mine had to be airlifted out in 2001 after he misjudged a jump from a rock into a pool and hurt his back seriously.
I also remember the tragedy of June 1996 when eight hikers were swept down the gorge and drowned in a flash flood. I happen to remember returning from a walk on the beach in Muscat before 10 am that morning. Already, the clouds were tumbling over the top of the mountains, a sure sign of thunderstorms and rain later in the day.
Never be caught in a wadi if there is the slightest suspicion of rain.
If you are able to track down a copy, the reference to this brochure is:
Davison Jr, W. Don 1985 Majlis Al Jinn Cave, Sultanate of Oman Public Authority for Water Resources, Report PAWR-20, October 1985
Adventure and ecotourism companies are irked, apparently, because they can no longer take paying visitors to go and see the site. I have some sympathy with the authorities over this. It's far more clear-cut to issue a total ban, rather than a permissive one when rangers might not be able to argue over permits and safety measures with persuasive guides. The location of the cave is relatively remote. Should a rescue operation be required, I suspect the public cost and logistics would be deemed untenable.
No such foibles seem to deter trekkers on the Snake Gorge challenge in Wadi bani Awf, which carves through the Al Hajar mountains south of Rustaq. You will note a warning on the page that the walk is dangerous. A friend of mine had to be airlifted out in 2001 after he misjudged a jump from a rock into a pool and hurt his back seriously.
I also remember the tragedy of June 1996 when eight hikers were swept down the gorge and drowned in a flash flood. I happen to remember returning from a walk on the beach in Muscat before 10 am that morning. Already, the clouds were tumbling over the top of the mountains, a sure sign of thunderstorms and rain later in the day.
Never be caught in a wadi if there is the slightest suspicion of rain.