After the ball is over - the AGCC summit in Muscat 2008
The AGCC summit has come and gone. Has the AGCC entourage of officials, civil servants, domestics, reporters grown in comparison with recent years? Or was there a demand for increased, rigorous security? Possibly a combination of both in order to explain the almost complete closure of Muscat's 5-star hotels and main roads over the Christmas and New Year holiday season. There would probably have been a 'dry' day in most resorts on the occasion of the Islamic New Year and the arrival of the sacred month of Muharram.
Arrangements for the summit were well in train before the terrorist attacks in Mumbai. Mumbai is uncomfortably close to the Gulf. A story appeared in The Hindu Business Line of 7th December, of an Omani youth being arrested in Goa. Apparently, he had been browsing al-Qaeda content in an Internet cafe. Not speaking English, he was alleged to have been browsing Arabic language sites. It transpired that his visit visa had run out.
The Israeli assault on Gaza overshadowed the conference. An AFP report suggested that Saudi Arabia had rejected a follow-up meeting of Gulf presidents to discuss the situation in Qatar next week, as merely a "summit of statements" and therefore a futile gesture.
It's not surprising that the AGCC leaders would not be tempted to be over-eloquent in condemning Israeli action and supporting Hamas. Hamas grew out of the Palestinian wing of the Muslim Brotherhood in the late 1960s. The Muslim Brotherhood is a banned organisation throughout the Arab world, notably in Egypt, where its members have been branded as terrorists. Ironically, "much of Hamas's funding came from Palestinian expatriates and private donors in Saudi Arabia and other oil-rich Persian Gulf states."
Although the Muslim Brotherhood, which is committed to Islamise societies and introduce sharia law, professes non-violence, al-Qaeda has "historical and ideological affiliations with the Egyptian Brotherhood."
Gulf Monetary Union
Monetary union of the Gulf currencies was the projected theme of this year's conference. Agreement was reached. All the technical work had been done before the leaders met. So news of the new currency's name, the 'khaliji', and of the date by which monetary union would be enacted, December 2009, were in the public sphere before being ratified by the AGCC leaders.
A Gulf monetary union and common currency would enable the Gulf economies to become independent of global economic pressure caused by being pegged to a fluctuating US dollar, on which the price of oil is based, or so the theory goes.
While correcting a broken link in this article, I came across another story which chimed with my own perceptions:
Oman withdrew from plans to join the monetary union in 2006, saying that its economy was not ready. Not only that, Minister for National Economy, Ahmed bin Abdul Nabi Makki, again confirmed this week the Sultanate's view that the region itself was not ready for monetary union.
HM Sultan Qaboos bin Said al-Said's opening remarks to the conference, calling for a mechanism to stablise oil prices, emphasises that Oman believes efforts would be better devoted to broad international discussion of economic conditions.
Only the monetary union is to be launched in January 2010. Decisions on the single currency and the location of the Gulf Central Bank require further discussion.
Both Oman and Kuwait cut their interest rates in December, following Federal Reserve rates, even though interest rate cuts can worsen inflation. Oman's inflation rate did fall to 13.4% in September 2008, just 0.3% less compared with the inflation rate in August.
The Muscat Declaration
The summit concluded with another Muscat Declaration.
More details emerged in stories published by the Times of Oman. Statements were agreed regarding
I hope the journalists had a great time while staying at the Muscat Intercontinental Hotel where they were treated to an exhibition of books published in the Gulf countries. Most of the books were apparently in Arabic.
All in all, as one has learned to expect from AGCC summits, nothing emerged which was likely to be beyond polite interest. Officially that is.
Free Trade Agreements
The Oman-USA FTA came into force on 1st January 2009, which many believe will mean an influx of American companies bidding for work, protected by the FTA rules. Apparently, US exports will become less expensive in Oman. Does that mean that the streets of Muscat will be flooded with American rather than Japanese or German cars? It's naughty I know, but I can't help imagine Muscat becoming a haven for all those cars and SUVs that the distressed American car industry hasn't been able to sell back home.
Labour agreements signed between India and Oman in November were presumably a precursor to full implementation on the labour rules' side.
Not such good news for the Gulf's trade agreement with the European Union. "General-secretary of the GCC, Abdul Rahman Al Attiyah, announced suspension of negotiations [in mid-December 2008] until further notice. He stipulated the EU signing a draft accord as a condition for resumption of talks." Bur a free trade agreement with Singapore was agreed at the summit.
Arrangements for the summit were well in train before the terrorist attacks in Mumbai. Mumbai is uncomfortably close to the Gulf. A story appeared in The Hindu Business Line of 7th December, of an Omani youth being arrested in Goa. Apparently, he had been browsing al-Qaeda content in an Internet cafe. Not speaking English, he was alleged to have been browsing Arabic language sites. It transpired that his visit visa had run out.
The Israeli assault on Gaza overshadowed the conference. An AFP report suggested that Saudi Arabia had rejected a follow-up meeting of Gulf presidents to discuss the situation in Qatar next week, as merely a "summit of statements" and therefore a futile gesture.
It's not surprising that the AGCC leaders would not be tempted to be over-eloquent in condemning Israeli action and supporting Hamas. Hamas grew out of the Palestinian wing of the Muslim Brotherhood in the late 1960s. The Muslim Brotherhood is a banned organisation throughout the Arab world, notably in Egypt, where its members have been branded as terrorists. Ironically, "much of Hamas's funding came from Palestinian expatriates and private donors in Saudi Arabia and other oil-rich Persian Gulf states."
Although the Muslim Brotherhood, which is committed to Islamise societies and introduce sharia law, professes non-violence, al-Qaeda has "historical and ideological affiliations with the Egyptian Brotherhood."
Gulf Monetary Union
Monetary union of the Gulf currencies was the projected theme of this year's conference. Agreement was reached. All the technical work had been done before the leaders met. So news of the new currency's name, the 'khaliji', and of the date by which monetary union would be enacted, December 2009, were in the public sphere before being ratified by the AGCC leaders.
A Gulf monetary union and common currency would enable the Gulf economies to become independent of global economic pressure caused by being pegged to a fluctuating US dollar, on which the price of oil is based, or so the theory goes.
While correcting a broken link in this article, I came across another story which chimed with my own perceptions:
The years of difficulties, delays and doublespeak suggest that there is more chance of Bahrain winning the football World Cup in 2010, than there is of you or I being asked to settle a bill in khaleeji, or whatever Gulf leaders elect to name the currency.Single currency? Meh!. If that link gives up working, look for the title on Arabian Business dated 17th December 2008.
Oman withdrew from plans to join the monetary union in 2006, saying that its economy was not ready. Not only that, Minister for National Economy, Ahmed bin Abdul Nabi Makki, again confirmed this week the Sultanate's view that the region itself was not ready for monetary union.
HM Sultan Qaboos bin Said al-Said's opening remarks to the conference, calling for a mechanism to stablise oil prices, emphasises that Oman believes efforts would be better devoted to broad international discussion of economic conditions.
Only the monetary union is to be launched in January 2010. Decisions on the single currency and the location of the Gulf Central Bank require further discussion.
Both Oman and Kuwait cut their interest rates in December, following Federal Reserve rates, even though interest rate cuts can worsen inflation. Oman's inflation rate did fall to 13.4% in September 2008, just 0.3% less compared with the inflation rate in August.
The Muscat Declaration
The summit concluded with another Muscat Declaration.
"the Sultanate praises the decision of the AGCC ministers responsible for environmental affairs, in granting a periodical award in the name of the Arab Gulf Cooperation Council for outstanding environmental activities. The award aims to raise the level of environmental understanding and awareness among the peoples of the region, and to encourage individuals and institutions to research, create, and innovate in order to devise suitable solutions for contemporary environmental issues."His Majesty Sultan Qaboos bin Said al Said is going to pay for this award.
More details emerged in stories published by the Times of Oman. Statements were agreed regarding
- increasing piracy in the Gulf of Aden and the Red Sea
- membership of the Yemeni Republic at the AGCC Standardisation Authority and Gulf Organisation for Industrial Consultancy, the AGCC Auditing Authority and Gulf Radio and TV
- Withdrawal by Israel to pre-1967 borders
- the UAE's right to islands in the Gulf currently occupied by Iran
- tricky one this - importance of abiding by international principles and resolving dispute with Iran by diplomatic means
- keeping the region free from nuclear weapons whilst reserving the right to use nuclear energy for peaceful purposes
- the necessity of maintaining the sovereignty, territorial unity (note) and independence of Iraq.
A communiqué issued at the end of the two-day summit strongly condemned the “painful events in Gaza and the destruction inflicted by the brutal Israeli military without any human consideration or legitimacy”.In addition, the summit agreed to the establishment of a "basic statute of the AGCC anti-drugs criminal information centre due to be established in Qatar" and congratulated Bahrain on the security measures it had taken during recent disturbances. In general, the attendees confirmed that it was essential to share information to combat terrorism. Full details in the Times of Oman.
I hope the journalists had a great time while staying at the Muscat Intercontinental Hotel where they were treated to an exhibition of books published in the Gulf countries. Most of the books were apparently in Arabic.
All in all, as one has learned to expect from AGCC summits, nothing emerged which was likely to be beyond polite interest. Officially that is.
Free Trade Agreements
The Oman-USA FTA came into force on 1st January 2009, which many believe will mean an influx of American companies bidding for work, protected by the FTA rules. Apparently, US exports will become less expensive in Oman. Does that mean that the streets of Muscat will be flooded with American rather than Japanese or German cars? It's naughty I know, but I can't help imagine Muscat becoming a haven for all those cars and SUVs that the distressed American car industry hasn't been able to sell back home.
Labour agreements signed between India and Oman in November were presumably a precursor to full implementation on the labour rules' side.
Not such good news for the Gulf's trade agreement with the European Union. "General-secretary of the GCC, Abdul Rahman Al Attiyah, announced suspension of negotiations [in mid-December 2008] until further notice. He stipulated the EU signing a draft accord as a condition for resumption of talks." Bur a free trade agreement with Singapore was agreed at the summit.
Blue City bonds junked - appears in The National, published Abu Dhabi
News has finally been published in Abu Dhabi's The National about Moody's downrating of Blue City bonds.
I first wrote about this after spotting a couple of sentences in Project Finance magazine three weeks ago. Also see Interesting Times for Blue City. There was a lot of discussion but few verifiable facts.
The National's article confirms that
Mr al-Lawati did say that the Omani government was committed to all outstanding real estate projects, perhaps opening the door for an injection of government cash at some stage. That would be complicated by outstanding legal issues.
He bewailed, "How can any Omani expect foreign investors to act if they themselves do not believe in the project?"
Food for thought. But more than that, how do nationals connect with the declared government objective of diversifying from oil? Al Madina al-Zarqa was intended to provide stimulus to this goal, creating a micro-economy in its own right, with jobs and services.
If Omanis can't identify with that goal, why not?
I first wrote about this after spotting a couple of sentences in Project Finance magazine three weeks ago. Also see Interesting Times for Blue City. There was a lot of discussion but few verifiable facts.
The National's article confirms that
"Moody’s Investor Services downgraded about US$399 million (Dh1.47 billion) of senior notes to “Ba1” from “Baa3”. The rating is now below investment grade. An official at Moody's said the project "had entered a challenging period."Wael al Lawati, the chief executive of Omran, the government's tourism and development company, was reported to have said that sales are slowing and credit harder to come by, particularly for projects in their earliest stages, such as Blue City.
As of August, the company in charge of the first phase of development, Blue City Investments 1, had booked only $30.6m in sales, compared with a target of $101m. In an interview in September, Mr Russell told The National that sales had risen closer to $50m, but that was well below the Nov 7 target of $186m."
Mr al-Lawati did say that the Omani government was committed to all outstanding real estate projects, perhaps opening the door for an injection of government cash at some stage. That would be complicated by outstanding legal issues.
"Blue City officials said they would not disclose the project’s sales for the current period or comment on the Moody’s report."The Times of Oman published an article about a visit to Al Madina al-Zarqa (the new name for the project) from International College of Engineering and Management and German University of Technology in Oman two days ago. Marketing staff explained the purpose of the city and showed a video presentation. It wasn't clear whether students actually went on site but I noted that:
"The visit also highlighted the importance of occupational safety on site, especially in large projects such as Al Madina A’Zarqa – which has until now recorded two million man hours without injuries and over 500 hours without a loss time injury (LTI)."I did have an email from someone employed on the project yesterday who assured me that both Turkish and Greek contractors were on site, working for AECO LLC.
He bewailed, "How can any Omani expect foreign investors to act if they themselves do not believe in the project?"
Food for thought. But more than that, how do nationals connect with the declared government objective of diversifying from oil? Al Madina al-Zarqa was intended to provide stimulus to this goal, creating a micro-economy in its own right, with jobs and services.
If Omanis can't identify with that goal, why not?
Moody's said to have junked Blue City Bonds
The only access I have to this news is a two-line snippet from Project Finance magazine. So if anyone has any more detailed factual, rather than speculative or judgemental information, they are welcome to share it.
The $399 million 'A1' tranche has been cut from Baa3 to Ba1 because sales of units are well below what is required.
The $399 million 'A1' tranche has been cut from Baa3 to Ba1 because sales of units are well below what is required.
MSM gets National Day present of RO150 million
World news agencies reported yesterday that Oman's minister of commerce and industry, Maqbool Ali Sultan, had announced a RO150 million (US$389 million) bail-out of the Muscat Securities Market (MSM), Oman's stock market.
The value of the MSM index has fallen from 11554.69 points at the end of May 2008 to 5,846.19 on November 17th.
In October, Mr Sultan had attempted to allay fears of a financial meltdown, reminding his listeners that Oman had one of the best-performing markets in the Gulf countries, even though it is the smallest bourse, and that the 'earning per share is slightly less than 9 per cent.'
Furthermore, "profits had grown by more than 42% in the third quarter of this year. Listed companies had achieved 54 per cent growth or RO411 million profits during the first half of this year against RO266 million in the same period last year."
At the end of March this year, 30% of stocks were owned by foreign investors. These investors have retreated and the loss of confidence has been contagious. Even successful companies such as Galfar Engineering and Renaissance Services have not been immune from selling.
The Omani government is putting in 60% of the bail-out funds while the private sector and pension funds are contributing the remaining 40%. The objective is to buy up shares that no-one else wants to buy, in a bid to stabilise the market.
Care will be needed in deciding when it would be appropriate for the fund to resell the shares it has bought back to the market, in order to avoid another downward spiral in prices. The question remains as to whether the move was in response to broad market conditions or as a result of pressure from small investors.
The market gained three percent once the news had been announced.
Oman's fund is modest. Kuwait's sovereign wealth fund is to pump at least 1billion Kuwaiti dinars into Kuwait's stock exchange over the next five years, while the "Qatar Investment Authority said last month that it would buy between 10 per cent and 20 per cent of banks’ shares on the Qatar bourse, at a cost of about $5.3bn."
The value of the MSM index has fallen from 11554.69 points at the end of May 2008 to 5,846.19 on November 17th.
In October, Mr Sultan had attempted to allay fears of a financial meltdown, reminding his listeners that Oman had one of the best-performing markets in the Gulf countries, even though it is the smallest bourse, and that the 'earning per share is slightly less than 9 per cent.'
Furthermore, "profits had grown by more than 42% in the third quarter of this year. Listed companies had achieved 54 per cent growth or RO411 million profits during the first half of this year against RO266 million in the same period last year."
At the end of March this year, 30% of stocks were owned by foreign investors. These investors have retreated and the loss of confidence has been contagious. Even successful companies such as Galfar Engineering and Renaissance Services have not been immune from selling.
The Omani government is putting in 60% of the bail-out funds while the private sector and pension funds are contributing the remaining 40%. The objective is to buy up shares that no-one else wants to buy, in a bid to stabilise the market.
Care will be needed in deciding when it would be appropriate for the fund to resell the shares it has bought back to the market, in order to avoid another downward spiral in prices. The question remains as to whether the move was in response to broad market conditions or as a result of pressure from small investors.
The market gained three percent once the news had been announced.
Oman's fund is modest. Kuwait's sovereign wealth fund is to pump at least 1billion Kuwaiti dinars into Kuwait's stock exchange over the next five years, while the "Qatar Investment Authority said last month that it would buy between 10 per cent and 20 per cent of banks’ shares on the Qatar bourse, at a cost of about $5.3bn."
Videos of His Majesty's speech to the Council of Oman
Thanks to a friend on Facebook, I became aware that two videos have been posted to YouTube, of His Majesty Sultan Qaboos' speech to the Council of Oman yesterday.
I would recommend viewing them, since the visual impact indicates the power of the speaker. The videos are good quality and have English sub-titles. Read a transcript of the speech on the Times of Oman website.
In Part 1, His Majesty highlights the need for education and training of Omanis, particularly in Information and Communications Technology. He exhorts institutions within the country to implement and/or upgrade their IT systems in order to provide services.
Part 2 of the speech shows His Majesty warning government officials that they are in office to serve the nation and not to seek power and influence for themselves, which can be interpreted as an injunction against corruption. He refers to the current global financial system but brushes over the impact this might have on development programmes. He does announce that the country is to look into alternative energy sources and food security.
Apparently, the Omani Authority for Electricity Regulation published a report in June this year which concluded that "large-scale solar-thermal plants have the potential to provide sufficient electricity to meet all of Oman's domestic electricity requirements, as well as generating electricity for export, [as well as] significant wind energy potential in coastal areas to the south of Oman and in the mountains north of Salalah."
Food security? That's going to be hard without more water supplies. Unless taking over farms in other countries could guarantee food supply.
His Majesty finished by saying that "our international cooperation is in line with the Sultanate’s higher interests." He looked forward to the AGCC summit which would be held in Muscat "soon."
I would recommend viewing them, since the visual impact indicates the power of the speaker. The videos are good quality and have English sub-titles. Read a transcript of the speech on the Times of Oman website.
In Part 1, His Majesty highlights the need for education and training of Omanis, particularly in Information and Communications Technology. He exhorts institutions within the country to implement and/or upgrade their IT systems in order to provide services.
Part 2 of the speech shows His Majesty warning government officials that they are in office to serve the nation and not to seek power and influence for themselves, which can be interpreted as an injunction against corruption. He refers to the current global financial system but brushes over the impact this might have on development programmes. He does announce that the country is to look into alternative energy sources and food security.
Apparently, the Omani Authority for Electricity Regulation published a report in June this year which concluded that "large-scale solar-thermal plants have the potential to provide sufficient electricity to meet all of Oman's domestic electricity requirements, as well as generating electricity for export, [as well as] significant wind energy potential in coastal areas to the south of Oman and in the mountains north of Salalah."
Food security? That's going to be hard without more water supplies. Unless taking over farms in other countries could guarantee food supply.
His Majesty finished by saying that "our international cooperation is in line with the Sultanate’s higher interests." He looked forward to the AGCC summit which would be held in Muscat "soon."
China involved in an Iran-Oman gas deal?
Following HE Mohammed al-Rumhi's stonewalling on whether Oman had signed an agreement to import gas from Iran, the Iranian media was quick to issue confirmation from their side that such a deal had been agreed last April and that details were being negotiated with an end-date of March 2009. Stories appeared on Press TV and Fars News Agency websites. The stories were more cautious than earlier reports in September, quoting Rumhi's comments at the ADIPEC conference, and saying only that Oman was considering such a move.
Oman may be playing a waiting game, possibly dependent on the outcome of the US elections, although equally dependent on whether the charges that Iran will make for its gas are acceptable. Its cousin in the Gulf, Bahrain, has already stated that it will press ahead with negotiations to buy gas from Iran, despite any possible objections from the USA, with which, like Oman, it has a free-trade agreement. The Financial Times of 23rd October quoted observers as doubting that the deal would go ahead given Bahrain's reliance on both Saudi Arabia and the USA, neither of which have could be described as having good relations with the Iranian Islamic Republic. The article speculated that Bahrain might be trying to 'persuade' Saudi Arabia to intervene with Qatar which has put a moratorium on its North Field until 2010, by 'flirting' with the idea of importing gas from Iran.
Oman has already begun to receive gas from Qatar via the Dolphin pipeline , but needs substantially more to fuel its power needs and development projects .
More worryingly for Oman, speculation has appeared on a Texas-based ezine website called Energy Tribune that China is trying to obtain oil from Iran using Oman's LNG facility. I quote:
While this speculation may be too far-fetched, it's impossible to entirely refute it without more detailed information being published.
Oman may be playing a waiting game, possibly dependent on the outcome of the US elections, although equally dependent on whether the charges that Iran will make for its gas are acceptable. Its cousin in the Gulf, Bahrain, has already stated that it will press ahead with negotiations to buy gas from Iran, despite any possible objections from the USA, with which, like Oman, it has a free-trade agreement. The Financial Times of 23rd October quoted observers as doubting that the deal would go ahead given Bahrain's reliance on both Saudi Arabia and the USA, neither of which have could be described as having good relations with the Iranian Islamic Republic. The article speculated that Bahrain might be trying to 'persuade' Saudi Arabia to intervene with Qatar which has put a moratorium on its North Field until 2010, by 'flirting' with the idea of importing gas from Iran.
Oman has already begun to receive gas from Qatar via the Dolphin pipeline , but needs substantially more to fuel its power needs and development projects .
More worryingly for Oman, speculation has appeared on a Texas-based ezine website called Energy Tribune that China is trying to obtain oil from Iran using Oman's LNG facility. I quote:
China is now trying to get Iran’s energy supply in a roundabout way. CNPC is in talks with Oman to build or use its existing energy infrastructure to import Iran’s LNG. In so doing, CNPC hopes to dilute possible U.S. criticism. CNPC is also eager to secure a contract to develop the second phase of Iran’s Kish gas field. It is doing an independent study to build a pipeline to move the Kish gas to Oman’s Qalhat LNG plant for liquefaction, and then ship the fuel to China.Qalhat LNG did indeed sign a master sale and purchase agreement with China National Offshore Oil Corporation (CNOOC) in September with little in the way of detail on what the agreement involved. Reportedly, Oman has restricted exports of its own LNG in order to fulfil its domestic needs, so how is the country in a position to agree to further exports?
While this speculation may be too far-fetched, it's impossible to entirely refute it without more detailed information being published.
Oman's oil minister blames financial crisis for possible project slowdown
Oman's Oil and Gas minister, HE Mohammad bin Hamad bin Seif al-Rumhy, has conceded that Oman will have to slow down oil and gas development projects and possibly also the Duqm Refining and Petrochemical Complex as a result of the global financial crisis.
Rumhi was talking to a Reuters correspondent at the Abu Dhabi International Petroleum Exhibition and Conference at which Gordon Brown, the British Prime Minister, spoke at his first appointment in the UAE, on his four-day tour of the Gulf. Brown is seeking to raise funds at the conference on behalf of the International Monetary Fund (IMF) to assist countries badly hit by the crisis.
Although Rumhi's pronouncement might be thought to tally with the caution that could accompany drafting of next year's budget, (see my previous posting) , he stated that the problem actually lies with external project finance. It's far more difficult to raise funds now than even just six months ago. Even if foreign loans are to pay for these downstream projects, Oman has to guarantee the payback.
It doesn't help that the development costs are rising.
And while Iran remains ebullient about Oman's cooperation in development of the Kish oil field, Rumhi would say only that talks are still ongoing.
The UAE's oil minister announced this morning that the UAE had implemented oil production cuts agreed by OPEC. Kuwait and Nigeria were said to have informed customers that there would be cuts in supply from December. Iran is reported to have told the Indian Oil Corporation that supply would be reduced by 5% from this month. But there's no word yet of imminent production cuts by Saudi Arabia, the biggest oil producer.
Oman is not a member of OPEC, but keeps an interested watching brief. Read this very interesting background on HE Muhammad al-Rumhi, his plans for Petroleum Development Oman and Qalhat LNG, and the development of Oman's oil and gas industry. Rumhi's stated aim is to optimise oil and gas production as a long-term strategy in Oman.
-----------
As a measure of the impact of inflation in Oman, the total cost of The Wave, a real estate project near Muscat has doubled from '$2 billion (Dh7.3bn) to $4bn since its launch nearly two years ago.' Nick Smith, the CEO, blamed inflation for 15-20% of the increase in project cost. The remainder is due to the increased construction costs for building 'new phases and hotels.' ie, amending the project spec.
Rumhi was talking to a Reuters correspondent at the Abu Dhabi International Petroleum Exhibition and Conference at which Gordon Brown, the British Prime Minister, spoke at his first appointment in the UAE, on his four-day tour of the Gulf. Brown is seeking to raise funds at the conference on behalf of the International Monetary Fund (IMF) to assist countries badly hit by the crisis.
Although Rumhi's pronouncement might be thought to tally with the caution that could accompany drafting of next year's budget, (see my previous posting) , he stated that the problem actually lies with external project finance. It's far more difficult to raise funds now than even just six months ago. Even if foreign loans are to pay for these downstream projects, Oman has to guarantee the payback.
It doesn't help that the development costs are rising.
And while Iran remains ebullient about Oman's cooperation in development of the Kish oil field, Rumhi would say only that talks are still ongoing.
The UAE's oil minister announced this morning that the UAE had implemented oil production cuts agreed by OPEC. Kuwait and Nigeria were said to have informed customers that there would be cuts in supply from December. Iran is reported to have told the Indian Oil Corporation that supply would be reduced by 5% from this month. But there's no word yet of imminent production cuts by Saudi Arabia, the biggest oil producer.
Oman is not a member of OPEC, but keeps an interested watching brief. Read this very interesting background on HE Muhammad al-Rumhi, his plans for Petroleum Development Oman and Qalhat LNG, and the development of Oman's oil and gas industry. Rumhi's stated aim is to optimise oil and gas production as a long-term strategy in Oman.
-----------
As a measure of the impact of inflation in Oman, the total cost of The Wave, a real estate project near Muscat has doubled from '$2 billion (Dh7.3bn) to $4bn since its launch nearly two years ago.' Nick Smith, the CEO, blamed inflation for 15-20% of the increase in project cost. The remainder is due to the increased construction costs for building 'new phases and hotels.' ie, amending the project spec.
Implications of Oman's budget estimates for 2009
Last week, the Financial Affairs and Energy Resources Council reviewed the state budget estimates for the coming year, which will be unveiled at the beginning of January 2009.
Government ministries will have been working for months on their own budget estimates before figures were presented to this meeting.
On the day that the article was published, the price of Oman 1M oil was trading at around $65 a barrel. Today, the price stands at just over $58 a barrel, up by $4 a barrel from the previous day's closure.
In the face of an obvious global financial downturn, the Council nevertheless chose to set the state budget "on the assumption that oil will be priced at $55 per barrel."
This budget estimate was still more generous than that for the 2008 budget which was set at £45 a barrel. Considerable detail on budgetary figures and expenditure for 2008 is included in that article.
In January this year, a report from Moody's Investors was quoted by Emirates 24/7 as saying that GCC countries, of which Oman is one, could find it hard to curb expenditure growth in the face of rising inflation. For example, Oman hiked the salaries of government employees by 15% in 2007 as inflation began to bite.
Oman's inflation rate has risen by double figures every month this year. Inflation slowed from 14% in June to 13.7% in July but remained unchanged in August.
Perhaps the quoted figure of $55 reflects what is needed to maintain required levels of government spending as well as to sustain the development plans announced at the beginning of the year.
Nevertheless, a breakeven price of $76 a barrel has been quoted for Oman, bearing in mind that economists do differ substantially over actual figures.
Will there be retrenchment, or a standing-still?
"Oman’s actual budget surplus peaked at an all-time high of RO1.567 billion in the first eight months of 2008 compared with a surplus of RO652.4m in the same period of 2007" according to the Times of Oman on 23rd October. With luck, the State Reserve Fund will be able to step in and cover any deficit, should that be required.
I noted this paragraph in the January story, quoting Ahmed bin Abdulnabi Macki, minister of national economy and deputy chairman of the Financial Affairs and Energy Resources Council:
Government ministries will have been working for months on their own budget estimates before figures were presented to this meeting.
On the day that the article was published, the price of Oman 1M oil was trading at around $65 a barrel. Today, the price stands at just over $58 a barrel, up by $4 a barrel from the previous day's closure.
In the face of an obvious global financial downturn, the Council nevertheless chose to set the state budget "on the assumption that oil will be priced at $55 per barrel."
This budget estimate was still more generous than that for the 2008 budget which was set at £45 a barrel. Considerable detail on budgetary figures and expenditure for 2008 is included in that article.
In January this year, a report from Moody's Investors was quoted by Emirates 24/7 as saying that GCC countries, of which Oman is one, could find it hard to curb expenditure growth in the face of rising inflation. For example, Oman hiked the salaries of government employees by 15% in 2007 as inflation began to bite.
Oman's inflation rate has risen by double figures every month this year. Inflation slowed from 14% in June to 13.7% in July but remained unchanged in August.
Perhaps the quoted figure of $55 reflects what is needed to maintain required levels of government spending as well as to sustain the development plans announced at the beginning of the year.
Nevertheless, a breakeven price of $76 a barrel has been quoted for Oman, bearing in mind that economists do differ substantially over actual figures.
Will there be retrenchment, or a standing-still?
"Oman’s actual budget surplus peaked at an all-time high of RO1.567 billion in the first eight months of 2008 compared with a surplus of RO652.4m in the same period of 2007" according to the Times of Oman on 23rd October. With luck, the State Reserve Fund will be able to step in and cover any deficit, should that be required.
I noted this paragraph in the January story, quoting Ahmed bin Abdulnabi Macki, minister of national economy and deputy chairman of the Financial Affairs and Energy Resources Council:
With regard to the tourism sector, upon which the Sultanate very much counts, in view of its several potentials, the preliminary data for 2007 indicate that the sector is expected to grow by a rate exceeding 8 per cent. This is due to the increase in the accommodation capacities and the efforts exerted to promote the tourism in the Sultanate.I wonder what Mr Macki's take is on the cancelled Christmas holidays for the disappointed 'very much counted' Christmas tourists.
British tourists up in arms over Christmas holiday let-down in Oman
That's pretty much how London's Daily Telegraph has described the directive of the Diwan of the Royal Court to the management of the Bar al-Jissah resort, that it should be made available to the Gulf Cooperation Council (GCC) heads of state and their delegations for the whole of Christmas week.
Not just one, but two articles on this dreadful denial of rights (I'm being wry/facetious) to the affluent tourists who had booked their holiday in Oman's winter sunshine for this period. Sultan ruins Christmas in Oman, and Oman holiday plans wrecked by Sultan.
I wrote about this a few days ago, explaining the probable rationale behind the move.
It's a pity that the newspaper didn't actually even attempt to work out the realpolitik behind Oman's decision. The GCC summit is traditionally held in the last quarter of the year. As Blue Chi pointed out in his comment on the Telegraph's article, it's a big deal in the Gulf region.
Oman should have hosted the summit last year (2007), but the venue was changed to Qatar because the Al Bustan Palace Hotel, built originally to accommodate the first time Oman had hosted the summit in 1985, was seriously damaged during Cyclone Gonu in June 2007. I don't know if it did re-open, but it's been closed again for major refurbishment, probably in preparation for this year's summit. Has project management goofed? Were specifications for the refurbishment changed, which delayed the opening time?
Whatever the story, Oman HAD to host this year's summit. The Bar al-Jissah resort was the next most suitable venue. It has its own road. I assume it can be reasonably secured. It is, I understand, luxurious. It can accommodate lots of people.
And perhaps it would be appropriate to remind outraged British tourists that the GCC countries are Moslem. Not only that, but King Abdullah of Saudi Arabia, the most prominent member of the AGCC, is Custodian of the Two Holy Mosques. In the strict interpretation of Islam, there is no such thing as Christmas.
The major Moslem holiday, Eid al-Adha, and the preceding Hajj, the pilgrimage to Mecca, which is one of the pillars of Islam, falls in the period from late November right through to the third week of December. There is more religiosity in the Gulf than there is in Britain, where Christmas is more of a commercial, rather than a religious, festival.
The summit could not take place until the Eid was over. Although one wonders if there is a hint of malice in the GCC leaders collectively deciding to time the event for that particular week, as if to punish Oman for its unpreparedness.
Western tourists can complain all they like about their losses, but they aren't currently the bigger picture as seen from the point of view of Gulf leaders. Frankly, I find the Telegraph's reaction embarrassingly parochial, even if it is true that tourists would be dissuaded from booking holidays in Oman for the Christmas period in the future. Oman only hosts the GCC summit every six years, so they should be safe for a while.
By the way, a statement by an unnamed official at Oman's Ministry of Foreign Affairs said that, "the GCC summit will not host any party from outside the AGCC member states," that is, no-one will be coming from Iran.
Not just one, but two articles on this dreadful denial of rights (I'm being wry/facetious) to the affluent tourists who had booked their holiday in Oman's winter sunshine for this period. Sultan ruins Christmas in Oman, and Oman holiday plans wrecked by Sultan.
I wrote about this a few days ago, explaining the probable rationale behind the move.
It's a pity that the newspaper didn't actually even attempt to work out the realpolitik behind Oman's decision. The GCC summit is traditionally held in the last quarter of the year. As Blue Chi pointed out in his comment on the Telegraph's article, it's a big deal in the Gulf region.
Oman should have hosted the summit last year (2007), but the venue was changed to Qatar because the Al Bustan Palace Hotel, built originally to accommodate the first time Oman had hosted the summit in 1985, was seriously damaged during Cyclone Gonu in June 2007. I don't know if it did re-open, but it's been closed again for major refurbishment, probably in preparation for this year's summit. Has project management goofed? Were specifications for the refurbishment changed, which delayed the opening time?
Whatever the story, Oman HAD to host this year's summit. The Bar al-Jissah resort was the next most suitable venue. It has its own road. I assume it can be reasonably secured. It is, I understand, luxurious. It can accommodate lots of people.
And perhaps it would be appropriate to remind outraged British tourists that the GCC countries are Moslem. Not only that, but King Abdullah of Saudi Arabia, the most prominent member of the AGCC, is Custodian of the Two Holy Mosques. In the strict interpretation of Islam, there is no such thing as Christmas.
The major Moslem holiday, Eid al-Adha, and the preceding Hajj, the pilgrimage to Mecca, which is one of the pillars of Islam, falls in the period from late November right through to the third week of December. There is more religiosity in the Gulf than there is in Britain, where Christmas is more of a commercial, rather than a religious, festival.
The summit could not take place until the Eid was over. Although one wonders if there is a hint of malice in the GCC leaders collectively deciding to time the event for that particular week, as if to punish Oman for its unpreparedness.
Western tourists can complain all they like about their losses, but they aren't currently the bigger picture as seen from the point of view of Gulf leaders. Frankly, I find the Telegraph's reaction embarrassingly parochial, even if it is true that tourists would be dissuaded from booking holidays in Oman for the Christmas period in the future. Oman only hosts the GCC summit every six years, so they should be safe for a while.
By the way, a statement by an unnamed official at Oman's Ministry of Foreign Affairs said that, "the GCC summit will not host any party from outside the AGCC member states," that is, no-one will be coming from Iran.
No Christmas for the AGCC summit
If you had been hoping to spend Christmas and the New Year basking in the sun at the Bar al-Jissah resort and spa, you are likely to be disappointed.
According to a private message I have received, ALL the facilities at both the Al Bandar and Al Husn hotels at the Bar Al-Jissah resort are to be placed totally at the disposal of the Diwan of the Royal Court from 24th-30th December 2008 (inclusive), "to facilitate the requirements of the delegates attending the GCC Summit."
The message coincides with the assertion by secretary-general of the AGCC Abdul Rahman bin Hamad Al Attiyah, printed in the Times of Oman yesterday that:
The Times of Oman report added that because the proposed dates for the AGCC summit fell in late November and coincided with the pilgrimage season of the Hajj, the meeting had been postponed.
Eid al-Adha is scheduled to start on 8th December, following the Hajj. Traditionally, it is a long holiday, particularly in Saudi Arabia.
In the past, Oman has hosted the AGCC summit at the Al Bustan Palace Intercontinental Hotel, but the Al Bustan is closed for refurbishment. So the organisers have gone for the next exclusive venue - the Shangri-la Resort.
I received my news from someone who had been planning a lavish, relaxing Christmas there. It will not happen. There will be no Christmas at Shangri-La.
He speculated that the action of closing the hotels would be extremely detrimental to the opinion of high net-worth tourists on Oman as a tourist destination, particularly as Christmas and New Year are the peak period for winter holidays in western countries. Otherwise you go skiing from January to March.
But I suspect that the feelings of expatriate tourists are not the focus of the AGCC summit organisers. Tourists with money can always go somewhere else.
Within the AGCC community, it is fraternity and brotherhood with fellow Arabs that counts - and Saudi Arabia is a big neighbour where Christmas is not recognised.
On another note, the Khaleej Times reported yesterday (21st October 2008) that 11,000 residents on the Batinah coast will be moved to make way for a 240 km coastal road and possibly also a railway.
The displaced citizens will be rehoused in "2,200 houses to be built at a cost of RO148 million under an agreement signed by the government here on 19th October with Al Rajhi Development Company (ARDC) in Barka, Musanah, Liwa and Shinas."
The plan was also announced in Sunday's Times of Oman, but with a different emphasis.
According to a private message I have received, ALL the facilities at both the Al Bandar and Al Husn hotels at the Bar Al-Jissah resort are to be placed totally at the disposal of the Diwan of the Royal Court from 24th-30th December 2008 (inclusive), "to facilitate the requirements of the delegates attending the GCC Summit."
The message coincides with the assertion by secretary-general of the AGCC Abdul Rahman bin Hamad Al Attiyah, printed in the Times of Oman yesterday that:
“No new dates [for the AGCC summit] have yet been set as it is a procedural issue and it’s still under consultation.”A Saudi newspaper suggested that the most likely dates for the conference would be 29th-30th December.
The Times of Oman report added that because the proposed dates for the AGCC summit fell in late November and coincided with the pilgrimage season of the Hajj, the meeting had been postponed.
Eid al-Adha is scheduled to start on 8th December, following the Hajj. Traditionally, it is a long holiday, particularly in Saudi Arabia.
In the past, Oman has hosted the AGCC summit at the Al Bustan Palace Intercontinental Hotel, but the Al Bustan is closed for refurbishment. So the organisers have gone for the next exclusive venue - the Shangri-la Resort.
I received my news from someone who had been planning a lavish, relaxing Christmas there. It will not happen. There will be no Christmas at Shangri-La.
He speculated that the action of closing the hotels would be extremely detrimental to the opinion of high net-worth tourists on Oman as a tourist destination, particularly as Christmas and New Year are the peak period for winter holidays in western countries. Otherwise you go skiing from January to March.
But I suspect that the feelings of expatriate tourists are not the focus of the AGCC summit organisers. Tourists with money can always go somewhere else.
Within the AGCC community, it is fraternity and brotherhood with fellow Arabs that counts - and Saudi Arabia is a big neighbour where Christmas is not recognised.
On another note, the Khaleej Times reported yesterday (21st October 2008) that 11,000 residents on the Batinah coast will be moved to make way for a 240 km coastal road and possibly also a railway.
The displaced citizens will be rehoused in "2,200 houses to be built at a cost of RO148 million under an agreement signed by the government here on 19th October with Al Rajhi Development Company (ARDC) in Barka, Musanah, Liwa and Shinas."
The plan was also announced in Sunday's Times of Oman, but with a different emphasis.
A vote of no confidence? Healthcare City at Al Sawadi abandoned
In a brief note yesterday, Ameinfo announced that The Kuwait-based Gulf Investment House has withdrawn from financing the Majan Development Company's bid to build a one billion dollar (RO400 million) healthcare city adjacent to the Blue City development.
Who, or what, is the Majan Development Company? The Khaleej Times helpfully obliges:
The head of the bank's investment group said that they had carried out "a feasibility study [ ] which yielded positive results with regard to the Omani real estate market."
The healthcare city venture was announced only in March 2008. Bashar Nasser Al Tiwaijri (also spelt Tuwajiri), Senior Manager, Direct Investment, GIH, said at a news conference that
Nonetheless, Ameinfo quoted MEED yesterday as saying that GIH had abandoned its plans for the healthcare city. No reason was given.
No connection with Blue City has ever been declared, and the current turmoil in financial markets means that funds for investment are much harder to come by, if not funds on an individual basis with which to buy property, but one wonders...
Who, or what, is the Majan Development Company? The Khaleej Times helpfully obliges:
Majan Development Company, MDC, with an authorised capital of RO40 million and paid up capital of RO25 million, has been founded by a group of investors in the region with Kuwait-based Gulf Investment House (GIH) holding a 50 per cent stake.Inspired by the potential returns on real estate investment in Oman, the Sharjah Islamic Bank declared in May this year that it had taken a ten percent stake in the company, putting the value of MDC at over $100 million ($1 billion).
The other partners are the Pension Fund of Oman's Ministry of Defence, Sharjah Islamic Bank and Real Estate Trading Company (10 per cent each), Public Authority for Social Insurance (nine per cent) Oman-UAE Exchange Company (five per cent), Oman Cement Company (four per cent) and the Pension Fund of the Royal Guard of Oman (two per cent).
The head of the bank's investment group said that they had carried out "a feasibility study [ ] which yielded positive results with regard to the Omani real estate market."
The healthcare city venture was announced only in March 2008. Bashar Nasser Al Tiwaijri (also spelt Tuwajiri), Senior Manager, Direct Investment, GIH, said at a news conference that
the proposed healthcare city, to be built on an area of one million square metres in Al Sawadi allotted by the Ministry of Tourism, some 100kms from Muscat, would comprise medical colleges, hospitals, hotels, conference halls and shopping malls.GIH too had asked an international consultancy to carry out a feasibility study, which had been positive. The GIH stake in MDC is variously said to be 20 percent or 50 percent, depending on which news report you read.
Work on the first phase of the project, to be carried out on a build, operate and transfer (BOT) basis, will start by next year. At the end of the BOT period, it will be handed over to the government.
Nonetheless, Ameinfo quoted MEED yesterday as saying that GIH had abandoned its plans for the healthcare city. No reason was given.
No connection with Blue City has ever been declared, and the current turmoil in financial markets means that funds for investment are much harder to come by, if not funds on an individual basis with which to buy property, but one wonders...
Three videos of Oman
These three videos date back to January 2004, when I visited Muscat. It's taken me this long to download the video from the camcorder and to edit it. I apologise for the poor quality. I aim to improve!
I went to the Muscat Festival at Al Khuwair one rainy January evening, after storms had been raging over the mountains. There weren't so many people there as a result.
I suspect that nationals would flinch at my emphasis on traditional crafts and dancing, but as a Western tourist, it's the kind of thing that I'm interested in. More photos of the Muscat Festival...
I was able to tour the Sultan Qaboos Grand Mosque in Al Ghubrah, at the second time of trying, because I was considered to be 'undressed' when I went the first time. Not that it will make much impact on readers, but this kind of reaction from over-zealous doormen is a real affront to female tourists. I suspect that, as a lone female visiting, I was judged more harshly. Even one stray lock of hair led to admonishment.
However, the gardens and the birdsong were a delight. More photos of the Grand Mosque...
Finally, here is a glimpse of the Al Kasfah Spring at Rustaq. The constantly upwelling water has a temperature of around 46 degrees centigrade. Many people visit the spring to bathe in its waters which are believed to have therapeutic properties. Above the spring is a mosque. This is the start of a falaj system within this area of Rustaq. Water flows through the bath house into a bathing area for women, and is then used downstream progressively for washing clothes, domestic use and finally for irrigating agriculture. Photos of Nakhl and Rustaq...
"An inconvenience is only an adventure wrongly considered; an adventure is an inconvenience rightly considered." ~Gilbert Keith Chesterton (1874-1936)~
I went to the Muscat Festival at Al Khuwair one rainy January evening, after storms had been raging over the mountains. There weren't so many people there as a result.
I suspect that nationals would flinch at my emphasis on traditional crafts and dancing, but as a Western tourist, it's the kind of thing that I'm interested in. More photos of the Muscat Festival...
I was able to tour the Sultan Qaboos Grand Mosque in Al Ghubrah, at the second time of trying, because I was considered to be 'undressed' when I went the first time. Not that it will make much impact on readers, but this kind of reaction from over-zealous doormen is a real affront to female tourists. I suspect that, as a lone female visiting, I was judged more harshly. Even one stray lock of hair led to admonishment.
However, the gardens and the birdsong were a delight. More photos of the Grand Mosque...
Finally, here is a glimpse of the Al Kasfah Spring at Rustaq. The constantly upwelling water has a temperature of around 46 degrees centigrade. Many people visit the spring to bathe in its waters which are believed to have therapeutic properties. Above the spring is a mosque. This is the start of a falaj system within this area of Rustaq. Water flows through the bath house into a bathing area for women, and is then used downstream progressively for washing clothes, domestic use and finally for irrigating agriculture. Photos of Nakhl and Rustaq...

