Navigation

I've been meaning to write about inflation for several months now. If the Financial Times and The Economist are both baffled in how to propose measures that will control it, who am I to declare what a course of action should be? All that they or I can do is to report on the figures and the impact.

It does seem to me that Oman is following one of its time-honoured traditions. Do nothing, and matters will change in time of their own accord.

Rising inflation is not unique to Oman, although the rate is growing alarmingly there as well as in the other Gulf countries. Broadly speaking, it seems that there is a dysfunction between macroeconomic measures, commitment to national investment and microeconomic reality. Agreements that were signed years ago must be respected and bills must be paid. It's imperative to retain those sovereign financial ratings.

To discuss inflation in Oman in any meaningful way, I need time to think and look up items. That won't be today.

Instead, here are some small items that have appeared in the media recently.

Last Saturday's Financial Times reported briefly the results of an experiment to determine whether 'freeloaders' will accept punishment from or retaliate against society.

Students in 16 cities around the world played a "public goods" game, in which everyone is given monetary tokens. They could either keep the tokens for themselves, or put them into a common pot that yields extra interest to be shared between all the players, whether or not they contributed to the pot. After one round, everyone's contribution is revealed and players can "punish" each other by taking tokens away.

National differences emerged in subsequent rounds. In some cities the freeloaders took revenge and hit back at their punishers, ultimately decreasing collaboration and cutting everyone's earning to very low levels. This "anti-social punishment" took place mainly in what the authors call "more traditional societies based on authoritarian and parochial social institutions", including Saudi Arabia, Oman, Russia, Belarus, Ukraine, Greece, Turkey and South Korea.

Which rather implies that Omanis are more likely to adopt a dog-in-the-manger attitude at an individual level.

A week before that, the FT also published an article from a Morgan Stanley analyst suggesting that petrodollars, ie, the money earnt by oil producers at current high prices, could affect the value of the dollar and the euro severely. He foresaw a massive switch of Gulf investment into emerging market currencies, let alone Sovereign Wealth Funds, including Oman's State General Reserve, which are regarded with much suspicion in the West.

A wizened seismologist blogged that his assignment in Oman had been completed. He lamented that the new IO Scorpion, a cable-based seismological land recording system did not meet field requirements. He blamed an over-dependence on Windows operating systems and IT kiddies brought up on Microsoft wizards and more used to playing games than tackling real-world needs. Nothing to do with Oman directly except that it reminded me of a situation in my own place of work in Oman a decade ago, when expat administrators took the decision to go with Windows based software rather than listening to old established IT experts. It could also be a cautionary tale when it comes to implementing e-government solutions. Impartial advice is still needed on proposed projects, even though Oman hosts a Microsoft training centre.

I wonder what impact KOM's e-games conference will have when it happens in April. I'm sure the participants will enjoy their sojourn in Muscat. I installed Second Life a couple of years ago and abandoned it after one hour, deciding that real life was more urgent than a virtual one. I also noticed a host of unclad dummies hovering around the entrance. Presumably the debris from others who couldn't work out how to clothe their avatars. The workshop on the second day of the KOM conference does at least suggest that participants will learn how to personalise their own avatars. Will gaining "an understanding of how to get the most from the environment" mean that they will also learn how to spend real money in a virtual world? I'm quite sure that buying virtual funds means parting with real cash.

I'm interested in the notion that gaming could be used as a training and heritage tool though. I'd like to know where else in the world heritage has been supported by serious gaming solutions. My 17 year old son is 'into' gaming. He's heard of Second Life, but is infinitely more interested in competing against his mates on 'World of Warcraft.' Before he could afford gaming over the Internet, he did enjoy playing Age of Empires, and The Romans. He said he learnt a lot of history by playing out the battles. Is that the same as promoting heritage through gaming? It might be useful if KOM would put papers up on its website afterwards.

Oxford Business Group's weekly round-up discussed inflation in Oman.

The [rent] committee also recommended boosting agricultural output by providing technical and financial assistance to primary producers, including establishing projects to increase cattle, sheep and poultry farming [ ]. At the same time, imports of live cattle and goats from neighbouring countries should be allowed, as long as health standards [are] met, said Ali Sultan (minister of commerce and industry.

Where will the water and feed come from to nourish these additional home-produced animals? Hasn't Oman virtually eschewed water resources management in favour of desalination, which is still the most costly way of providing water? I don't count recharge dams as an effective water resources management feature. The return on the water recharged by the dams that may be used for supplying agriculture and domestic needs is unlikely to come anywhere near the costs of building the dams in the first place.

Just in case someone hasn't noticed, wheat-based animal feed products have increased in price by tens of percent. Animals are being slaughtered in UK because farmers can't afford to feed them.

Finally, Gulf countries are reckoned to have largely avoided the effects of the sub-prime mortgage debacle in the USA and the resulting credit crunch. Earlier this week, shares in Bear Stearns, a US finance company, plunged more than 11 percent, despite intervention by the Federal Reserve. I seem to recall that Bear Stearns was underwriting, or perhaps it's more appropriate to say arranging finance, for a major construction project in Oman.

Relax. Shares in Bear Stearns recovered after Chief Executive Alan Schwartz said on Wednesday that the company has hefty cash reserves that have remained little changed this year.

Addendum, 14th March 2008: The day after I wrote the last two paragraphs about Bear Stearns, news came today that the company had approached the US Federal Reserve for emergency funding to enable it to continue trading. The stock plunged in value by over 50 percent as a result. The bank JP Morgan Chase is also said to be offering help. Seems to me then that the CEO was being less than economical with the truth, particularly as his latest statement says that his bank can "make no assurance that any strategic alternatives will be successfully completed.” I think I'd be feeling a bit concerned if I was an investor in that Oman construction project, unless of course, the scheme has been entirely refinanced. This is where transparency would be useful, if we could know what the arrangements are.