Identifier
Created
Classification
Origin
05MUSCAT243
2005-02-13 13:12:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Muscat
Cable title:  

OMAN OFFICIAL ON PRIVATIZATION, FTA HOPES

Tags:  ECON KPRV EIND ETRD ECPS KTEX PREL MU 
pdf how-to read a cable
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 MUSCAT 000243 

SIPDIS

SENSITIVE

STATE FOR EB/CBA, NEA/ARPI
USDOC FOR 4520/ITA/MAC/AMESA/OME/MTALAAT
STATE PLEASE PASS USTR/JBUNTIN AND JFENNERTY

E.O. 12958: N/A
TAGS: ECON KPRV EIND ETRD ECPS KTEX PREL MU
SUBJECT: OMAN OFFICIAL ON PRIVATIZATION, FTA HOPES
(C-NE4-01168)

-------
Summary
-------

UNCLAS SECTION 01 OF 02 MUSCAT 000243

SIPDIS

SENSITIVE

STATE FOR EB/CBA, NEA/ARPI
USDOC FOR 4520/ITA/MAC/AMESA/OME/MTALAAT
STATE PLEASE PASS USTR/JBUNTIN AND JFENNERTY

E.O. 12958: N/A
TAGS: ECON KPRV EIND ETRD ECPS KTEX PREL MU
SUBJECT: OMAN OFFICIAL ON PRIVATIZATION, FTA HOPES
(C-NE4-01168)

--------------
Summary
--------------


1. (SBU) In a meeting on February 1, National Economy Under
Secretary Abdul Malik al-Hinai outlined the Omani

SIPDIS
government's privatization strategy for a visiting USG
official in the power, water, telecommunications and
transport sectors. He predicted the sale of 30 percent of
state-owned telecoms incumbent Omantel will come in
March-April, while larger scale privatization of telephone
landline, power distribution and wastewater services must
await further government expenditures to extend
infrastructure to rural and outlying areas. He expressed
Omani government determination to reach a Free Trade
Agreement with the USG expeditiously, and hopes it will
produce immediate benefits in terms of new investment. He
indicated Oman's desire for a liberal rules of origin
delineation. End summary.


2. (U) Visiting EB Special Advisor J. Frank Mermoud met
February 1 with Ministry of National Economy (MNE) Under
Secretary Abdul Malik al-Hinai. While Mermoud lobbied for

SIPDIS
U.S. firm Bechtel's ultimately successful bid on an aluminum
smelter project in the industrial port of Sohar, he likewise
solicited Hinai's views on the proposed bilateral Free Trade
Agreement (FTA),and on the Ministry's plans for
privatization, which Hinai oversees.

--------------
FTA Wishes, Expectations
--------------


3. (SBU) The Under Secretary emphasized the investment and
industrial ramifications of an FTA, saying the Omani
government is committed to concluding the agreement as
expeditiously as possible with the U.S. in hopes of spurring
bilateral trade. Hinai indicated that his personal barometer
of the success of an eventual FTA will be the amount of
investment it brings into the Sultanate. He had heard of
such successes from his Jordanian colleagues following
implementation of that free trade pact. Possibly laying down

a marker on Oman's FTA negotiating position, he said he hoped
Oman could be treated as a developing nation where rules of
origin are concerned, saying such a measure will be vital to
Oman's garments industry. But overall, he emphasized the
need for FTA to produce immediate, tangible benefits for
Oman's business community.

--------------
Sectoral Privatization Plans
--------------


4. (U) Al-Hinai gave a brief run-down of the government's
privatization strategy and status by sector.

Power: The Sultanate has already privatized some aspects of
the power sector, including two operations (in Barka and
Dhofar) that have U.S. corporate participation. He deemed it
possible that, by 2006, nearly all power generation plants
will be fully privatized. A longer-term prospect is
privatization of power distribution networks. He indicated
that the government feels obligated to extend electrification
to remaining rural areas before agreeing to sell off that
infrastructure.

Desalination and Wastewater: A number of desalination
projects are in the cards for Oman. A facility in Sohar is
currently under construction by a Belgian-led consortium
(Tractabel),and there are currently studies on enlarging the
Barka desal facility near Muscat and building a new plant in
Sur. The Sohar project will be huge, he said, since the
facility will have to meet the water needs of both the
Batinah (the most populous of Oman's eight regions) and
Dakhiliyah regions. The plant in Sur will be vital to
agriculture in Oman's Sharqiyah region, which has been under
prolonged drought. As for wastewater, there are two
state-owned firms operating in that field (in Muscat and
Dhofar). While the MNE is committed to privatizing them
eventually, the government again insists on extending the
basic infrastructure into a complete network before selling
the firms off.

Telecommunications: A second mobile phone operator (Qatar's
Q-Tel, in a consortium with TDC of Denmark and local
investors) has recently been licensed to offer competition to
state-owned incumbent Omantel. Hinai reported that the
long-awaited public offering of 30 percent of Omantel shares
is "imminent," guessing that it could occur as early as the
March-April timeframe. He said telecommunications
privatization was not wholly in MNE's purview, since the
sector's value is treated as a major asset by the Ministry of
Finance. The new Telecommunications Regulatory Agency (TRA)
will soon be fully operational and professionalized, which
will further facilitate privatization. He cautioned,
however, that Omantel (and by implication, the government)
needed to invest significantly more to expand fixed lines and
Internet infrastructure to the remote parts of the Sultanate
still without service.

--------------
Most Attractive Investment Areas
--------------


5. (U) Asked for the more prospective sectors of the Omani
economy for U.S. businesses, al-Hinai listed power,
desalination and wastewater as being the most attractive, in
part due to the existing U.S. presence in those fields in
Oman. (The wastewater network in Dhofar, for instance, was
initially started under a USAID grant.) He thinks a new port
project for the remote central coast town of Duqm might also
be of U.S. interest, with fish farming, a dry dock and an
asphalt factory among the envisioned industries there. But
apart from large U.S. corporations like Dow and Bechtel,
al-Hinai said he strongly hopes FTA will make Oman more
attractive and viable for American small and medium-sized
enterprises.

--------------
Comment
--------------


6. (SBU) While ambitious, Oman's privatization plans still
envision a predominant role for the government in developing
infrastructure and undertaking capital investment. Current
budget surpluses make such investments possible, but there is
a serious risk of public spending "crowding out" private
investment. In the meantime, Oman continues to hope that the
FTA will yield significant new prospects for American
investment. With Dow already planning a large presence in
Oman, and Bechtel reporting to us February 13 that they won
the aluminum smelter bid, there is a growing momentum for
American firms in the Sultanate on the eve of FTA
negotiations.
BALTIMORE