Identifier
Created
Classification
Origin
06MUSCAT1368
2006-09-18 11:40:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Muscat
Cable title:  

ECONOMIC CHALLENGES, GCC INTEGRATION HIGHLIGHT

Tags:  ECON EFIN ETRD PREL MU 
pdf how-to read a cable
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UNCLAS MUSCAT 001368 

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STATE FOR NEA/ARP
COMMERCE FOR ITA COBERG

E.O. 12958: N/A
TAGS: ECON EFIN ETRD PREL MU
SUBJECT: ECONOMIC CHALLENGES, GCC INTEGRATION HIGHLIGHT
ROUNDTABLE DISCUSSION


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SUMMARY
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UNCLAS MUSCAT 001368

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/ARP
COMMERCE FOR ITA COBERG

E.O. 12958: N/A
TAGS: ECON EFIN ETRD PREL MU
SUBJECT: ECONOMIC CHALLENGES, GCC INTEGRATION HIGHLIGHT
ROUNDTABLE DISCUSSION


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SUMMARY
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1. (SBU) Top government officials and business
representatives discussed efforts to both diversify Oman's
economy and forge stronger regional integration with its GCC
neighbors during an Economist-sponsored roundtable. The
closed-door meeting provided the private sector a rare
opportunity to engage ministers in a public forum. End
Summary.

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DIVERSIFICATION KEY
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2. (SBU) In a September 10 address to Muscat,s business
elite at the Economist-sponsored First Business Roundtable
with the Government of Oman, Commerce and Industry Minister
Maqbul bin Ali Sultan identified sustainable growth and
maintenance of living standards as the government's top
priorities. Maqbul stated that in an environment of strong
growth, low inflation, and ample domestic liquidity, the
government must promote continued development through human
resources initiatives, private sector investment, and
economic diversification. Regarding the latter, Maqbul
highlighted oil's continued commanding presence in Oman's
economy, which currently accounts for 40% of Oman,s GDP and
80% of its export earnings. For this reason, Maqbul stressed
the importance of government efforts to use its natural
resources to develop gas-based downstream industries. While
further efforts to develop the tourism sector have been
successful, Maqbul acknowledged that the promotion of other
industries, such as fisheries, have not.


3. (SBU) Taking advantage of the open forum, U.S. Awasthi,
chairman of the Oman-India Fertilizer Company, cautioned the
Minister that the government should not establish new
environmental laws that go beyond international standards.
Maqbul responded that the government would abide by its
environmental commitments under the U.S.-Oman Free Trade
Agreement (FTA),which contained "a very big environmental
chapter." On labor, National Bank of Oman CEO Andrew Duff
expressed his concern over Oman's labor rigidities, which he
believed thwarted businesses from releasing non-performing
Omanis. After a round of applause from the audience, Maqbul
reaffirmed his commitment to the Omanization program, but
expressed his openness to improving worker productivity.

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MONETARY UNION BY 2010?
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4. (SBU) Central Bank Executive President Hamoud Sangour
al-Zadjali characterized Oman's banking sector as stable,
profitable, and well-capitalized. He stressed that the
Central Bank continues to remain conservative in its lending
regulations and would work with the commercial sector on
implementing Basel II requirements. Zadjali said that Oman
has no plans to open up the sector to Islamic banking
interests, noting that, "At the end of the day, Islamic banks
face the same expenses for borrowing as other financial
services."


5. (SBU) Zadjali predicted that banks would consolidate as
the GCC moved toward a single economy. He stated that
forming a GCC monetary union by 2010 would be difficult,
noting that consensus was still needed on budget deficit and
public debt ceilings, as well as on benchmarks for foreign
reserves, inflation, and interest rates. Zadjali also noted
that the GCC governments were still debating the merits of
forming a monetary council, as opposed to a Gulf Central Bank
along the lines of a European Central Bank.

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RARE EVENT
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6. (SBU) Comment. The event provided a rare opportunity for
the private sector to pose unscripted questions to several
cabinet-rank ministers, including the Minister of Transport
and Communications and the Minister of Oil and Gas. One
private sector contact appreciated the openness of the
ministers, one of which questioned the government's decision
to create a third LNG train on the basis of overly-optimistic
information. Another key government contact told Econoff
that he appreciated the serious exchanges of dialogue that
occurred in the opening sessions, though he expressed

disappointment that the roundtable lost its sharpness as the
day slowly turned into an exchange of congratulatory
speeches.
GRAPPO