TRANSPORT AND COMMUNICATION MINISTER SETS SIGHTS

UNCLAS SECTION 01 OF 02 MUSCAT 000993

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/ARP, EB/CBA, EB/CIP, EB/TRA
COMMERCE FOR ITA (C.OBERG)

E.O. 12958: N/A
TAGS: ECON BEXP EAIR ECPS ELTN MU
SUBJECT: TRANSPORT AND COMMUNICATION MINISTER SETS SIGHTS
ON ECONOMIC EXPANSION, LIBERALIZATION

REF: A. MUSCAT 990

B. MUSCAT 896

C. MUSCAT 881


1. (U) Contains business proprietary information - please
protect.

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Summary
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2. (SBU) The Ambassador called upon the Transport and
Communications Minister to review recent developments in the
sectors and to advocate for Gulf Air's purchase of Boeing
aircraft (ref A). The Minister expressed full support for
further telecom liberalization and Oman's two-airline
strategy. Railway plans are under review, and the Minister
expressed his desire to see greater U.S. company
participation on project tenders. End Summary.

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Commitment to Telecom Liberalization
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3. (U) On June 18, the Ambassador paid an introductory call
to Transportation and Communications Minister Sheikh Mohammed
bin Abdullah al-Harthi to review recent developments in the
Minister's portfolio. Al-Harthi reiterated the government's
commitment to liberalize the telecom sector. He remarked
that the private sector would best meet the growing telecom
needs of the Sultanate in a quickly changing technology
market, evidenced by the success of the second mobile license
issued in 2004. He predicted that Oman would liberalize its
value-added services sector within the next few months, and
noted that a consultant is evaluating a tender proposal for a
second fixed-line operating license.

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Airlines Good for Oman
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4. (SBU) Taking a big picture perspective on the impact
airlines have on the economy, al-Harthi endorsed Oman's
two-carrier strategy. He explained that regional carrier
Oman Air was essential in providing both domestic and
regional service. He was pleased that Oman Air turned a
profit and paid out dividends last year, but he took a
cautious view toward its future performance, noting "let's
see what happens."


5. (SBU) Al-Harthi also expressed continued support for Gulf
Air. Though the airline has been a financial "drain" over
the years, al-Harthi said that the government looks at the
bigger economic benefits that the carrier brings to Oman. He
cited air links to Europe and Asia, employment opportunities,
and purchasing of goods and services as benefits that Gulf
Air brings to Oman. For this reason, al-Harthi commented
that the government committed itself to bankrolling Gulf Air
for the next three years by recently approving its business
plan.


6. (SBU) Al-Harthi further considered the growth of "national
identity" airlines, such as Emirates, Etihad, and Qatar
Airways, as indicators that the promotional value of an
airline may sometimes outweigh operating performance. He
doubted that Dubai could have grown as much as it already had
without the assistance of Emirates Airlines. In the same
light, al-Harthi is hopeful that Gulf Air, now down to two
partner nations, would be able to do the same for Oman and
Bahrain. Going forward, al-Harthi hopes that Gulf Air will
replicate Emirates' expansion beyond air services into
hotels, duty-free retail, catering, and car rentals.

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Working on the Railroad
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7. (U) In discussion of the extensive developments in the
port and road networks, al-Harthi raised the government's
interest in the GCC railway project. He views the proposed
rail network as an opportunity to connect Oman's ports with
its upper Gulf neighbors, providing shippers the opportunity
to move goods through the Gulf without incurring the added
costs of passing through the Strait of Hormuz. He said that
the GCC has contracted with a consultant to determine the
feasibility of rail networks in GCC countries and Yemen,
projecting that it would have to have dual use
(passenger/cargo) capabilities in order to be viable.

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U.S. Consultants Wanted
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8. (SBU) Al-Harthi wants to see more American consultancy and
contracting firms participating in Omani tenders. Critical
of the quality of work currently being done, al-Harthi noted
that Oman needed the international expertise that large-scale
projects such as the Muscat Seeb airport expansion demanded.
He pointed out that because tenders come quickly, with some
requesting proposals in a 4-6 week time frame, American
companies would have to be patient and willing to build up a
presence in Oman. He highlighted Parsons International as a
U.S.-based company that has been able to gradually elevate
its stature to the point where it is now a significant
player.
GRAPPO