OMANI COMMERCE MINISTER TALKS UP FTA BENEFITS WITH

C O N F I D E N T I A L MUSCAT 001091

SIPDIS

SIPDIS

STATE FOR NEA/ARP, H
STATE PASS USTR FOR JBUNTIN
COMMERCE FOR ITA COBERG

E.O. 12958: DECL: 12/02/2017
TAGS: ECON ETRD PREL MU
SUBJECT: OMANI COMMERCE MINISTER TALKS UP FTA BENEFITS WITH
CODEL MORAN

Classified By: Ambassador Gary A. Grappo, reasons 1.4 b and d

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Summary
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1. (SBU) Oman's Commerce and Industry Minister spoke highly
of the U.S.-Oman Free Trade Agreement's (FTA) potential to
strengthen bilateral economic relations during a November 26
visit to Muscat by a U.S. Congressional delegation. The
Agreement, according to the Minister, would assist government
efforts to diversify Oman's economy by attracting U.S.
investment in the industrial, energy, and technology sectors.
In keeping with Oman's efforts to maintain good relations
with Tehran and to open up new economic opportunities, the
Minister affirmed that his government would continue
discussions with Iran on joint energy initiatives. End
Summary.

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Good for Us, Good for You
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2. (SBU) On November 26, members of a U.S. Congressional
delegation (CODEL) led by Representative James Moran of
Virginia discussed the state of bilateral economic relations
with Minister of Commerce and Industry Maqbool bin Ali
Sultan. (Note: The delegation also included Representatives
Tom Davis of Virginia, Steve Chabot of Ohio, Keith Ellison of
Minnesota, and Laura Richardson of California. End note.)
Maqbool expressed appreciation for Congressional approval of
the FTA, and hoped that it would be "as good for the United
States as it will be for Oman." The Minister recognized that
efforts to implement the Agreement had been delayed by
intellectual property rights concerns, but added that "we
have resolved almost everything," and that he was in receipt
of a letter from the Ambassador regarding the USG's position
on data protection requirements. Responding to a query on
when the FTA would enter into force, Maqbool replied "as
early as possible, certainly by the end of the first quarter
of next year."


3. (SBU) Maqbool anticipated both sides accruing a number of
benefits from the FTA once it was implemented. On trade, the
Minister acknowledged that the tariff breaks would be modest,
since Oman's average customs duty rate was only 2.9% and most
of its exports, such as liquefied natural gas, fertilizer,
and methanol, were already committed to Asian companies via
long-term contracts. He noted, however, that the
"psychological effect" of duty-free access would aid U.S.
imports to Oman. The Minister further found hope for Oman's
sagging textile industry with the FTA's exemption from the
yard-forward rule in exporting certain garments to the United
States.

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Foreign Investment Magnet
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4. (SBU) With implementation of the Agreement, Maqbool
expected a bigger bounce from U.S. investment in Oman,
stating: "Look at what has happened in Singapore, Jordan,
Israel, and Bahrain after signing an FTA. All had an
increase in U.S. investment. This Agreement will help us
also." To this end, Maqbool expressed interest in seeing
greater activity from Ex-Im Bank and OPIC in supporting
future U.S. projects in Oman.


5. (SBU) Maqbool remarked that the Agreement would enable
Oman to attract the type of foreign investment needed to
invigorate its private sector, which would be counted on to
provide jobs for its sizable youth population. The Minister
noted that along with the construction or expansion of port
facilities, Oman was beefing up its industrial capacity. As
an example of Oman's future industrial growth, he cited the
development of the city of Salalah where a free zone
containing methanol, PET, and brakes plants would add to the
trans-shipment port's value. Maqbool also highlighted the
growth of the industrial port of Sohar, which contained over
$14 billion of committed investment. He had "high hopes" for
a new port to be constructed at Duqm, half way down the
Arabian Sea coast between Muscat and Salalah. In addition to
the processing of minerals, gypsum, and limestone, Maqbool
stressed that the construction of a refinery and
petrochemicals complex would aid in making Duqm a success.


6. (SBU) On top of building its transportation and logistics
sector, Maqbool stated that Oman was focusing on developing

its technology, information, and communications sectors, as
well as alternative energy projects. The Minister predicted
that after 2015, solar energy would play a "big role," and
that U.S. research initiatives could unlock Oman's potential.
He added that Oman was also looking into the "capture and
cold storage" of coal. With U.S. investment, according to
Maqbool, Oman could serve as a center for coal distribution
to India, the GCC, and Yemen.

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Oil Price Outlook
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7. (SBU) Responding to a query on the direction of oil
prices, Maqbool prefaced his response by stating that Oman
was not an OPEC member and that it was a small producer
compared to OPEC's overall daily output. On the possibility
of higher oil prices, the Minister mused that such a prospect
would "not be in favor of the world economy." He cautioned
that prices were not simply the result of increased demand,
but reflected other factors, such as the weakening dollar and
problems in Iran. Maqbool further commented that the United
States, as a "rich" country, stood a better chance of
weathering price hikes in comparison to Asian and African
countries, which were "getting hurt." He surmised that oil
prices would have to come down, but hoped that "they don't go
down too much to the point where it hurts us."

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Still Talking to Iran
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8. (C) On Oman's relationship with Iran, Maqbool remarked
that Oman "is a friend of all, enemy to none." Offering his
perception that the world's problems are either related to
religion or border disputes, the Minister echoed the
government's desire to maintain "the best relations" with
Iran. Furthermore, Maqbool told CODEL members that Iran,
with its large economy and surplus gas reserves, offered
potential business opportunities for Oman. Commenting on
proposed joint gas ventures with Iran, he added, however,
that "we only deal with the professionals."


9. (U) CODEL Moran did not have an opportunity to clear this
message.
GRAPPO