OMANI TOURISM PROJECTS GAIN MOMENTUM

C O N F I D E N T I A L MUSCAT 000188 SIPDIS SIPDIS STATE FOR NEA/ARP, EEB/CBA COMMERCE FOR ITA THOFFMAN E.O. 12958: DECL: 03/02/2018 TAGS: ECON EINV PREL MU SUBJECT: OMANI TOURISM PROJECTS GAIN MOMENTUM Classified By: Ambassador Gary A. Grappo for Reasons 1.4 (b and d) -------------- Summary -------------- ¶1. (C) OMRAN, the government's tourism investment company, continues to play a crucial role in the planning of several prominent, integrated resort complexes throughout the Sultanate. While most projects are located in Muscat, OMRAN's efforts will bring the potential economic benefits of the tourism industry to more isolated areas of Oman. Many of the projects, especially those based on residential freehold development, have generated significant buzz; however, feasibility questions surround the hyped Blue City project. End Summary. -------------- OMRAN Takes the Lead -------------- ¶2. (C) On February 26, Econoff met with OMRAN Chief Financial Officer Prakash Gabra to review the progress of Oman's tourism development initiatives. Headlining OMRAN's projects is the development of a convention center complex in Muscat. Revised plans include the creation of a 4,000-seat venue, four hotels with 1,000 rooms each, 70,000 square meters of office space, and a 150,000 square meter mall. Completion of this project is scheduled for 2012. In addition, OMRAN will develop a prime strip of beachfront in Muscat, which will include hotels, commercial outlets, and residential units, as well as a boutique hotel in Muscat's Bousher district, close to the mountains. ¶3. (C) Outside of Muscat, OMRAN plans to invest $2 billion in the construction of a three-hotel, two-golf course resort complex at Duqm, currently a lightly populated coastal area half-way between Muscat and Salalah. The complex, which is scheduled to open in 2010, will serve as a contrast to the government's industrial plans for Duqm, which include a drydock, refinery, and airport. To capitalize on Oman's natural beauty, OMRAN will construct a 35 million rial (USD 90 million) resort on top of Jebel al-Akhdar, one of Oman's highest peaks. Plans call for a 100-room resort to be managed by an Indonesian company, with published room rates starting at $500 per night. Rounding out OMRAN's efforts is the construction of a small hotel on Masirah Island, home to some of Oman's turtle nesting grounds. -------------- Joint Ventures for Tourism -------------- ¶4. (C) Complementing these investments is OMRAN's involvement as a 30% equity partner in several planned integrated tourism complexes just outside of Muscat. Gabra stated that OMRAN has partnered with Sama Dubai and Egyptian-based ORASCOM on developing resort complexes at Yiti and Sifah, respectively. Residential units at Sifah, according to Gabra, are 100% sold out, while units at the Yiti complex will soon be released for sale. Additionally, OMRAN has entered into a joint venture with Saraya of Jordan to construct a resort planned for Qantab. In Salalah, the government is teaming up with ORASCOM on the development of the Salalah Beach Resort, which will include five hotels, two golf courses, and 6,000 residential units, which have also been sold out. The CFO estimates that 50% of the buyers in these projects are Omani, with 40% of those being investors. ¶5. (C) In review of other tourism projects not involving OMRAN, Gabra stated that "The Wave," a joint venture between the Muscat Municipality and Majid al-Futtaim of Dubai, was proceeding amidst brisk sales. He also believed that the $1 billion "Omagine" project, a one million square meter entertainment/residential complex being developed by U.S. promoter Frank Drohan, would also move forward under a build-lease agreement with the government. -------------- Concern about Blue City -------------- ¶6. (C) Gabra expressed concern, however, over the development of "Blue City," a proposed $15 billion integrated tourism complex one hour northwest of Muscat. Remarking that the interest rate on the $1 billion bond issued for construction of the first phase was "very high," the CFO questioned the viability of the highly publicized project as a whole. He added the secondary sales market for Blue City was very soft, with 25 yet-to-be built units currently looking for buyers. In the end, however, Gabra predicted that the government would step in should the project falter significantly. ¶7. (C) In a subsequent conversation with Econoff, Oman Arab Bank Deputy General Manager Michel LeFur shared similar concerns regarding the feasibility of Blue City, characterizing its future as "a big question mark." He agreed with Gabra's positive assessment of the Wave and the Yiti projects, given the close proximity of the former to Muscat, and the backing of the Maktoum family for the latter. As for Sifah, he was more cautious on its outlook based on its distance from the capital, but nevertheless predicted that outside investment would buoy the development. In general, however, he found that considerable market hype had inflated property values, and took with a "grain of salt" claims by property developers that their projects were already sold out. GRAPPO