OMANI MINISTER REAFFIRMS AMBITIOUS TOURISM PLANS

C O N F I D E N T I A L MUSCAT 000255 SIPDIS SIPDIS STATE FOR NEA/ARP, EEB/CBA COMMERCE FOR ITA THOFFMAN E.O. 12958: DECL: 04/01/2018 TAGS: ECON EINV MU SUBJECT: OMANI MINISTER REAFFIRMS AMBITIOUS TOURISM PLANS REF: MUSCAT 188 Classified By: Ambassador Gary A, Grappo, reasons 1.4 (b and d) -------------- Summary -------------- ¶1. (C) Oman's Minister of Tourism affirmed that the Sultanate's ambitious tourism development plans remain on track, despite the rapid escalation of construction and labor costs. Completion of several integrated tourism projects along greater Muscat's waterfront, along with the construction of a convention center complex, will significantly add to the capital's woefully inadequate hotel room supply. Coupled with this expected rise in facilities, Oman has begun to advertise itself internationally, albeit cautiously. The same pace extends to tourism development outside of Muscat, which is being carefully evaluated in light of its potential appeal to foreign travelers. End Summary. -------------- Development on Track -------------- ¶2. (C) On March 23, the Ambassador discussed the status of Oman's various tourism initiatives with Minister of Tourism Rajiha bint Abdulameer bin Ali. Rajiha noted that Oman's visitor volume would double from current levels once the first phase of the Ministry's development plan is completed in 2010. She stated that, "Oman should have quite a number of new hotels open by then," including two hotels in the Yiti complex and one hotel in the Wave development. The Minister raised the possibility of Marriott building a 5-star property in an exclusive area of Muscat, but noted that there was "no deal yet." ¶3. (C) Of particular concern to Rajiha in meeting this timeline was the construction supply shortage affecting the Gulf region. She said that individual companies were doing what they could to procure materials, but that two major Muscat hotels currently under renovation, the Sheraton and the al-Bustan, have faced significant delays due to skyrocketing building costs. The Minister predicted that the two should now open by November and September, respectively, after being closed for over a year each. ¶4. (C) Rajiha also voiced concerns over plans by some companies to develop projects well outside of Muscat. "We need to be careful," she cautioned, as visitors may not want to go to far flung parts of Oman without tourist services or infrastructure. "Conceiving and building a project is easy," she mused, "but running the project is a different matter." The Minister continued that before developers build in other areas of Oman, the Ministry would need to confirm that there was a unique tourist draw to generate sufficient demand. -------------- Center to Anchor Commercial Development -------------- ¶5. (C) Rajiha reaffirmed to the Ambassador that the government's tourism investment company, OMRAN, was funding the entire convention center project, a multi-use facility to include hotels and office space. The complex, located near the Muscat Hills country club and golf course, will anchor a commercial district containing a shopping center and offices. In building the complex without private sector investment, the government hopes that the anticipated revenue stream will cover the expenses of the convention center in the long run. Rajiha added that the Ministry has completed the center's feasibility study, which is now before the Ministry of Finance for review. Once the plan has been approved, according to the Minister, OMRAN would then proceed to select a contractor specializing in convention center design and management. The Ministry has set a projected completion date of 2012 to coincide with the opening of Muscat's new airport. -------------- Upbeat on Blue City -------------- ¶6. (C) Turning to the ambitious Blue City project, located approximately 60 miles northwest of Muscat, Rajiha stated that several financiers, led by Bear Sterns, had provided $900 million in capital for the first phase of the project. She noted that the first offerings were sold out, and in spite of the recent turmoil surrounding capital markets in general and Bear Stearns in particular, the project retains sufficient capital to continue. (Note: Recent court action in Oman concerning the resolution of a dispute between the two equity partners of Blue City is reported septel. End Note.) ¶7. (C) The Minister further confirmed that the government was working with Kuwaiti investor Bait al Istithmaar al Khaliji (Gulf Investment House) on developing a healthcare "city" within Blue City, but added, "I don't know why they announced it (in the media). I don't foresee any problems with the project, but I would have preferred to wait." She explained that a market study for building a post-operative recovery center aimed primarily at Europeans was under review. The center would co-exist with Dubai's new medical city, since, according to Rajiha, "This service is not readily available." The Ministry plans to also conduct a feasibility study, to include the possibility of adding a hospital and medical college. -------------- Still "Omagining" the Possibilities -------------- ¶8. (C) On the proposed Omagine project, led by U.S. promoter Frank Drohan, Rajiha said that the plans were taking a "long time" to formulate. "We wanted to be sure that the project is going in the right direction," remarked the Minister. She also noted that the envisioned Omani-oriented theme park, centered on seven "pearls," has been the biggest stumbling block, as the Ministry wanted to ensure that it met the "highest standards." ¶9. (C) Another problem facing Omagine has been efforts to attract at least 30% Omani participation, which would make the project "more secure," according to Rajiha. So far, Omagine has attracted interest from the owners of a prominent shopping center in Muscat, who have provided a cash investment equivalent to 12% of the total equity. The Minister relayed to the Ambassador that other Omani investors had been identified, but that she did not know their identities. The Minister continued that the government previously considered being a 30% investor in Omagine, but ultimately decided not to participate. The government has insisted, however, that the project cover its costs first -- income from all of the project's components (hotel, residences, entertainment, etc.) will go to one account and only be shared with investors once the operating costs have been met. -------------- Selling Oman Overseas -------------- ¶10. (C) Rajiha informed the Ambassador that the Tourism Ministry was keen on promoting its "brand" to the international community. The Ministry has developed a new logo for Oman, which it intends to unveil soon. It is also marketing Oman as a "different destination," and wants development to mirror traditional Omani customs. In Musandam, for instance, developers have built an upscale resort in the style of a traditional Omani village. In selling Oman's distinct culture, the Ministry has opened offices in the UK, Germany, France, Australia and the UAE. It is further looking to open offices in Singapore and China, and is just starting its marketing efforts in the U.S. Rajiha cautioned, however, that, "We don't want to go too fast and get ahead of ourselves." GRAPPO