LOOKING FOR ECONOMIC GROWTH IN OMAN'S INTERIOR

C O N F I D E N T I A L SECTION 01 OF 03 MUSCAT 000359

SIPDIS

STATE FOR NEA/ARP

E.O. 12958: DECL: 05/14/2018
TAGS: ECON ETRD EINV MU
SUBJECT: LOOKING FOR ECONOMIC GROWTH IN OMAN'S INTERIOR

REF: A. MUSCAT 256

B. 07 MUSCAT 324

Classified By: Ambassador Gary A. Grappo for Reasons 1.4 (b and d)

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Summary
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1. (C) Business officials in the Omani interior towns of
Buraimi (located on the border with the United Arab Emirates)
and Ibri are optimistic about the economic growth potential
of their respective areas, in spite of the obstacles facing
them. Improved road access and availability of natural gas
and building materials figure significantly in their
development plans, as does increased vehicular traffic from
the UAE and Saudi Arabia. Buraimi faces an added concern
with regard to the tightening of its border with the UAE,
while Ibri looks for stronger commercial and community ties
with foreign entities. End Summary.

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Opportunities in Buraimi
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2. (C) As part of his outreach to the interior, on May 4,
the Ambassador traveled to Buraimi and met with the governor
and other local authorities. Sheikh Batti bin Mohammed bin
Saif al-Niyadi, Director of the Oman Chamber of Commerce and
Industry-Buraimi, told the Ambassador he was optimistic over
Buraimi's future, especially since the Sultan elevated
Buraimi's status to that of a governorate in 2006, which
provided for greater political clout as well as a larger
budget to fund projects. Niyadi remarked that the climate
was ripe for investment, enhanced by recent announcements on
the building of a cement factory and of an automobile
assembly plant in Buraimi. The Director highlighted Oman's
reputation for transparency in attracting business, citing
the recent court victory by a Bahraini national against an
Omani royal (ref A). Niyadi remarked, "In Oman, you don't
need the sheikh's support to get things done, unlike in other
Gulf Cooperation Council countries." In addition, he
anticipated that the construction of a dual-lane highway from
Sohar to Buraimi, with an onward link to Abu Dhabi, would
pave the way for further commercial development. For these
reasons, he welcomed U.S. interest in investing in Buraimi.

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Overcoming Obstacles
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3. (SBU) While upbeat about its prospects, Niyadi
acknowledged that Buraimi was facing several significant
obstacles to future growth. The Director pointed out that
the lack of natural gas would hinder continued industrial
development in the governorate, even though a pipeline to
import gas from Qatar would transit Buraimi. He further
noted that raw materials were in short supply, the result of
intense regional competition for increasingly scarce
resources. For example, Niyadi explained that the price of
steel has risen from 170 RO (USD 441) per ton to 470 RO (USD
1,220) per ton, with forecasts expecting the price to inflate
even further to 700 RO per ton (USD 1,881). He recounted
that a local sheikh who built a tissue factory was
subsequently approached by individuals looking to buy his
building, primarily for the steel.

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Border Woes
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4. (SBU) Buraimi faces an even greater challenge in terms of
normalizing its border relationship with the UAE. The
September 2006 establishment of formal border crossing
checkpoints by the UAE between Buraimi and the larger Emirati
city of Al-Ain initially caught many Buraimi residents
off-guard (ref B). Accustomed to the free movement of goods
and people between the cities, the checkpoints discouraged
the flow of traffic from Al-Ain, hurting business on the
Buraimi side of the border.


5. (SBU) Local contacts suggest that the situation appears to
be improving. Manoj Saini, Assistant General Manager of the
Buraimi Hotel, commented to Econoff that while the
checkpoints initially drove down business, an arrangement to
permit expatriates in the UAE to renew their residence visas
in Buraimi has filled his hotel. Several hundred expats now
enter Buraimi on any given day to await reissuance of their
UAE visas. (Note: The Omani border checkpoint remains

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approximately 20 kilometers inland, so non-Emirati residents
can exit the UAE to renew their visas without having to
formally enter Oman. End Note.) An American citizen
entrepreneur who lives in Buraimi but conducts most of his
business in Al-Ain, said that the border formalities are now
much more efficient with the UAE's issuance of "border
crossing cards" to expatriate residents of Buraimi.

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Unlocking Ibri's Potential
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6. (U) Following his visit to Buraimi, the Ambassador
traveled south to Ibri, a regional hub in the al-Dhahriah
governorate. Sheikh Hilal bin Said al-Hijri, the wali (local
head of government) of Ibri, highlighted to the Ambassador
the importance of his wilayat (district) during their May 5
meeting. With 115,000 residents and 244 villages, Ibri,
according to the wali, serves as an important crossroads for
the region. Ibri has been the beneficiary of considerable
government investment, including a recently inaugurated $8.5
million technical college, a new sewage plant, and a new $5
million court complex.


7. (U) Hijri characterized the development of roads to Ibri
as crucial for development of its small commercial base. The
wali was grateful for the construction of the highways to the
coastal cities of Muscat and Sohar, and expressed enthusiasm
that a dual-lane road under construction linking Saudi Arabia
with Oman would facilitate the flow of Saudi traffic to
Muscat and Salalah via Ibri. Hijri noted that the main
tourist season for Ibri was June through August, when
residents from other Gulf states passed through the wilayat
en route to the cooler climes of the Dhofar governorate in
southern Oman. He estimated that pass-through traffic ranged
between 300 and 900 cars per day, but commented that Ibri
lacked sufficient hotel accommodations to generate
substantial overnight business.


8. (U) Supplementing endeavors to capitalize on traffic flows
was Ibri's greater emphasis on industry. Hijri remarked that
the government's recent opening of a technical college in
Ibri would boost local interest in learning trades, and that
the construction of an additional private technical institute
would provide further vocational opportunities in the
wilayat. The wali identified the marble and granite business
as a particular economic bright spot in Ibri, whose companies
currently export 75% of their marble to Dubai. Hijri was
also hopeful that additional gas production opportunities
would arise in the oil fields of Fahud, 125 kilometers south
of Ibri.

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Building Stronger Community Ties
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9. (U) While in Ibri, the Ambassador also met with Sheikh
Shihab al-Shukaili, Director of the Oman Chamber of Commerce
and Industry-Ibri, and leading business representatives from
the wilayat. Shukaili stressed that Ibri was generally
overlooked when it came to doing business in Oman, and
highlighted that his area had the people, minerals, and
access to the UAE and Saudi Arabia to establish an industrial
hub. In light of the pending implementation of the U.S.-Oman
Free Trade Agreement, he requested the Embassy's assistance
in promoting Ibri as a place to do business.


10. (SBU) During a subsequent roundtable discussion, State
Council member and local businessman Ali al-Yahyai expressed
skepticism about foreign interest in Ibri. Mohamed
al-Kalbani, member of the Consultative Council, claimed that
those foreign companies already in Ibri, such as Occidental
Petroleum, do not make an effort to build ties with the
community. He specifically pointed out that a request for
Occidental to fund a comprehensive economic study for Ibri
had gone unanswered. Kalbani added that there were other
opportunities for Occidental to contribute to the community,
such as funding a scholarship program for Ibri students to
study in the U.S. or establishing a computer center for Ibri
youth, but that the company had remained largely absent from
the community.


11. (U) Business representatives also raised their concern
regarding rising prices and supply shortages. Fish, which
has gone up 47% in price over the past year in Oman, was in
short supply earlier this year in Ibri before the Ministry of
Fisheries stepped in to provide extra truckloads of fish.
(Note: The Minister of Fisheries is from Ibri. End Note.)
Another product in short supply is cement. Media report that

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the government has arrested four people in Ibri in connection
with selling cement at exorbitant prices, but that the
practice purportedly continues.

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Comment
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12. (SBU) Both towns face problems of isolation from the rest
of Oman in their attempts to develop their economies. The
Omani government has attempted to mitigate this obstacle by
improving the road networks to both Buraimi and Ibri. Ibri
is especially appreciative of the links to both Muscat and
Sohar, while Buraimi sees much of its future tied to the UAE.
(Note: It is only an hour's drive from Buraimi to both Dubai
and Abu Dhabi, as opposed to a four hour drive to Muscat.
End Note.) For this reason, Buraimi residents were
particularly discouraged when new UAE checkpoints made it
more difficult to travel to Al-Ain, but are now seemingly
content with the subsequent arrangements made to ease the
formalities.


13. (SBU) On the issue of corporate stewardship, it is worth
noting that Occidental has provided community support in the
areas where it operates, but takes a low-key approach in
advertising its actions to the public. In general,
Occidental looks to award contracts to local companies in the
areas of transportation, water hauling, fencing, and road
grading. It has established an English language training
center in the town of Haima (close to its fields in
Mukhaizna),as well as an operator/technical training
program. Besides its efforts to remodel a local high school,
Occidental purchases food and sundries from local sources,
provides water to eight villages, and gives preferential
consideration to hiring Omanis. Occidental estimates that
the value of its local support programs equaled $10 million
in 2007. The bulk of that support most likely went to its
larger Mukhaizna field in the south, as opposed to its
smaller Safah field closer to Ibri.


14. (C) Of interest is what was not discussed during the
Ambassador's initial meeting with Sheikh Yahya bin Humud
al-Ma'mari, the Governor of Buraimi. In submitting the
request for the appointment, the Ministry of Foreign Affairs
agreed to schedule it on the condition that the Ambassador
not raise any substantive issues with the governor. The
meeting itself was devoid of genuine substance, an indication
that the sheikh was following strict MFA orders to keep
discussion to the weather and the immaculate condition of
Buraimi's streets. It is unclear why the MFA muzzled the
governor, but the Embassy suspects that the MFA did not want
Ma'mari to use the Ambassador's trip to the region to air an
extensive list of complaints about being forgotten by Muscat.
End Comment.
GRAPPO