AMBASSADOR CONDUCTS BROAD OUTREACH IN SALALAH

C O N F I D E N T I A L SECTION 01 OF 02 MUSCAT 000430

SIPDIS

E.O. 12958: DECL: 06/11/2018
TAGS: PREL ECON ETRD ENRG SENV KPAO MU
SUBJECT: AMBASSADOR CONDUCTS BROAD OUTREACH IN SALALAH

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

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SUMMARY
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1. (SBU) Summary: The Ambassador visited the southern Omani
city of Salalah and the surrounding governorate of Dhofar May
26-28. His trip included a meeting with the Deputy Governor
of Dhofar, a tour of the operations of an expanding
U.S.-based company, a discussion with university students
about higher educational opportunities in the U.S., a visit
to a nature preserve for the rare Arabian leopard, a lunch
with local notables given by one of Salalah's elected
representatives to the Majlis al-Shura, and the hosting of a
reception for local U.S. citizens. End Summary.

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ECONOMIC GROWTH RAISES ENVIRONMENTAL AND ENERGY CONCERNS
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2. (SBU) Sheikh Abdullah bin Saif al-Mahruqi, Deputy
Governor of Dhofar, warmly received the Ambassador and fondly
recalled his travels within the U.S. as a young man. He
described an expanding local economy fueled in part by new
businesses locating in the Salalah Free Zone and the
construction of numerous development projects. Plans for the
booming real estate sector included three new shopping
complexes, several hotels/resorts for tourists, and the
"Muriya" residential and commercial community where non-GCC
foreigners will be able to own freehold property. A new
airport slated to open by 2011 would help bring more tourists
to the region, he noted, while expansion at the Port of
Salalah would increase maritime commercial traffic and
provide more jobs for local residents.


3. (C) Mahruqi noted that development in the region carried
an environmental cost. As owners of small farms in Salalah
tried to convert their land to commercial or residential use
to capitalize on the land boom, the city was being deprived
of its "lush" feel and much needed "green space." Moreover,
the Deputy Governor stated that overuse of underground
aquafiers and the corresponding increase in the salinity of
the local ground water table had led the government to move
larger-scale cultivation of water-intensive crops to areas
farther in the interior where there was more fresh
underground water.


4. (C) The Ambassador commended the Omani government for its
stewardship of the environment and noted that implementation
of the U.S.-Oman Free Trade Agreement (FTA) could bring more
economic opportunities for Salalah. In particular, the
relatively generous rules of origin provisions in the FTA
would help attract foreign direct investment from countries
in addition to the U.S. Mahruqi responded positively to the
prospect of more American firms coming to Salalah and
commented that current restraints on electricity available to
new industries would be eased by a new 300-400 MW gas-fired
power plant due to come on-line in 2010. (Note: The Manager
of Business Development for the Salalah Free Zone told poloff
while in Salalah with the Ambassador that the new plant would
not begin operations until 2011 and that it would not provide
enough energy to meet future expectations for the Free Zone.
End Note.)


5. (C) Speaking on his governorate's border with Yemen,
Mahruqi said that there were "a lot" of Somali and Ethiopian
refugees in Yemen and that police in Oman's Dhofar
governorate apprehend some of them "every day" for illegally
entering Oman. To avoid capture, he remarked, a number of
these illegal migrants remained outside of the city of
Salalah and caused damage to Oman's trademark and
highly-valued frankincense trees.

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ONE U.S. COMPANY'S SUCCESS STORY
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6. (SBU) To get a first-hand look at business conditions and
opportunities for American companies, the Ambassador took a
tour of the facilities of U.S.-based Octal Petrochemicals
(formed in 2006) in Salalah. Octal hopes to become the
world's leading supplier of polyethylene terephthalate (PET)
and chose the Salalah Free Zone due to its location adjacent
to the Port of Salalah, which provides an optimal entry point
for raw materials while providing convenient access for
Octal's finished products to a number of important markets.
Orders from its plant are loaded directly into containers for
shipment from the port, obviating the need for warehouses.


7. (SBU) Octal officials told the Ambassador that they were
so pleased with their decision to locate in Salalah that they
were building a much larger production facility and took the

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Ambassador to view its construction. The company currently
has approximately 70 employees, both Omani and expatriate,
and plans to increase this number to roughly 400 when it
completes its expansion in September. Once the new plant is
up to full production capacity, Octal expects to meet 60% of
global demand for PET. Starting salaries for factory workers
begin at 250 Omani rials (USD 650) in contrast to the minimum
wage for Omanis of 140 rials (USD 364). (Note: With recent
salary increases for the public sector, which employs over
80% of Omani citizens, very few, if any, Omanis work for the
minimum wage. End Note.) Conscious of its obligation to be
a a good "corporate citizen," Octal is considering ways of
contributing to the Salalah community in addition to
providing jobs for local residents.

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PROMOTING HIGHER EDUCATION IN THE U.S.
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8. (SBU) Dhofar University in Salalah is an enthusiastic
proponent of educational exchanges with the U.S. The
university has formal ties with American University of Beirut
(AUB) and its curriculum is almost entirely modeled on AUB's.
On a visit to the university's temporary campus, the
Ambassador met with the president and faculty members to
discuss the school's expansion plans and continued
cooperation with the Embassy. The university's
vice-chancellor informed the Ambassador that Dhofar
University will host over 60 American college students this
summer for Arabic language training. After this meeting, the
Ambassador addressed a group of students (mostly female) on
higher educational opportunities in the U.S. and then donated
English and Arabic language books to the university library.
The visit concluded with a tour of the site of the school's
new campus, which is currently under construction.

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DHOFARIS TO FOREIGN COMPANIES: DO MORE FOR THE COMMUNITY
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9. (C) On May 28, the Ambassador met with Dr. Rasheed
al-Huraibi, one of Salalah's two elected representatives to
the Majlis al-Shura, the lower house of Oman's bicameral
advisory body. Following this meeting, Huraibi hosted the
Ambassador at a luncheon attended by over 40 local leaders
from the business community, the media, government offices
and tribal groups. A principal theme during the lively
discussion was the alleged failure of U.S. and international
companies in Oman to sufficiently contribute to their local
communities. Some attendees suggested that foreign companies
(with little apparent regard for the size of their in-country
operations) should follow the example of large Omani
state-owned companies in providing funding for big-ticket
items such as the building of housing units. The Ambassador
responded that American businesses in Oman were supporting
their communities, but often chose not to publicize their
actions. He cited Occidental and Microsoft as good examples
of "corporate citizens," and noted the latter firm's active
partnership with the Omani government in providing training
and other resources to raise computer literacy in the
Sultanate.


10. (C) A few lunch participants stated that the U.S. could
improve its image in Oman by offering financial assistance
for local projects in the Sultanate. One Omani suggested
that the U.S. build a new hospital in Salalah. (Note: It is
highly unlikely that the Omani government would accept
foreign money for the building of public facilities. End
Note.) The Ambassador replied that Oman, as a middle-income
country, had graduated from receiving U.S. economic aid as it
had sufficient resources to provide for its own needs. He
explained that U.S. assistance instead took other forms and
gave the example of cooperative projects funded by the Middle
East Partnership Initiative (MEPI) that have led to new
initiatives in education and other areas.
GRAPPO