OMAN'S COMMERCE MINISTER: U.S. LEADERSHIP CRITICAL TO

C O N F I D E N T I A L MUSCAT 000148 SIPDIS E.O. 12958: DECL: 2019-02-28 TAGS: ECON EFIN MU SUBJECT: OMAN'S COMMERCE MINISTER: U.S. LEADERSHIP CRITICAL TO RECOVERY IN THE GLOBAL ECONOMIC CRISIS REF: a) OMAN 147 (NOTAL) CLASSIFIED BY: Gary A. Grappo, Ambassador; REASON: 1.4(B),(D) ¶1. (C) American leadership is "critical" to the world's recovery from the global economic crisis, according to Oman's Minister of Commerce & Industry, Maqbool bin Ali bin Sultan. The minister told the Ambassador February 26 that now is the time for the U.S. to assert the leadership that "the world has counted on" for the last 70 years. ¶2. (C) The minister said he and the rest of Oman's economic leadership were "impressed and encouraged" so far by the President's quick actions to address the crisis in the U.S. He said the stimulus package showed U.S. commitment to act fast, but also worried that, "You don't have the money and will have to borrow even more." However, he said that the focus must be on returning the U.S. financial sector to health. "That is the core issue," he emphasized, "and nothing else can happen until your financial sector begins to recover; then the rest of the world's finances can return to health." He expressed continuing concern about slow action on the part of European governments to address the crisis and said Oman was especially worried about the health of Eastern European economies. Even if the Western European economies stabilize, he stated, an unhealthy Eastern Europe would "bring down many European banks." ¶3. (C) As for Oman, Maqbool said that he expects the Omani economy will suffer this and even next year, "but not as badly as others." He predicted one-two percent economic growth for 2009, down from double-digit growth the last four years. He expects exports to fall 50-60% as a result of the slide in oil prices, with the attendant adverse impact on the current account and balance of payments. At the budgeted $45 per barrel, he revealed, Oman expects to run a budget deficit in excess of $2 billion, again down substantially from the double-digit surpluses of 2004-2008. ¶4. (C) The government's biggest pre-occupation is unemployment, given the expected fall in private sector business activity. For that reason, he said, the government will continue with its many development projects, including Duqm port development (reftel),the new Muscat International Airport, the Salalah airport, several smaller airport projects and road construction projects. "If the government does not continue with these, there would be an unsustainable contraction in our entire economy." With reserves that had been built up over the last several years - the Strategic Government Reserve Fund, an infrastructure development fund and an "emergency fund" - and the country's double-A credit rating (Moody's),it can rely on internal funding and even turn to the credit markets, if necessary. Even so, he acknowledged, if the global crisis extends beyond 2010, Oman would need to seriously rethink its economic policy. ¶5. (C) Comment: Maqbool was significantly more forthcoming in this private discussion than he and other senior leaders have been publicly. In recent media interviews, Maqbool, Economic Minister Ahmad Abdulnabi Makki and the president of Oman's Chamber of Commerce & Industry have presented a much glossier assessment of the economy, a reflection of Oman's inability to communicate transparently with its public. Nevertheless, having avoided the perils of the sub-prime crisis and the troubles of U.S. and international banks in taking on unknown and poorly understood assets, Omanis probably stand on firmer ground than do many other countries. They are more likely to be affected by the fall-out from the global downturn, especially the slide in oil prices. GRAPPO To view the entire SMART message, go to URL http://repository.state.sgov.gov/_layouts/OSS SearchResults.aspx?k=messageid:b6615cca-425e- 41cb-a0ff-d4c0ed8cb1bd