March 2015 Issue 2. Vol 1 - asalah.umsdigital.comasalah.umsdigital.com/Asalah_En/images/news_letter/asalah-News... · 2 Dear Valued asalah Client, Welcome to the latest issue of the

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March 2015 Issue 2. Vol 1

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Dear Valued asalah Client,

Welcome to the latest issue of the monthly asalah Priority Banking Newsletter.

asalah is delighted to join the nation in celebrating the auspicious return of His Majesty Sultan Qaboos to the Sultanate. asalah is honoured to extend best

DGM MESSAGE

wishes for the well-being and a long life to His Majesty Sultan Qaboos to lead Oman to greater prosperity, progress and development.

Remaining true to our earlier promise, this issue is packed with extensively researched, engaging and insightful articles that are relevant to your asalah lifestyle and profile. The succeeding editions will also carry the same level of attention in presenting high-quality information about market trends; local, regional and global economies; financial developments; as well as lifestyle, culture and leisure.

We believe, armed with information and the right perspective, investors can create long-term value in the present circumstances. Clearly, the regional markets are valued attractively at present. Coupled with the current low interest rate scenarios, acquisition of long-term assets will be a good investment strategy.

The asalah proposition is committed to bringing to you the best in banking experience and privileges. We cherish your relationship, and we are committed to moving forward to strengthen it. Our growing team of Relationship Managers is committed to responding to your needs and work out meaningful solutions. There are many ways to reach us - through our Relationship Managers, website, email or call centre; just as we reach out to you though various channels, including social media.

We are also pleased to announce that, for the first time in Oman, asalah Priority Banking has introduced the asalah Entertainer 2015 smartphone app to its clients with more than 600 unbeatable ‘Buy 1 Get 1 Free’ offers across 15 countries, including Oman, the UAE, the UK, Thailand and other countries.

The offers cover a range of categories, including dining, entertainment, outdoors, holiday, beauty and spa and travel. The exciting offers can be redeemed electronically using your smartphone.

asalah clients can also enjoy the Rewards of Indulgence programme and avail great discount offers at various retail outlets across the Sultanate using asalah cards. To view the updated promotions, please visit www.bankmuscat.com/asalah.

We will continue to deepen our engagement and relationship with our valued clients and look forward to a mutually rewarding relationship.

Best wishes to you and your family.

Ali Said AliDeputy General Managerasalah Priority Banking

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EXECUTIVE SUMMARY

EXECUTIVESUMMARY

Oman’s non-oil sector is revving up as the hydrocarbons sector loses steam, with real estate and the non-oil manufacturing emerging as bright spots in the economy.

While Oman’s real GDP growth will moderate in 2015-16 to an annual average of 3.3% owing to the knock-on effect of lower oil revenue on domestic demand, gains in the non-oil sector will help to support economic growth in 2017-19, averaging 3.5%, according to the Economist Intelligence Unit (EIU).

The Sultanate is also investing heavily in infrastructure that should further boost the economy. Investments in transporta-tion, manufacturing, infrastructure, ports, logistics and communications are vital at a time when global economic growth is uncertain and crude oil and natural gas prices are trending lower than previous years and may remain subdued for some time to come.

“The development of manufacturing and tourism, accompanied by infrastructure improvements, will boost non-oil exports and should increasingly become a driver of growth during the second half of the forecast period,” the EIU said.

Oman's non-oil

sector takes

bullish position The government is also planning to issue a USD 520 million sukuk (Islamic bond) to ensure that it maintains its capital commitments for diversification projects.

“We hope it (low oil prices) will be short-lived. The government will continue with its plan to invest and go for mega infrastructure projects," Central Bank of Oman Executive President Hamood bin Sangour Al-Zadjali told Reuters.

As major capital commitments continue to trickle into the economy, analysts expect real GDP growth to average a relatively robust 3.5% a year in 2017-19, supported by stronger domestic demand (on the back of recovering oil prices), although this remains far below the annual average of 7.2% in 2008-09, the consultancy said.

Oman is also looking to develop a strong high-end tourism sector across its plentiful coastline, which should help attract interest from international inves-tors looking to pick up real estate in tourist destinations.

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FEATURED STORY

The Royal Oman Opera House Muscat (ROHM) is the first and only opera house in the Gulf region. A brainchild of His Majesty Sultan Qaboos bin Said, it is a testament to his passion for the arts and Oman’s little-known enthusiasm for classical music that is now coming to gain more recognition.

Oman also happens to be the home of the only Arabic classical orchestra in the region: the Royal Oman Symphony Orchestra (ROSO). Established in 1985 by His Majesty to train young Omani men and women in classical music, its debut concert was held in 1987.

ROHM, which officially opened on October 12, 2011 with a production of Puccini’s Turandot, has become a regular venue for ROSO to showcase its talent and even perform with some of the world’s more admired musicians.

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Located in the upscale Shati Al Qurum district of Muscat, its unimposing cube-like structure has become a monument in the Omani capital, subtly blending into the city’s low-rise skyline. Its architecture may shun flamboyance, but its interior does not shy away from the glorious patterns of Arab, Islamic and Omani designs. From carvings to stencilling, the concert hall showcases traditional designs including touches of Mamluk, Mongolian and Arabic.

ADVANCED THEATRE TECHNOLOGY

While the concert hall’s architecture and interiors may be traditional, it boasts the most advanced and state-of-the-art acoustic technology to ensure that every one of the 1,100 guests it can accommodate enjoy the same listening experience.

In a first-of-its-kind feature for an opera house, each seat is also fitted with an interactive screen to provide subtitles in Arabic and other languages during foreign language performances. The screens likewise allow the visitor to interact with organisers should an event (such as one that includes voting) require it, as well as access the evening’s programme and even book tickets for future shows.

The Royal Oman Opera House … Showcasing the finer things in life

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The hall has a mobile stage and a 500-tonne, movable acoustical shell that is curved and has hard surface designed to reflect sound towards an audience. Attached to the shell is a 50-tonne organ, which is also movable at the push of a button to accommodate different types of performances (such as plays).

WORLD-CLASS ARTISTS

The opera house hosts performances from various genres from all over the world, from ballet to jazz and even Arabic music. That blend, a modern-day testament to Muscat’s seafaring and cosmopolitan history, makes ROHM one of the top destinations in Oman for tourists as well as residents.

So far, it has hosted world-famous names in classical music, including tenors Plácido Domingo and Andrea Bocelli, soprano Renée Fleming, as well as cellist Yo Yo Ma, the London Philharmonic Orchestra, the American Ballet Theatre and Lebanese diva Majida Al Roumi.

Marcel Khalifa, the legendary Lebanese composer, singer and oud player, gave his own stamp of approval to ROHM after performing there for two nights with the ROSO in early March 2015. On Twitter, the world-renowned musician declared that ROHM was one of the most beautiful opera houses he had seen, praising Oman’s taste for music and the important role that Omani women play in it.

“After Sydney, Alaska, the John F Kennedy Centre for the Performing Arts in Washington, DC, Paris, Vienna and other capitals, I say that I saw all the beauty in Muscat’s Opera House,” said Khalifa.

PRESERVING OMANI HERITAGE

Aside from bringing the cultures of the world to Oman, ROHM also aims to play a central role in the preservation of Oman’s history of dance, music and folklore. It is an attempt at ensuring that the forces of globalisation, which often bury traditional cultures, are instead used to propel them to greater heights.

In a project that is a first of its kind in magnitude, ROHM is currently in the process of studying, documenting and archiving traditional Omani art forms and folklore that have otherwise been passed down orally.

The Opera Galleria shopping mall, attached to the ROHM, is home to the Al Angham flagship restaurant: a reservation-only fine dining venue that serves Omani cuisine. To date, the restaurant has received rave reviews.

The opera house also offers free tours of the premises as well as school visits and family nights to encourage attendance. Tickets are also priced relatively low, starting at OMR 5 (USD 13), to ensure accessibility for all.

ROHM plans to be more than just a regional cultural hub and performance arts centre, with organisers planning to reach out directly to Oman’s schools in order to inspire appreciation of local Omani arts.

MANUFACTURING

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Strong investment in Oman’s manufacturing sector is expected to play a key role in the country’s economic diversification strategy.

Oman manufacturing poised for growth

Vale Oman Pelletizing Company LLC, the USD 2 billion subsidiary of Brazilian mining conglomerate Vale SA, posted record production of iron ore pellets in 2014 at its Sohar facility. A string of other announcements should also buoy the manufacturing sector.

Oman Oil Refineries and Petroleum Industries Company (Orpic) recently picked 19 consortia for its pre-qualification process for the engineering, procurement and construction (EPC) work packages of its USD 3.6 billion Liwa Plastics Industries Complex (LPIC).

In addition, Oman Investment Fund and joint venture partners UK-based Tri-Star Resources and Dubai’s Castell Investment signed a USD 40 million bank loan deal to finance the construction of a 20,000-tonne antimony roasting facility in Sohar.

Used in batteries, metals and cable sheathing, antimony production is dominated by Chinese producers, but presents a huge opportunity for the Sultanate.

In addition, Australia’s Alara Resources Limited has signed a memorandum of understanding (MoU) with Oman’s Mawarid Mining Company to process around one million tonnes of copper/gold ore from the Washibi deposit in north Oman. The MoU commits the two sides to work collaboratively on optimising a plan for the development of the Washihi copper-gold deposit, seen as the largest copper resource in the Sultanate to date.

“As it prepares to break ground on the Oman National Railway project, which will require significant quantities of sand and rock, the government is slowly putting the brakes on the export of raw minerals, with a view to encouraging investment in mineral processing and value addition,” Oxford Business Group said.

“Projects aimed at extraction of copper, rare earths, limestone and chromite are considered especially high potential; chromite extraction, for example, is key to sustaining growth in Sohar’s burgeoning ferrochrome smelting industry, which is itself critical to steel production.”

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OMAN MINING LAW

A new mining law is also expected to be announced within the next few months.

“The country’s ninth five-year plan (2016-2020) is expected to be a new catalyst for the expansion of existing industries and the creation of new industries,” according to H.E. Ali bin Masoud Al Sunaidy, Oman's Minister of Commerce and Industry.

The country has also paid special attention to the development of industrial estates, under the direction of Public Establishment for Industrial Estates (PEIE). The initiative has attracted more than OMR 5 billion (USD 13 billion) since its inception in 1991, with foreign investors contributing just over 42% of the total.

"Significant growth rates have been noted in the various industrial estates. The growth rate in the size of private sector investment has surpassed 106% during the period from 2007 to 2014,” said PEIE Chief Executive Officer Hilal bin Hamad Al Hasani in a recent statement.

The PEIE attracted investments of around OMR 657 million (USD 1.7 billion) in the first half of 2014, a 27% improvement over the same period in the previous year.

In addition, the PEIE intends to proceed with expansion in Al Rusayl, Nizwa, Knowledge Oasis Muscat and Al Mazunah Free Zone. Development of phases 3 to 6 in Sohar Industrial Estate and the second phase of Al Mazunah Free Zone are also set to be completed. Work is likewise underway in preparing designs for the master plan of Ibri Logistics area, which is seen as a vital project due to its proximity to the Saudi border, the PEIE CEO said.

According to the country’s official state statistics agency, there were 2,730 registered industrial companies in the country at the end of 2013 with the majority located in Muscat (893) and Al Batinah north (475).

LOW COMMODITY COST STIFLES GROWTH

Oman’s petrochemicals-led manufacturing sector contracted 8.6% in the third quarter as oil prices slipped, led by nearly 15% decline in petrochemicals. However, the “other manufacturing” sector grew 2.7%.

Contraction aside, exports of chemical products rose 18.8% during the first 11 months of 2014, while plastic and rubber products shot up 26.6% during the period. In addition, exports of base metals and articles expanded 7.6%, reflecting continued growth in the non-oil sector.

Despite the short-term jitters due to commodity prices, the industry is expected to bounce back on strong investment in the sector.

“The petrochemicals, aluminium, steel and mining segments are witnessing strong growth as a result of new and planned processing and manufacturing facilities, while ongoing development at industrial estates and the port cities of Salalah, Duqm and Sohar promise long-term opportunities for new players and construction companies,” the Oxford Business Group said in a recent report.

The country’s advantageous location and industrial ports present a unique opportunity for the nascent manufacturing base to create a niche for itself among the Gulf states and play a vital role in diversifying the economy.

REAL ESTATE

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Oman’s real estate transaction reached nearly OMR 3 billion (USD 7.8 billion) last year, a 27% jump over 2013, according to the real estate registry at the Ministry of Housing.

Real estate deals hit USD7.8bn in Oman

Real estate transactions stood at 354,565, with Muscat governorate accounting for 80,299 of the transac-tions. Mortgage transactions shot up 30% during the year to reach 19,255 with a total value up 12% to reach OMR 1.75 billion (USD 4.5 billion), the ministry noted.

The figures show that the property market remains upbeat despite lower crude prices, even as rental prices eased.

“Rental value growth for two and three bedroom apartment during the first three quarters of 2014 followed a path of stabilisation, with third quarter experiencing no change in average rents, following 0.7% rise in the second quarter,” said Cluttons, the real estate consultancy.

“This equates to a 2.3% rise during the 12 months to the end of the third quarter 2014, with two-bedroom apartments (3.1%) outperforming three-bedroom apartments (1.5%) over the same period.”

According to UK-based consultancy Savills, 4,000 one- and two-bedroom apartments are expected to enter the rental market in the next 24 months which can result in the possible softening of rentals.

“However, if the population of Muscat continues to grow at historic rates, this space should be absorbed without detrimental effect, but any rental value increases could be slowed,” Savills said, noting that the

influx of expatriate families should also drive housing demand.

The rental cooling-off period should help ease pressure on the real estate market and also buoy consumption in the economy at a time when oil prices have trended lower.

Oman is already the second least expensive place to live in the Gulf region, after Saudi Arabia. Numbeo’s global survey places Oman 63rd out of 119 countries in its cheapest annual global cost of living index. The index takes into account the difference in living costs between countries including cost of groceries, rent, transportation, restaurants and utilities.

ECONOMIC BACKDROP

While low oil prices remain a concern, the authorities are looking to maintain spending on infrastructure development in order to boost the economy. The latest Oman budget focuses heavily on capital spending that should keep the economic engines turning.

Moody’s ratings agency noted that despite lower government revenues and higher government debt over the next one to three years, Oman's debt metrics will still compare favourably with its peers.

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“The Omani government has several funds, as well as deposits in the domestic banking system,” Moody’s said.

The government’s total assets has grown from OMR 8 billion (USD 20.8 billion) in 2004 to OMR 24 billion (USD 62.3 billion) by end-2013 -- equivalent to 80% of GDP and around nine times outstanding govern-ment debt. This provides authorities the fiscal cushion to keep focusing on expanding the economy.

Overall, the Sultanate’s real gross domestic product is expected to grow at a respectable 3.2% this year and 3.4% next year, according to ratings agency Standard & Poor’s. In addition, the general business and consumer sentiment also remains upbeat. A recent YouGov-Bayt.com survey revealed that eight out of 10 Omani citizens were optimistic about 2015.

The government is also looking to crack down on unlicensed brokers to help bring more transparency and predictability into the market.

The Ministry of Housing will not approve transac-tions initiated by unlicensed brokers, according to Mohammed bin Salim Al Busaidi, chairman of the Omani Real Estate Association (OREA) and a Majlis Al Shura member.

"All real estate transactions should be legal and there will be no opportunities for individual and unlicensed brokers to buy and sell properties," the chairman told the media.

In addition, the Ministry of Housing, OREA and the National Centre for Statistics and Information (NCS) are planning to start an official real estate index in the first quarter of 2015 to promote transparency in the sector.

A directorate-general is also being established to create a more business-friendly environment for international and domestic real estate investors.

The new policies and strengthening of the legal framework should further boost investor confidence in the real estate market.

Bank Muscat shareholders approve OMR500m sukuk programmeBank Muscat , the Sultanate's largest lender, has announced that its shareholders have approved the Board's recommendation for the setting up of a OMR 500 million (or its equivalent in US Dollar currency) Meethaq Sukuk Programme for the issuance of sukuk in various tranches in the domestic and international markets through public subscription or private placement.

The Sukuk tranches under the Meethaq Sukuk Programme will be in different amounts, maturities, and profit rates, issued on different dates with varying terms and conditions of subscription. The total amount of sukuk issued under the Meethaq Sukuk Programme will not exceed OMR 500 million (or its equivalent in US Dollar), the lender said in a filing to the Capital Market Authority. - Oman Daily Observer Read More >>

TruckOman plans facilities in DuqmTruckOman plans to establish facilities in Duqm as it foresees bright prospects for this strategically located port town, said a senior official at TruckOman.TruckOman, a 94% owned subsidiary of Al Yousef Group, is a leading Omani-owned provider of oil and gas logistics services in the Sultanate, and its other activities include supply chain management and total logistics services.

The company offers a wide range of services, which includes heavy lift and transportation, infield rig and camp movements, mobilisation of all oilfield equipment from ports to final location and general transportation and line haulage in addition to warehousing activities such as chemicals and temperature controlled storage and operation of pipe and chemical yards with transport services. - Times of Oman Read More >>

OMR500m to boost development of fisheries sector in the sultanateThe fisheries sector is one of the promising sectors for diversifying sources of the national income, creating job opportunities and ensuring high added value.

The sector has been allocated OMR 500 million for its development between 2013 and 2020. The Ministry of Agriculture and Fisheries has already started implementing this plan as the 2015 budget has given priority to two major projects - the fish processing complex in Duqm and infrastructure development to boost the production of aquaculture. - Muscat Daily Read More >>

Oman shows improvement in Global Innovation IndexIn the 2014 Global Innovation Index (GII), Oman ranks 75th out of 143 countries, slightly moving up the ladder relative to 2013 when it held the 80th place over 142 countries.

The seventh edition of the GII has been co-published by Cornell University, INSEAD and the World Intellectual Property Organization.

The latest report was themed under the concept of the human factor in innovation, essentially looking at how change and growth is achieved through the participation of people.

Every country in the GII is ranked according to the overall score it achieved in the average of two sub indices, the Innovation Input and the Innovation Output. - Oman Daily Read More >>

'Oman is ripe for investment'The broad range of investment opportunities emerging in Oman against a backdrop of steady, economic growth was highlighted in a wide-ranging video interview given by Oliver Cornock, Middle East managing editor for the global publishing, research and consultancy firm Oxford Business Group (OBG).

The interview, in which Cornock shared his thoughts on Oman's economic growth story with economic analyst Nicholas Anderman, looked at the Sultanate's economy with a backdrop of lower oil revenues, yet continuing high levels of budget spending. - Times of Oman Read More >>

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NEWS OMAN

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Surge in regional wealth creates new opportunities for private banksPrivate wealth in GCC has doubled from USD 1.1 trillion to USD 2.2 trillion, making the region a lucrative market for both local and global private bankers, but to fully capitalize on new opportunities, banks need to devise new strategies for the fast growing affluent class according to a study by management consultancy Strategy&, formerly Booz & Company.

Strategy& estimates that at present, there are between 1.5 million and 1.6 million wealthy households in the GCC with total investable assets of around USD 2.2 trillion (AED 8.1 trillion). While Saudi Arabia accounts for about 44 per cent of the region’s private wealth the UAE has about 30% share at the end of 2013. - Gulf News Read More >>

UAE central bank chief says UAE is benefiting due to dollar pegThe UAE’s Gross Domestic Product is unlikely to be affected from the drop in oil prices since the country is currently benefiting from a strong US dollar, according to Mubarak Al Mansoori, Governor of the Central Bank of the UAE, who spoke at a conference in Abu Dhabi.

“It will affect us (lower oil prices) but we have financial capacity in terms of banks and sovereign wealth funds. Banks are in a good position today. Business is as usual,” said Mubarak Al Mansoori while taking part in a panel discussion at the Global Financial Markets Forum. - Gulf News Read More >>

FDI in Qatar touches QR111.8bnThe size of foreign direct investment (FDI) inflow to Qatar has touched QAR 111.8 billion at the end of 2012, a 1.2% increase from a year ago. Though the FDI has targeted various economic activities in Qatar, four major sectors accounted for 90.7% of the Qatar's total inward FDI at the end of December 2012.

These sectors include mining and quarrying; manufacturing; building and construction; professional, scientific, technical, administrative and supportive service activities. - The Peninsula Read More >>

King's spending boosts Saudi non-oil business growth in February -PMIGrowth in Saudi Arabia's non-oil private sector accelerated to a four-month high in February as lavish handouts to citizens by the new king buoyed the economy despite the plunge in oil prices, a survey of businesses showed.

The seasonally adjusted SABB HSBC Saudi Arabia Purchasing Managers' Index rose to 58.5 points last month from 57.8 in January. It stayed well above the 50-point level separating expansion from contraction.The government has pledged to use its huge fiscal reserves to offset the impact of cheap oil with heavy state spending, while late in January King Salman marked his accession by announcing additional social and infrastructure spending. - Reuters Read More >>

Kuwait sovereign fund says cutting U.S. investments, raising EuropeThe Kuwait Investment Office (KIO), the London branch office of sovereign wealth fund Kuwait Investment Authority (KIA), is gradually reducing its overweight stance on U.S. assets after keeping that position for seven years, its chief executive said.

Osama al-Ayoub, speaking at a business conference in Abu Dhabi, also said the KIO was going overweight on Europe because of the European Central Bank's decision in January to use quantitative easing, a radical form of monetary stimulus.

"This year, we're starting after seven years of overweighting the U.S. market, we're starting to implement an overweight of European markets and gradually reducing our overweight to U.S. markets," he said. - Reuters Read More >>

GCC

DISCLAIMER

This Newsletter is strictly for information purposes only and shall not be relied upon by any party for whateverpurpose, and the information herein does not represent the views of bank muscat. While every reasonable carehas been taken to ensure the accuracy or completeness of the information contained in this Newsletter, bankmuscat SAOG and its employees make no representation or warranty, whether express or implied, and acceptno responsibility for its accuracy or completeness. As such, bank muscat accepts no liability whatsoever for anydirect or indirect loss arising from any use of this Newsletter or its contents.

Nothing in this Newsletter is intended to be or should be considered as legal, regulatory, tax, financial, or otheradvice. You should consult your own professional advisors about issues mentioned herein that may be ofinterest to you as this Newsletter is published for general information and does not have regard to the specificinvestment objectives, financial situation, and particular needs of any specific person.

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