Oman_At the cutting edge_2006

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ACENTURIES OF TRADE HAVE GIVEN THE

SULTANATE A UNIQUE VISION. TODAY, IT IS

USING AN OIL PEAK TO MAXIMIZE ITS OPTIONS

Oman: at the cutting edge

An aromatic gum resin found in the Dhofar mountains first putOman on the world map. The intense perfume obtained fromfrankincense is said to have exercised incantatory powers overconsumers. Trade in the early Middle Ages reached as far asAlexandria, from where it was loaded onto vessels headed forGenoa. A nation of seafarers, Omani merchants later spread themystique of frankincense to Zanzibar, where it is still sold at out-door markets.

History can offer smart parables. Oman is located on thesouthern tip of the Arabian Peninsula, midway between Asia andEurope. The nation governed by Sultan Quaboos has learned tocultivate globalization on its own terms ever since its forebearsexplored the Indian Ocean in intrepid dhows. It comes as no sur-prise then that it is beginning to lay the foundations of what it seesas a future knowledge-based society. It has liberalized mobile net-works and opened R&D labs in Muscat, the capital, to maximizeits options.

But Oman is much more than the sum of its historical feats.Natural gas, a clean-burning fuel, offers a conduit to future eco-nomic sustainability. The Sultanate is a classic small, open economywhere the tax regime is flexible and inflation is low. Future mone-tary union with members of the Gulf Cooperation Council (GCC)will serve to anchor macroeconomic policy. "We are coordinatingpolicies, designing institutional support and national data systems,"says Central Bank President Hamood Sangour al Zadjali.

For decades, policymakers knew that oil reserves were finite.In 1998, a downturn in oil production forced a rethink of eco-nomic opportunities. Output of oil and condensates is down to735,000 barrels per day (bpd) in 2005. According to the state-owned Petroleum Development Oman (PDO), this year marks alow point ahead of a projected rise back up to 800,000 bpd in2009. Not to worry. Oil peaking is often a definitional concept tiedto the availability of new technologies.

Geography, it turns out, is a useful ally. Oman is on the worldenergy map not only because of its crude output. Its exports of nat-ural gas will generate $24 billion over the next 25 years, accordingto Minister of National Economy Ahmed Macki. The reason behindthis explosive growth is a global switchover to natural gas at elec-tricity plants. By 2010, world gas demand will surpass 40 million

cubic meters per day. "The strategy to reduce our dependence on oilis multidimensional. Our share of oil in GDP has decreased fromabout 70% to 40%. The completion of our LNG project is thus amajor achievement," says Macki. With oil prices showing little signof weakness, petroleum has not lost its appeal. But on a conceptuallevel, it is losing momentum to private sector initiatives.

Part of the momentum was lost in 1998 when oil prices fellbelow $10 per barrel. The authorities launched a diversificationprogram known as Vision 2020, which involved gas sales tofinance infrastructure projects. The objective of Vision 2020 is togradually build the base for a competitive workforce in IT. In themeantime, Oman has opened a high-tech transshipment seaport totap container traffic. Within two years, the port of Salalah haspicked up contracts with shipping companies in Singapore. It nowcompetes with Abu Dhabi. At the marine terminals in Sohar, fer-tilizer plants were added to marine terminals to maximize indus-trial uses. Natural gas pipelines feed both seaports.

Minister Macki thinks GDP will grow 9% in nominal terms in2006. Of that figure, he attributes 5% to the non-oil sector. Omanientrepreneurs are looking forward to projects spinning off of theprivatization program. Many will be gas-based, but others willreflect how well Oman has adapted to globalization: mobile net-works and airport services. "Since the private sector will take thelead in job creation in the long term, we are accelerating the sell-offprogram. The main privatization targets will be in power, water andtelecommunications," says Macki. By then, Oman will have comefull circle from trade in frankincense to sales of cellular bandwidth.

SPECIAL ADVERTISING FEATUREOMAN At the cutting edge

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PHOTOS LEFT AND CENTER: WERNER THIELE; RIGHT: HANNE & JENS ERIKSEN. ALL PHOTOS COURTESY OF MINISTRY OF TOURISM

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INDUSTRY

OPP: multi-million dollar project

The modern Sohar IndustrialPort, 250km northwest of capi-tal Muscat, will house the newPP plant which is expected tobe up and running bySeptember 2006.The new plant in Sohar willboast a production capacity of340,000 metric tons per year ofPP manufactured in pellet formof various grades. OPP uses theNovolen technology — a triedand true system used aroundthe world — to manufacture itscompetitively priced product.And in a move to give the pro-ject international reach andequip it with technological andmarketing know-how, theOmani government hasbrought Korean giant LGInternational on board as astrategic partner. Indeed, LG

will be responsible for interna-tional markets other than thosein which Oman PolypropyleneLLC is traditionally active, suchas the Middle East and theIndian subcontinent.Be it regionally or globally, thePP market certainly is brimmingwith potential. Worldwidedemand has exploded in recentyears, reaching 35 million tonsin 2003, making polypropylenesecond only to polyethylene inthe plastics sector. And OPP isuniquely positioned to bringvalue to the market. Says Dr.Mohammed Benayoune, OmanPolypropylene’s Chief ExecutiveOfficer: “In our market studies,we came out to be the lowestcost producer, even comparedto Saudi Arabia, the reason forthis being that our plant is inte-

grated with the refinery. Therefinery has all the utilities andstorage on its side which meansthat our costs are lower thanthat of a normal PP plant.”All of this bodes well forOman’s future in the petro-chemicals sector. The determi-nation of this smaller country— often in the shadow ofregional giant Saudi Arabia —can be seen in the company’sunwavering commitment tonational development. Dr.Benayoune explains: “Job cre-ation is one of the majorobjectives for the governmentin Oman, and we are hoping tohelp the government in thatrespect”. The environment alsofigures highly among OPP’s pri-orities, and the companyabides by strict environmental

protection guidelines.Local and foreign investorshave been quick to respond tothe opportunities presented bythe project. The fact that thenew plant is located in theultra-modern Sohar IndustrialPort is particularly attractive, asis the complete technical sup-port that OPP offers its cus-tomers. Dr. Benayoune pointsout that the innovative natureof the downstream PP businesshas brought plenty of jobs andinvestors to Oman’s neigh-bours in the Gulf, adding, “Weare hoping to do somethingsimilar here in Oman, obviouslyon a smaller scale. Weobserve closely what othercountries have done, and wetry to learn from their success-ful experience.”

DESTINED TO BE A KEY PLAYER IN OMAN’S THRIVING DOWNSTREAM INDUSTRY IS THE OMAN

POLYPROPYLENE PROJECT (OPP), WHICH AIMS TO MAKE POLYPROPYLENE — A PRODUCT THAT IS

INCREASINGLY BEING HAILED FOR ITS VERSATILITY — A CATALYST FOR NATIONAL GROWTH

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SPECIAL ADVERTISING FEATUREOMAN Tourism

TTourism and theeconomyThe successful promotion of tourism any-where relies heavily on the physical attrib-utes that a country has to offer. It is a factthat Oman does have quite a few advan-tages over other beautiful destinations: it isthe friendliest, greenest country in theArabian peninsula, a part of the worldwhich has never lacked fascination. Oman,compared to some Islamic countries takes amore moderate approach to its religion andtruly welcomes travelers. “In this troubledworld of today where lack of security is acommon phenomenon rather than anexception, Oman stands as oneof the very few countries wheretourists from any nationalitycan enjoy a safe environment,”says Minister of Tourism Dr.Rajiha Abdul Ameer Ali.

The trade routes whichOmanis founded or followedfor centuries probably havesomething to do with their easyacceptance of strangers. Apartfrom Portuguese and Turkishdominance of the coastalregions between 1508 and1650, it was the Omanis themselves whoextended their territories abroad as far asthe fabled Zanzibar which nowadaysbelongs to Tanzania. The Muscat rulers alsoestablished trading posts on the Persiancoast and went even to Pakistan. Covetedby both the French and the British (who hadseized Oman’s overseas possessions)throughout the 19th century, the Sultanateconcluded several treaties of friendship withGreat Britain. English is therefore widelyspoken in Muscat, which tends to make thelife of tourists more pleasant.

The Ministry of Tourism is engaged ina program of maintaining a considerable

number of forts and castles while providingthem with the audiovisual means to depictthe history of the country. The attractionsin Oman, however, don’t stop at passivesight-seeing of monuments to its captivat-ing past: the more adventurous shouldknow that coral lined fjords, going as deepas 40 meters, afford some of the bestscenery in the diving world. Dolphin, whalewatching or surfing are also popularoptions with visitors, and more optionsincluding eco-tourism are being developed.

Within the framework of diversifyingthe economy away from oil,tourism should play an impor-tant role. The annual growthrate of the sector’s GDP hasbeen of over 3% and the pri-vate sector is being seen as astrategic partner with which tocapitalize on all the assets thecountry offers. “We are work-ing on increasing private sectoractivity in tourism by the intro-duction of an appealing incen-tive package on the one handand encouraging foreign

investment on the other hand,” says theMinister. A project for the construction ofthree top-class hotels at Barr al Jissahshould be commissioned in joint public-pri-vate venture this year. The idea is that even-tually the government role would be con-fined to the development of infrastructure.“We have achieved remarkable progress inthe last thirty years in building a network ofroads, communications and public utilitiesall over the country,” adds Dr. RajihaAbdul Ameer Ali. Such infrastructure pro-jects will certainly serve to increase theavailability of diverse experience to eventhe most jaded travelers.

RUGGED MOUNTAINS,

DEEPWATER FJORDS,

SPECTACULAR SAND

DUNES, GREEN HILLS

AND QUIET BEACHES

ARE ASSETS TO THE

COUNTRY’S TOURISM

MARKETING STRATEGY

Dr. Rajiha Abdul AmeerAli, Minister of Tourism

PHOTO HANNE & JENS ERIKSEN, COURTESY OF MINISTRY OF TOURISM

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SPECIAL ADVERTISING FEATURE

In the world according to Omzest,dreams can come true. And dreamsdeliver handsome profits. Omar Zawawi,founder and CEO of the Omzest group ofcompanies, has turned a simple tenetinto the cornerstone of his 34 years inbusiness. The formula has struck a chordin the Sultanate of Oman, where Zawawihas deals in construction, banking,manufacturing, logistics and education.The 70 companies in the Omzest familycover a vast territory of dreams. Bythinking ahead, there is never a deficit ofideas.“We constantly assess customer needs andwork out the technical viability of projects.Later, we figure out how to add value toour product line,” says Zawawi. His life asentrepreneur harks back to 1973, whenZawawi built a series of medical complexesin record time. Within 18 months, sixdifferent Omani towns got their hospitalsand schools. This was in the days whenOman boasted dirt roads and inland townswere off boundaries to strangers.That same year, Omzest,with a group ofinvestors, paid for machinery to startOman Flour Mills. Zawawi was soonbehind port services and the precursor ofOman’s national airline. Cement factoriesfollowed. The race of diversification ledOmzest to penetrate the world ofbroadcast media. Decades before AlJazeera went on the air, Zawawi’s group as

contractors for the Government of theSultanate of Oman constructed the Gulf’sfirst color television station. The wholeprocess, from first contract to firstnewscast, took less than 8 months. Omancame into the 20th century with aTechnicolor makeover in 1974.To continue its expansion, Omzest beganto seek internal sources of finance andcreated Oman International Bank, the first100% Omani-owned financial institution.Zawawi then entered a joint venture withthe Overseas Trust Bank of Hong Kongand Singapore. This led to the formationof the Oman Overseas Trust Bank, laterbought out and renamed as BankMuscat.It was one of the first signs that theSultanate was fully integrated in theglobal economy.Three years ago, in association with theBirla Institute of Technology in India,Omzest started the Waljat Colleges ofApplied Sciences. At Waljat, studentsreceive top-notch training and hands-onexperience with an emphasis on R&D. It isa unique way to further the goals ofOmanization of the workforce. “Trainingand education are vital sectors,” saysZawawi. “In our own way, we hope tocontribute to the aspirations and growthof our employees.”However, the manufacturing sector is stilla priority for the economy, longdependent on exports of natural

resources. From footwear to decorativeglass, manufacturing activity contributes41% of Omzest revenue and accounts fortwo-fifths of turnover. The factories in theholding export production to 90 differentworld markets. Certificates of quality, suchas ISO/HACCP, are creating new demand.And a wealth of small and medium-sizedenterprises ensures long-termemployment and keeps workforce skillsversatile.Today, due to the Leadership and uniqueforesight of H.M. the Sultan, Oman isproudly reclaiming its historical legacy asa seafaring nation. The port of Salalah hasbecome a case study for its forward-looking approach to 21st centurytranshipment flows. And the beaches ofthe Musandam Peninsula are drawingdivers from as far as Moscow.Furthermore, the stability - economic,political and social has paved the way forentrepreneurs like Omar Zawawi with aknack for anticipating trends to succeed.

OMZEST thinks theunthinkable

Omar Zawawi, founder and CEO of the Omzest group of companies

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SPECIAL ADVERTISING FEATUREOMAN Telecom

BusinessWeek

OOman has a lot of bandwidth. With a population of 2.5 million andseas of sand between its urban centers, it is no conventional marketfor mobile operators. Still, this is one of the most profitable mobilemarkets in the Middle East. The reason has to do with competition.

The Sultanate is the oldest independent state in the ArabianPeninsula. Until recently it was virtually cut off from the rest of theworld. But this is in stark contrast to the dynamism with whichtelecoms have picked up business ever since. Mobile subscribers(24.2%) now far surpass the number of fixed line subscribers(9.2%). In Muscat, systems suppliers are busy devising end-to-endsolutions and managers are talking to their customers.

Oman likes the fact that mobile operators not only introducejobs and competitive prices, but also training in cutting-edge tech-nology. Students at Sultan Qaboos University can now gain prac-tical knowledge from internships in Siemens or Ericsson. With e-government projects in the works, their skills will come in handy.And by rolling out ADSL networks, Omani businesses can opennew markets in the GCC.

Ahead of deregulation in the telecommunications sector, thegovernment drew up a Telecom Regulatory Authority (TRA). InFebruary 2004, Omantel, the comfortable state monopoly, wasforced to spin off Oman Mobile. The TRA required that the newoperator be listed at the Muscat Securities Market to ensure trans-parency and an accurate valuation of assets.

Telecom: the focus is coverageBUNDLED SERVICES, ROAMING CONTRACTS, INTELLIGENT NETWORKS, MISSED CALLS, SMS,GSMS: COMPETITION IS BRINGING MORE SERVICES TO MOBILE CUSTOMERS IN OMAN

According to the Minister of Communications, Mohammed alHarthy, by 2009 the number of mobile subscribers is likely to reach1.5 million, a penetration rate of 51.7%. But things are fast-paced inthe cellular world and business focus is changing. “Before, the net-work was the priority. Now it’s coverage. We go as far as possible inour claim that we have 95% coverage of the populated area ofOman,” says the managing director of Oman Mobile, Amer al Rawas.

Oman Mobile runs a GSM network based on 2.5G technolo-gy. Its prepaid service, Hayyak, accounts for 62% of its customerbase. With the entry last year of Nawras Telecom, a Danish andQatari-led consortium, Oman Mobile shifted priorities to the con-sumer area. “We don’t want to flaunt the fact that we are a bigcompany in Oman that makes a couple hundred million dollars.We want to talk about the shift that we are undergoing. Now wecan begin to show results,” says Rawas.

For Oman Mobile, the best position in the market is as a con-sumer-oriented organization. In the Sultanate, this is measured byreliability of service. Oman Mobile has several competitive advan-tages: nationwide coverage and technical quality. It is currentlyworking with Siemens to develop a high-end intelligent network.Will its prepaid customers ask for an upgrade?

SABCO Group, established in1977 during the earlyRenaissance days, has variedinterests in investments, realestate, retail business, servicesand manufacturing, throughwholly owned companies, jointventures, equity participationand public companies. Manyof the group companies areleaders in their respectiveindustries such as SABCO Artin advertising and media,Amouage in the exclusive per-fume business, SABCO Centrein retailing, and Al HailInvestments in asset manage-ment, to name a few.This family owned group hassome of its founding membersdevoted entirely to the gov-ernment activities while othermembers’ focus is entrepre-

neurial. SABCO Group’sChairman, Khalid bin HamadAl Busaid, an MBA graduatefrom the prestigious HenleyManagement College(Europe), has been instrumen-tal in restructuring the groupby focusing on creating propercorporate governance usingthe model of the public com-pany; a unique approach by afamily owned business. He hasintroduced key phased sys-tems and policy processes,creating transparency andcredibility securing the inter-ests of the stakeholders.Today, the reforms are showingprogress, enabling the Groupto reach even higher levels ofsuccess, contributing to thesocio-economic developmentof Oman.

RESEARCH: M. Monte - MARKETING: C. Johansson - TEXT: P. de Zardain - DESIGN: J. Berrio

www.vegamedia.coma VEGA MEDIA creation

“As one of the leading groupsin Oman, Sabco is committedto its vision of progress whilecontributing to the develop-ment of the country.” Khalid bin Hamad al Busaid, Chairman

FOCUS: SABCO GROUP