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Tuesday, February 23, 2010

Positive mood in Oman


The Sultanate of Oman may not have the massive oil reserves neighboring Saudi Arabia is known for, nor extravagant projects such as palm-shaped artificial islands that have put Dubai on the map. Instead, the Arab Gulf state is betting on cycling to catch the world's attention.

Thousands of posters—displayed prominently across the streets of the sleepy capital, Muscat—announced the descend of the world's cycling elite to this nation of 2.9 million as it staged the first-ever Tour of Oman, a road cycling race organized by the local municipality in partnership with the International Cycling Union and Tour de France.

The inaugural race, which ended Feb. 19, had 16 of the 20 teams participating in the Tour de France battling it out for the title of Tour of Oman 2010. After six days and a total distance of 687 kilometers in different parts of the country, which is located in the southeast of the Arabian Peninsula and about the same size as Poland, Swiss Fabian Cancellara of Team Saxo Bank claimed the overall victory of the race's first edition.

"The event aims to showcase the many natural sceneries we have in Oman," says Saif bin Suba'a Al Rashaidi , director general of the Muscat municipality. "It is also to show that Oman is able to organize such a high-profile sports event. We're fully responsible for organizing the tour, from A to Z."

The event adds to an overall positive mood in Oman, which celebrates its 40th anniversary this year. The sultanate, one of six Arab Gulf states that make up the Gulf Cooperation Council that also includes Saudi Arabia, has emerged from last year's economic turmoil relatively unscathed.

"We managed to avoid the setbacks of the global financial crisis and the crisis in some parts of the Gulf here by having very conservative policies for our banking sector," says Hamood Sangour Al Zadjali, executive president of the Central Bank of Oman.

"We did not allow our banks to invest in these toxic investments nor to keep a lot of funds outside the country," Mr. Al Zadjali says. Moreover, he adds, the central bank controls the amount of money the seven domestic banks can invest outside the country and their exposures to foreign exchange and to the stock and real-estate markets, both inside Oman and outside.

"These really conservative and prudent policies helped our banks to protect them from any setback from these problems, which we have seen other major international banks are exposed to," says Mr. Al Zadjali in his office in Muscat's Ruwi district.

Although it emerged last year that three of the country's banks—including local heavyweight Bank Muscat—have some exposure to debts gone bad at Dubai conglomerate Dubai World and Saudi family business Al Gosaibi, Omani banks are in better shape than their regional peers. A $2 billion facility made available by the government in 2009 to local banks remained largely untapped, according to Abdulmalik Al Hinai, undersecretary for economic affairs at the national economy ministry.

Moody's Investors Service on Feb. 18 cited the comparative strength of Oman's financial sector as one reason behind the upgrade of the country's sovereign rating, and kept a stable outlook on the banking system.

The positive mood is also reflected in the performance of the local bourse, the Muscat Stock Market, which is up 6.7% since the beginning of the year, outperforming its GCC peers.

Oman is the largest Arab Gulf oil producer that's not a member of OPEC. Although it isn't blessed with the vast hydrocarbon riches to be found in some of its northern neighbors and its crude reserves are harder to access, Oman managed to pump 860,000 barrels a day of crude in 2009, up from 812,000 barrels in 2008, according to Nasser bin Khamis Al Jashmi, undersecretary of the oil and gas ministry.

The resulting higher-than-planned oil revenues helped finance a 12% year-on-year increase in government spending in 2009, says the national economy ministry's Mr. Al Hinai, and limit the impact of the financial crisis on the local economy. Real gross domestic product is set to grow 3% this year.

"The government projected an oil price of $50 (a barrel) in this year's budget and we expect the price will hover between $70-80, which will really give some confidence to business in the country and will also generate additional revenues for the government to spend," the central bank's Mr. Al Zadjali says.

A forecast budget deficit of 800 million Omani Rials ($2.1 billion) "should be wiped out" if crude prices remain at this level, he adds.

To be sure, despite an ongoing strive for greater economic diversification, Oman remains heavily reliant on its oil sector. The country's non-oil sector contributed only about 21% to government revenues in 2008.

"How are you going to decouple from your oil revenues?" asks Joice Mathew, senior research manager at Muscat-based brokerage United Securities.

Tourism it is hoped will bolster revenues in coming years, helped by events such as the Tour of Oman and the 2010 Asian Beach Games, which will take place in Muscat in December.

In the capital's souk, the traditional market located in Muttrah on the waterfront promenade, Mahassan Al Mahari is beaming with optimism. In his cornershop, he sells Arabian Oud perfumes. The number of tourists—traditionally higher at this time of the year due to the cooler climate—is higher than last year and sales are good, he says.

"There are many tourists here now, from the U.K., Germany and other European countries, and from Gulf countries," Mr. Al Mahari adds. Maybe their numbers will increase further when the Tour of Oman returns in 2011. Mr. Al Rashaidi of the Muscat municipality says he's optimistic that the race will be back.

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