VZCZCXYZ6178
RR RUEHWEB

DE RUEHMS #1368/01 2611140
ZNR UUUUU ZZH
R 181140Z SEP 06
FM AMEMBASSY MUSCAT
TO RUEHC/SECSTATE WASHDC 7146
INFO RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS MUSCAT 001368 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ARP 
COMMERCE FOR ITA COBERG 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD PREL MU
SUBJECT: ECONOMIC CHALLENGES, GCC INTEGRATION HIGHLIGHT 
ROUNDTABLE DISCUSSION 
 
 
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SUMMARY 
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¶1. (SBU)  Top government officials and business 
representatives discussed efforts to both diversify Oman's 
economy and forge stronger regional integration with its GCC 
neighbors during an Economist-sponsored roundtable.  The 
closed-door meeting provided the private sector a rare 
opportunity to engage ministers in a public forum.  End 
Summary. 
 
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DIVERSIFICATION KEY 
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¶2. (SBU) In a September 10 address to Muscat,s business 
elite at the Economist-sponsored First Business Roundtable 
with the Government of Oman, Commerce and Industry Minister 
Maqbul bin Ali Sultan identified sustainable growth and 
maintenance of living standards as the government's top 
priorities.  Maqbul stated that in an environment of strong 
growth, low inflation, and ample domestic liquidity, the 
government must promote continued development through human 
resources initiatives, private sector investment, and 
economic diversification.  Regarding the latter, Maqbul 
highlighted oil's continued commanding presence in Oman's 
economy, which currently accounts for 40% of Oman,s GDP and 
80% of its export earnings.  For this reason, Maqbul stressed 
the importance of government efforts to use its natural 
resources to develop gas-based downstream industries.  While 
further efforts to develop the tourism sector have been 
successful, Maqbul acknowledged that the promotion of other 
industries, such as fisheries, have not. 
 
¶3. (SBU) Taking advantage of the open forum, U.S. Awasthi, 
chairman of the Oman-India Fertilizer Company, cautioned the 
Minister that the government should not establish new 
environmental laws that go beyond international standards. 
Maqbul responded that the government would abide by its 
environmental commitments under the U.S.-Oman Free Trade 
Agreement (FTA), which contained "a very big environmental 
chapter."  On labor, National Bank of Oman CEO Andrew Duff 
expressed his concern over Oman's labor rigidities, which he 
believed thwarted businesses from releasing non-performing 
Omanis.  After a round of applause from the audience, Maqbul 
reaffirmed his commitment to the Omanization program, but 
expressed his openness to improving worker productivity. 
 
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MONETARY UNION BY 2010? 
----------------------- 
 
¶4. (SBU) Central Bank Executive President Hamoud Sangour 
al-Zadjali characterized Oman's banking sector as stable, 
profitable, and well-capitalized.  He stressed that the 
Central Bank continues to remain conservative in its lending 
regulations and would work with the commercial sector on 
implementing Basel II requirements.  Zadjali said that Oman 
has no plans to open up the sector to Islamic banking 
interests, noting that, "At the end of the day, Islamic banks 
face the same expenses for borrowing as other financial 
services." 
 
¶5. (SBU) Zadjali predicted that banks would consolidate as 
the GCC moved toward a single economy.  He stated that 
forming a GCC monetary union by 2010 would be difficult, 
noting that consensus was still needed on budget deficit and 
public debt ceilings, as well as on benchmarks for foreign 
reserves, inflation, and interest rates.  Zadjali also noted 
that the GCC governments were still debating the merits of 
forming a monetary council, as opposed to a Gulf Central Bank 
along the lines of a European Central Bank. 
 
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RARE EVENT 
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¶6. (SBU) Comment.  The event provided a rare opportunity for 
the private sector to pose unscripted questions to several 
cabinet-rank ministers, including the Minister of Transport 
and Communications and the Minister of Oil and Gas.  One 
private sector contact appreciated the openness of the 
ministers, one of which questioned the government's decision 
to create a third LNG train on the basis of overly-optimistic 
information.  Another key government contact told Econoff 
that he appreciated the serious exchanges of dialogue that 
occurred in the opening sessions, though he expressed 
 
disappointment that the roundtable lost its sharpness as the 
day slowly turned into an exchange of congratulatory 
speeches. 
GRAPPO