VZCZCXRO8376
RR RUEHDE RUEHDIR
DE RUEHMS #0528/01 1490757
ZNR UUUUU ZZH
R 290757Z MAY 07
FM AMEMBASSY MUSCAT
TO RUEHC/SECSTATE WASHDC 8295
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 MUSCAT 000528 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR NEA/ARP 
COMMERCE FOR COBERG 
 
E.O. 12958: N/A 
TAGS: ECON ETRD MU
SUBJECT: GOVERNMENT TAKING LIMITED ACTION IN CURBING PRICE 
HIKES 
 
REF: A. MUSCAT 522 
 
     ¶B. MUSCAT 71 
     ¶C. MUSCAT 29 
 
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Summary 
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¶1. (U) The Minister of Commerce and Industry recently held a 
series of meetings with industry representatives to encourage 
restraint in price hikes in the wake of prominent media 
reports on the rising cost of living in Oman.  Aside from a 
wage increase for government workers last November and a push 
to issue more residential construction permits to ease the 
housing crunch, the government does not appear poised to take 
further measures to reign in prices.  End Summary. 
 
-------------------- 
Meeting of the Minds 
-------------------- 
 
¶2. (U) Responding to public concern over escalating prices, 
Commerce and Industry Minister Maqbool bin Ali Sultan 
recently held a series of roundtable discussions with local 
industrialists, merchants, and food wholesalers and 
distributors.  During these meetings, which one newspaper 
claimed was closed to the media, Maqbool reportedly urged 
participants to exercise restraint in increasing prices in an 
environment in which product prices are perceived as rising 
sharply in line with regional trends.  He called upon the 
Oman Association for Consumer Protection (OAFCP) and the 
consumer protection department in his own Ministry to educate 
the public on the use of alternative products to ease 
concerns. 
 
¶3. (SBU) Said al-Khusaibi, Chairman of OAFCP, told Econoff 
during a May 26 meeting that his organization is working 
closely with the Ministry on this issue, and that Minister 
Maqbool had adopted a facilitative role in promoting dialogue 
between businesses and consumers.  He said that industry 
representatives were, in general, on the defensive during the 
roundtable meetings, and he urged the government to monitor 
actions of those wholesalers engaging in price-inflating 
practices, such as the withholding of inventories from the 
market.  Khusaibi noted that while consumer awareness would 
be an important component of a campaign to ease price 
concerns, financial considerations ultimately would constrain 
what his volunteer-staffed organization could do. 
 
------------------------- 
Statistics back Reporting 
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¶4. (U) Growing public concern over price hikes has been 
prominently reported by the media.  The popular English 
weekly "The Week," for example, recently published a 
front-page report on the rapid increase of dairy and poultry 
products on the shelves of grocery stores in the capital.  On 
the housing front, the English daily "Oman Tribune" showcased 
the surge in Muscat and Sohar rental prices.  Such prices 
have increased by as much as 100% over the past two years in 
the wake of strong demand from an influx of expatriates 
against supply constrained by the lack of sufficient building 
permits for residential housing.  Even utilities are rising, 
with the "Oman Daily Observer" posting a piece on the rising 
cost of water, which, according to the English daily, is up 
39% over the past two years. 
 
¶5. (U) Statistics released by the Ministry of National 
Economy support such reporting, as official figures show a 
broad increase in Oman's overall consumer price index.  The 
Ministry reported that the General Price Index (GPI) for Oman 
in January 2007 was 4.2% higher than in 2006.  Leading the 
increases were the price of eggs (up 41%), vegetables (up 
23.6%), fish (up 13.5%), meat and poultry (up 11.4%), and 
fruit (up 10%).  The GPI for Muscat rose 3.4% over the same 
time period, with the capital city's wholesale price index 
rising 9%. 
 
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Comment 
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¶6. (SBU) Maqbool's comments are reflective of the fact that 
while the government is sympathetic to public concerns over 
commodity price increases, it will not take any substantive 
action to reign them in through price controls.  His 
sentiments echo statements made by Minister of National 
 
MUSCAT 00000528  002 OF 002 
 
 
Economy Ahmed bin Abdul Nabi Macki, who argued that the 
government would be indirectly promoting a black market by 
implementing such controls.  The government has already 
undertaken steps to supplement the salaries of government 
employees through a 15% wage increase granted in November 
2006, but does not appear to be keen on taking additional 
measures, aside from increasing the housing stock through the 
issuance of new residential construction permits.  As 
evidence of its policy to stay the course, the government 
intends to hold firm on its dollar peg (ref A), though it has 
come under criticism that consumer products, much of it 
imported from the European Union, are more expensive as a 
result of Oman's currency being tied to the weaker dollar. 
End comment. 
GRAPPO