Oman’s steady programme of economic and political reform rarely creates big headlines. Critics say that is because ‘reforms’ move too slowly; supporters argue that the sultanate’s cautious approach has held it in good stead since Sultan Qaboon bin Said al-Saeed’s accession in 1971. And the latter can again point to a steady flow of developments and deals to back up their case.
Much recent interest has been raised by the ministry of finance’s call for “suitably qualified strategic investors” to take a 25% stake in Oman Telecommunications Company (Omantel). Within this partial privatisation “the government may also consider providing the selected strategic investor with certain rights enabling it to increase its economic and voting exposure to Omantel”.
Darwish Ismail al-Bulushi, the ministry’s secretary-general, says: “The further privatisation of Omantel is another example of the government’s commitment to liberalising the economy and seeking to support the creation of world-class Omani companies.” The government expects the sale to be concluded this year, appointing Citigroup Global Markets as lead financial adviser and National Bank of Oman (NBO) as local adviser.
NBO’s mandate is another sign that the bank is returning to full health following problems in the late 1990s, when an operation in Egypt collapsed at great expense. In July, NBO said that it expected to maintain profit growth of about 21% in the the second half of 2008, after posting its second biggest quarterly profit in Q208, at OR11.65m ($30m).
This reflects the extent to which Muscat-based banks are expanding on the back of the Gulf economic boom; NBO plans to open an additional branch in each of Oman’s eight counties by the end of 2009.
Meanwhile, with assets of more than $11.9bn, BankMuscat (BM) has consolidated its lead in the local market. It announced 43.7% net profit growth (year-on-year) of OR57.8m for the first half of 2008, boosted by increased fee income from corporate, consumer and wholesale banking. Underlining the bank’s Asian connections – in line with Oman’s policy of focusing part of its development resources on enlarging its wide range of Indian Ocean connections – BM holds a strategic stake in Centurion Bank of Punjab and 43% of Indian securities house Mangal Keshav Group. Earlier this year it acquired 35% of Saudi Pak Commercial Bank “to enter the high-growth Pakistan market”.
In a drive to increase its projection across the Gulf, BM took a 49% stake in the Bahrain-based BMI Bank, whose other shareholders include Oman’s Royal Court Affairs with 11%. The court is also BM’s biggest shareholder, with more than 17%, followed by HSBC. Gulf-focused analysts, such as Cyprus-based Capital Intelligence, see the 2007 purchase of a 15% stake in BM by Dubai Financial Group as enhancing prospects for further Gulf Co-operation Council expansion.
A general upturn
The boom has led agencies to upgrade their ratings for banks across the region. In early August, Standard & Poor’s raised its Banking Industry Country Risk Assessments on Bahrain, Oman, Qatar and Saudi Arabia, with the sultanate (rated at A/stable/A-1), moving up into Group 5.
As the authorities acclimatise to better days, the Capital Market Authority is overseeing a gradual opening up of the Muscat Financial Centre. The latest entrant is Muscat’s first Swiss-origin private bank, Sarasin-Alpen, which in August received a licence to provide advisory services, incorporated as Sarasin-Alpen LLC (Oman).
After a period in the doldrums, the local stock exchange, the Muscat Securities Market (MSM), is performing again, the MSM Index recording 25% growth in the first half of 2008. Initial public offerings (IPOs) are back: the most recent involving Oman Merchant Bank’s plan to offer 40% of its capital to the public. OMB is a new bank, backed by Dubai-based Gulf Merchant Group, and has Central Bank of Oman (CBO) permission for the move.
As the banks grow, their contribution can be expected to rise, and there will be new players too. Hamood Sangour al-Zadjali, CBO executive president, says a new institution – Commercial Bank of Oman – will be established before end-2008 and is expected to sell 40% of its equity via an IPO. The market is moving.
COUNTRY FACTS
Population3.3 million
Population growth rate3.19%
Area212,460 sq km
Real GDP growth6.4%
GDP per capita$24,000
Key sectors• Services: 59.5%• Industry: 38.3%• Agriculture: 2.2%
Labour force920,000
Unemployment rate15%
Source: CIA World Factbook 2008
