US embassy cable - 05MUSCAT242

UNCLAS SECTION 01 OF 03 MUSCAT 000242 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB/CBA, NEA/ARPI 
USDOC FOR 4520/ITA/MAC/AMESA/OME/MTALAAT 
STATE PLEASE PASS USTR/JBUNTIN AND JFENNERTY 
 
E.O. 12958: N/A 
TAGS: BEXP, ETRD, KTDB, EINV, CVIS, ELAB, MU, U.S.-Oman Relations, Economic Affairs 
SUBJECT: EB SPECIAL REPRESENTATIVE MERMOUD TALKS BUSINESS 
IN OMAN (C-NE4--01168) 
 
REF: MUSCAT 142 
 
Contains Business Sensitive Information.  Please handle 
accordingly. 
 
1. (SBU) Summary: During recent meetings with senior State 
Department official Frank Mermoud, Omani government officials 
and members of the local and American business communities 
provided valuable insights into the upcoming free trade 
agreement (FTA) talks and the issues facing American 
companies in the Sultanate.  Omanization, training, and visa 
policy stood out among the concerns raised.  One official 
described the abundant opportunities available in the newly 
privatized power and water sectors, yet lamented the lack of 
American interest in current and upcoming projects.  Mr. 
Mermoud took the opportunity to register USG interest in 
Bechtel's (successful) bid on an aluminum smelter project 
with various officials in support of the company's formal 
advocacy request.  End summary. 
 
2. (U) Department of State Special Representative for 
Commercial and Business Affairs J. Frank Mermoud visited Oman 
on January 31-February 1 as part of an effort to gauge the 
overall climate for American commerce and investment in the 
Gulf region.  With FTA negotiations slated for the middle of 
March in Muscat, this visit served as a reminder of the many 
opportunities available to American firms in the Sultanate. 
The two-day trip also highlighted additional areas where 
American and Omani firms can work with the Embassy to 
generate new business. 
 
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Opportunities in the Power and Water Sector 
------------------------------------------- 
 
3. (SBU) Mr. Mermoud's initial meeting was with Bob Bryniak, 
the Canadian CEO of the newly established Oman Power and 
Water Procurement Company (Oman PWP).  Privatization of 
electricity and water services is yielding significant new 
opportunities for American exports and investment, and two 
U.S. firms (AES and PSE&G) are already active in the local 
market.  Future tenders include a prospective 400-600 MW 
power and desalination plant somewhere in the Batinah coastal 
region northwest of Muscat; the sale of the government's 585 
MW Rusayl power plant; and a desalination project in the 
eastern port city of Sur.  Bryniak expressed his dismay that 
American companies are overlooking the Omani market, despite 
Oman PWP's efforts to lure them to the Sultanate.  Instead, 
British, Canadian, Dutch, Belgian, and other companies appear 
to be increasing their presence in the local utilities 
market.  Bryniak's "wish list" for American firms would 
include top names among engineering and technical firms 
(e.g., Bechtel, Black & Veatch, Fluor, SAIC, Duke Energy, 
etc.), as well as prominent consulting firms specialized in 
privatization. 
 
--------------------- 
Dow, Oman Oil Company 
--------------------- 
 
4. (SBU) Mr. Mermoud visited the offices of Oman Oil Company 
(OOC) for three separate meetings.  The first was with 
Assilah al-Harthy, Head of Corporate Affairs for OOC, who 
complained bitterly about her poor treatment by Immigration 
in the U.S. last spring.  Although she claims she will visit 
again in March or April 2005, she knows a number of Omanis 
are refusing to travel to the U.S. on business for fear of 
harassment or delay at American airports. 
 
5. (SBU) The second meeting at OOC involved Bill Ray, the 
British CEO of the Oman Petrochemicals Industries Company. 
Ray is from the Dow Chemical Company, and he has been on the 
job for a mere four weeks as Dow establishes its initial 
presence in Oman under the terms of its joint venture with 
OOC and the Omani government.  Although there are only a 
handful of people in Oman developing the project at this 
time, the plan calls for up to 700-800 individuals operating 
a petrochemical plant in Sohar by the end of the decade (a 
figure which could include "several hundred" Americans). 
Given Dow's strong commitment to hiring and training Omani 
nationals, Mermoud commented that Dow's venture in Oman might 
be an excellent future candidate for the Secretary's Award 
for Corporate Excellence. 
 
6. (SBU) Lastly, Mr. Mermoud met with OOC Deputy CEO Mulham 
al-Jarf, who offered a positive outlook on U.S. investor 
interest in Oman.  He said the lower dollar was finally 
beginning to pay some dividends for U.S. bidders.  He gave 
Bechtel's bid on the aluminum smelter project (partly owned 
by OOC) a favorable review, and likewise noted that upstream 
gas firm IHS Energy (based in Colorado) had recently been in 
talks with OOC on a project.  Al-Jarf shared a privately 
commissioned study on the downstream manufacturing potential 
for gas-fed industries in the Sohar Industrial Port area.  A 
schematic listed over 50 different products, ranging from 
antioxidants to yarn, that can eventually spin out from the 
industries going in to Sohar.  Each family of products could 
support foreign and Omani firms and employ many times the 
number of personnel currently envisioned. 
 
-------------------- 
Chambers of Commerce 
-------------------- 
 
7. (SBU) Mr. Mermoud met with the President and Secretary of 
the Muscat American Business Council (MABC) over dinner. 
Both men raised concerns about the Omani government 
Omanization policy and the implication for hiring qualified 
workers, developing training programs, and budgeting for 
business expansions.  They also expressed an interest in 
hearing about the Administration's plans to engage more 
forcefully in the dialogue between Israel and the 
Palestinians, as well as the need to assure stability in 
Iraq.  The MABC President indirectly raised USG visa policy 
by stating his fear that the United States is failing to 
attract enough businesspeople and students from the Arab 
world. 
 
8. (SBU) Mr. Mermoud traded thoughts on the FTA with Oman 
Chamber of Commerce and Industry (OCCI) President Salim 
al-Ghattami.  Ghattami, who interrupted his attendance at an 
out-of-town conference to meet with Mermoud, warmly welcomed 
the opportunity to engage in dialogue on the FTA, which he 
feels will be critical to the eventual success of the 
negotiations.  He was pleased with the Omani government's 
preparations for FTA negotiations, including the fact that a 
private sector representative from the OCCI will be a member 
of the Omani negotiating team.  He said the Chamber was 
striving to be a transmission belt of private sector 
questions and concerns about the FTA.  Ghattami hopes the 
U.S.-Oman treaty will create the job-growth seen in countries 
such as Jordan, and attract large U.S. investments similar to 
Dow's.  While the Dow plant itself may not create lots of 
jobs, he is confident it will foster spin-offs that multiply 
job opportunities.  Ghattami made a strong pitch to build 
closer linkages between the OCCI and U.S. chambers of 
commerce. 
 
-------------- 
Labor Concerns 
-------------- 
 
9. (SBU) Mirroring concerns Mermoud heard elsewhere, Omani 
businessman Rishi Khimji, of the Ajit Khimji Group of 
Companies and the MABC Executive Committee, shared his 
worries about the labor-related aspects of the FTA.  He felt 
that Omani regulations already give overwhelming advantages 
to workers, particularly Omani nationals, and that labor 
unions or other entities will make it even harder for 
employers to fire non-performing or redundant staff.  He was 
also worried about the newly instituted workers 
representative committees (reftel), whose every activity is 
closely regulated by the government.  He feared those 
committees may give the government an open door to learn 
about the inner workings of companies, particularly if a 
member of the committee has an axe to grind against his 
employer.  While supportive of workers rights, Khimji said 
the critical difference will be made in how the Omani 
government implements its labor commitments.  As for other 
aspects of the FTA, Khimji was not concerned about any 
adverse effect on the services sector apart from expected 
losses in his own laundry operations, which are dependent 
upon the rapidly disappearing Omani garment industry. 
Regarding U.S. commercial opportunities, he was disappointed 
at the lack of response when his company seeks a U.S. 
supplier or partner in various deals, which he attributes to 
the unattractiveness of Oman's small market. 
 
10. (SBU) Mr. Mermoud ended his trip with a visit to the 
local office of Halliburton to meet with senior manager Bud 
Bierhaus, another MABC Executive Committee member who is soon 
to be announced as the new head of South Gulf operations for 
the company.  Halliburton recently won several large 
contracts with Petroleum Development Oman (PDO), the majority 
state-owned oil company, which marks the first successful 
back-to-back contracts in the company's experience in Oman. 
Nonetheless, Halliburton remains concerned that "political 
processes" within PDO prevented the firm from winning even 
greater contracts.  Mr. Mermoud suggested ways in which 
Halliburton could work to reverse the damage of its 
association with troubles in Iraq: touting its outstanding 
Omanization record, for example.  Other concerns voiced by 
Bierhaus centered around labor and the excessive restrictions 
on firing employees.  Bierhaus asserted that labor rights 
will be a big issue for Halliburton in the upcoming FTA 
negotiations. 
 
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Comment 
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11. (SBU) Frank Mermoud's visit to Oman provided a glimpse at 
the future potential for American business in the Sultanate. 
Much of this potential remains untapped due to an apparent 
lack of interest by U.S. firms that are busy seeking more 
lucrative markets in the region.  For those American 
companies present in Oman, labor issues dominate their 
concerns.  As FTA negotiations begin in earnest, we will seek 
to address these concerns while attracting greater interest 
in Oman from the U.S. private sector. 
BALTIMORE