What role does Pak Oman play in facilitating Omani investment into Pakistan and Pakistani investment into Oman?
MAJID: Pak Oman was established in 2001, mainly for the purpose of promoting bilateral investment into both countries, and any third party investment into Pakistan and Oman. So our focus is to work with international investors who are interested in either the Omani or Pakistani market. We facilitate them, we advise them, and whenever there is an opportunity, we partner with them in financing or investment. That is the main purpose of Pak Oman, it is owned by the Ministries of Finance of both of the governments.
How successful would you say Pak Oman has been at attracting investment?
MAJID:Â I think we have been quite successful in showing Oman to many international investors. Oman is rightly called the â€œHidden Jewel of Arabiaâ€ and there are many opportunities which are being externally explored by international investors, such as education, agriculture, infrastructure development, and hospitality, just to name a few investments. The amount of tourists coming to Oman is increasing every year and this automatically drives up interest in the country as a whole, not only from the hospitality and tourism sector, but also from the business sector as well. What we have seen in recent times is that there are many investors from different regions, from the Far East, from the Western world, and from this region as well. These investors have also shown an interest in investing in projects in Oman that are sustainable on a long-term basis; for example, infrastructure development, mining, agriculture, etc.
What are your investment priorities for 2013? Which sectors are showing the most potential?
MAJID:Â We are talking to different investors who are interested in the mining, hospitality, and education sectors.Â The typical working model in Oman is that local investors are always keen to work with international partners. If you look at Oman, the high-end businesses always look for technical expertise, even though Oman has brought a lot of its own technical expertise in terms of petroleum and infrastructure development. But still, since itâ€™s a growing country, there are areas that need international collaboration. The good thing about Oman is that it is an open country; the culture permeates from top to bottom. If you look at the society and the economy, Oman has a very flexible and open society. That is why international partners are very welcome over here. The local investors are also very keen, always very keen in fact, to partner with a reputed partner who can basically guide them and be a technical partner and be a local investor. If you look at Omanâ€™s regulatory regime, the good thing about Oman is that the regulators and the Government of Oman have always been very flexible. Even if something is not found in the regulatory framework, if you can come up with a good justification of what you want to do in Oman, and if itâ€™s good for the national economy, then the Ministries and the Government officials are always very welcoming. This is one of the beauties of Oman. Compared to many other regional countries, the people here are very approachable. From the top private sector guys to the Ministers, you can always knock on their door. They have an open door policy, you can talk to them about the projects in Oman and they will do everything they can do for their country.
What impact will the implementation of Islamic financial services and products have on the overall financial services sector?
MAJID:Â There is a really huge demand for Islamic financial services among the local population. It is widely reported that there are many Omanis that are keeping their deposits in regional countries just for the sake of being in Sharia compliant financial institutions. That being said, there is a lot of Omani money which is going to flow back to the country once Islamic finance is really launched. Although there are few institutions that have already started offering Islamic products and services or have their own Islamic branches as well. The Omani economy will benefit from money coming from the outside and there will be an opportunity for Omani investment for foreign managers to research products that will then be invested internationally. I think it is a bilateral opportunity for both investors. In a sense, Islamic finance is driven by the hard assets, by tangible assets. Oman is investing heavily in infrastructure development. Oman as a country is veryÂ under leveraged;Â they donâ€™t have many long-term liabilities. Islamic finance gives a very good opportunity for the government and the infrastructure development parties to raise long term funding at very competitive rates.
Of all the GCC countries, only the UAE and Oman enhanced their rankings in the World Bank's Doing Business 2013. Oman succeeded in improving its ranking and ranked 47the in the last report. Where have you seen improvements with regard to financial services in recent years?
MAJID:Â I think there is more maturity in the financial services sector in Oman. There are more products and services, and the best thing about Omanâ€™s financial services sector is that it is on a very stable note. Thatâ€™s why, being in a very stable and profitable franchise, the financial services sector can now invest in the long-term future of Oman. The banks are looking at private equity funds and infrastructure funds in which they can invest in for the long term. I think that financial services in Oman is in a very healthy shape compared to many other countries. We have recently seen the IFC investing in Bank Muscat a good sum of money, around OMR 75m ($200m). So this shows the interest of the international community in Omanâ€™s financial services sector. Because financial services have been very stable and profitable, they are moving to the next stage and are looking at long-term projects. If you look at the strategy of the Government of Oman as a whole, it has been to do things on a long-term basis. You will never see a short-sighted approach in terms of infrastructure or anything, especially if you look at the airport and exhibition center projects. All of these projects have been designed by keeping 20-30 plus years in view. For instance, look at things like the Duqm infrastructure development. Duqm is one of the most strategically located ports that is coming up. The Port of Duqm is going to play a very important role in the long-term future of the country. The way it is being developed and the way international partners and international investors are showing interest in the port of Duqm is tremendous. I would say this is one of the biggest things happening in the whole GCC region in the next 20 years.
What type of investment opportunities are most appealing in Duqm?
MAJID:Â Since Duqm is a large infrastructure zone, there are many opportunities available there. Itâ€™s a very comprehensive zone in fact. They have opportunities in almost every sector, including education, infrastructure, oil and gas, tourism, fisheries, industrial zones, and real estate. Right now, Duqm is at an early stage. They are very keen to have foreign partners and international investors coming in. I can say for sure there are many international investors who are willing to invest in Duqm.
The good thing about Oman is that the regulators and the Government of Oman have always been very flexible. Even if something is not found in the regulatory framework, if you can come up with a good justification of what you want to do in Oman, and if itâ€™s good for the national economy, then the Ministries and the Government officials are always very welcoming.
Numerous indications, including steady governmental spending together with the absence of inflationary pressures, suggest that the Omani economy should post strong results in 2013. How does this impact your domestic investment appetite?
MAJID:Â There is a strong domestic investment appetite for all the local players. Oman is a preferred destination for investment by all the local institutions and family offices because of its economic stability. Economic growth is part of the long-term vision. Oman has always had sturdy economic growth and it is mainly because of the economic policies. The policies have been able to build very good contingency reserves over the last few years due to high oil prices. Even if you look at the infrastructure development program, the way infrastructure is being done is not for the short term, it is on a long-term basis. That is why all the local players, domestic players, and the international players are really keen to do things in the Omani market. That said, there are free zones like Salalah, Sohar, and Duqm which all present so many opportunities. Even for the international partners, it makes a lot of sense to team up with a local player who has local know-how; one who knows the right people and who can be their financial partners in the project.
Why someone would have to look at an organization like Pak Oman when entering the market? Why is it important to have this type of player?
MAJID: Pak Oman is a long established company in Oman. We regularly work with Sovereign Wealth Funds, state owned enterprises, family offices, and investment houses on domestic and international projects. Partnering with Pak Oman opens the right doors at a very quick pace and we have have been quite successful in getting local JV partners for international players. I think there is still a lesser understanding on part of international players, they seem to be lacking appreciation of the depth of the Omani market. I believe that if there are international players who can come up with the product expertise, either in terms of Islamic finance or conventional finance, and they partner with the right local investment houses, they can be successful. Whether itâ€™s commercial banks or other investment institutions, there is a huge appetite. There could be significant success for them if they raise funds for their international projects. The commercial banking sector is quite mature but the investment services market is still at an early stage.