Abdul Kader Askalan, Chief Executive Officer of Oman Arab Bank spoke about Oman’s economic indicator and whether the banking sector in the Sultanate of Oman was affected by the international financial crunch, and explained some of the measures taken by the Central Bank of Oman (CBO) to alleviate these effects. He also spoke about the performance of Oman Arab Bank in the last months and its future expansion plans.
Askalan spoke about the present situation of the banking sector in Oman and the effect of the crisis on the sector, stating "Oman was slightly affected by the crisis and the banking sector is still solid and no bank in Oman is facing problems or a shortage of liquidity. Most of the banks are distributing dividends as normal. The only sector that was negatively affected was the share market, as foreign investors were afraid and they wanted to protect themselves and regain their capital so they started selling their shares, which in turn spread fear among the local investors and the market dropped by 45%. In short, the market fell out of psychological reasons rather than any capital or structural problems. Meanwhile, the government finances are still solid and they are keeping with their obligations for old projects and asking for tenders for new projects. . The Omani Government is planning to diversify the economy to reduce its dependence on oil, and tourism plays a central role in this strategy. Oman targets getting 1.5% of its total revenues from tourism by 2010 and not less than 3% by 2020. To achieve these goals, it plans to double the number of hotel rooms from the current 8,000 to 16,000 by 2010. But this Islamic nation is not looking for people travelling on the cheap. Oman is not looking for back-packers; they are looking for high quality, high-class tourism.
As Haremi said that "the governmental initiatives in ensuring world-class infrastructural facilities along with the refurbishing, renovation, beautification and maintenance of city landmarks, forts, castles and other structures have made Oman a tourist’s delight".
Additionally, most sectors are making profits from these mega projects. Furthermore, the government and the Central Bank of Oman (CBO) have taken several steps to increase the liquidity in the market. The government also created a fund with the Central Bank to enable any bank that needs financing. Unfortunately, this was not utilized as the banks are not borrowing for fear of losing their ratings. "This should be made directly as a deposit from the government to the banks, without going through the Central Bank," commented Askalan. In the region, he does not feel that there is a real recession and even if the drop in the stock market affected some investors badly. "There is no actual recession, although the import and export movement have been slightly affected but this fact does not amount to a fully fledged recession. Additionally, the Omani government is debt free, and even for mega infrastructure projects they rely on themselves and local capital."
Then the CEO moved to shed some light on his banks performance and future projects, saying "As a bank, we are currently involved in 90% of the current projects and many other plans are in the pipelines." When Oman Arab Bank was established in 1973, it started as a branch of the Jordanian Arab Bank. The bank stayed form 1973 till 1984 as a subsidiary of t Arab Bank. "Then, I suggested to create a local partnership with an 1984 as a joint closed stock company holding 51% of the bank and called the new entity Oman Arab Bank. Oman Arab Bank expanded its operations by acquiring all branches of Omani European Bank and then merged together in 1994," Askalan explained. The bank plans to increase its local branches to cover the whole country and its executive management is planning to increase its customers service such as providing its customers with online and phone banking. "We are the only bank that is using smart cards for government payment.
We are also creating new products to diversify our customer service and products, with new finances of car and house loans and insurance schemes," he noted. He elaborated on the bank’s policy as being very conservative and that is why Oman Arab Bank has been the least affected by any problem or hits. Currently, Oman Arab Bank is only investing in the local markets, and it has a limited exposure to personnel loans limited to 30%.
Askalan continued elaborating his vision of the bank’s future expansion plans and rational of local investment, saying "We currently have 52 branches all over the Sultanate of Oman. We have to cover the areas where we are not present; currently we are opening two or three new branches each year.
We have to keep in mind that Oman Arab Bank is expanding cautiously and it focuses on the profitability of its branches, giving them only one year before starting to make profits." Currently, the bank’s profits and operational results, "I can confidently say that we are earning 20-25% more than last year."
Our capital is 75 million Omani Riyal and we plan to increase it to 100 million in the short future. Meanwhile, why would we need to go to foreign market to invest, our major purpose and role is to support the local market, additionally limiting our investment to the local market increase our safety and control level," Askalan concluded.
