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Discuss this article (1 Comments)Oman on the up
by This email address is being protected from spam bots, you need Javascript enabled to view it on Wednesday, 14 October 2009
Positive monetary news and the announcement of continued investment have come as a boost to Oman's retail sector, as retailers enjoyed their customary seasonal boom during the Eid Al Fitr holiday.
Figures released by the Central Bank of Oman in September demonstrate a fall in the rate of inflation from 2.88% in June to 1.82% in July.
The latest figures are a major improvement from Oman's 2008 inflationary peak of 14%, prompted by high oil prices and fiscal loosening at the US Federal Reserve (the Omani Rial has been pegged to the dollar since 1973, with only one adjustment to the exchange rate in 1986).
The positive inflationary outlook was reflected in Oman's Consumer Price Index (CPI), with the CPI rising only one-tenth of a point to 128.8 for July.
The Food, Beverage and Tobacco index, which accounts for 30.4% of the weight of the CPI, in fact fell two-tenths of a point to 149.4, reflecting a more stable price outlook for the country's retail sector in particular.
This continued improvement in Oman's inflationary outlook has coincided with a more general improvement in industrial, consumer and retail demand, with money supply also growing again as investors and consumers alike take renewed confidence from stabilised prices.
A further reflection of confidence came from US credit rating agency Fitch, which reaffirmed the long-term issuer default rating (IDR) of four Omani banks, despite noting their exposure to high leverage through increased retail lending in a market report earlier in the year.
While the individual ratings of three of the banks were downgraded, the reaffirmation of their long-term IDR demonstrates that a stable outlook has returned to Oman's economy.
This confidence has been echoed by recent announcements of new investment in the Sultanate's retail sector. UK-based retailer Matalan chose Oman for the opening of its first regional presence in June of this year, while global furniture giant IKEA recently announced plans to expand into Oman.
Existing players in the local market are also keen to expand, with Landmark intending to increase its Emax electronics stores over the next 24 months, and add an additional 15,000 sq ft of warehouse capacity in Muscat.
Continued interest in Oman's retail sector reflects the increasing sophistication of the market, particularly in Muscat. While geographical particulars can make Oman logistically challenging - it is a large country with a fairly dispersed population - market concentration levels are nonetheless the highest in the region, with the country's top five retailers expected to achieve combined market share of nearly 50% by 2012.
Moreover, Oman's consumers are embracing new retail technology and services with vigour. Some 40.2% of Oman's internet users spent a total of $236m on e-commerce in 2008, according to Arab Advisors.
Such strong fundamentals make Oman an ideal location for expansion from neighbouring states. UAE retailers Lu Lu, Safeer and KM Trading have all expanded their operations into neighbouring Oman in recent years, with Al Maya Group joining them in 2009. The company plans to open seven supermarkets in the Sultanate by the end of the year, investing around $2.6m.
With a recent report from Dubai-based research firm Proleads revealing that the global crisis has not yet resulted in the cancellation of any of Oman's planned retail projects, it would seem that the Sultanate has successfully weathered the storm.
One of the key factors in ensuring that has been Oman's more measured approach towards expansion during the boom times - the Sultanate's 95 projects currently under construction or bidding are worth an estimated $38bn, as opposed to the $900bn total in neighbouring UAE. In the absence of such a heavy drag from real estate, retail has managed to avoid a crash landing, and maintain a steady outlook.
Oliver Cornock is Middle East specialist, Oxford Business Group's Regional Editor in the GCC.
READERS' COMMENTS
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Brilliant
Posted by Owen Bigg-Greenback on Friday 16 October 2009 at 15:09 UAE time
Would OBG be in the process of selling their latest Oman report perchance?
Posted by Owen Bigg-Greenback on Friday 16 October 2009 at 15:09 UAE time
Would OBG be in the process of selling their latest Oman report perchance?
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