The Business Year

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Hussain Ghalib Al Yafai

CEO, Standard Chartered Bank

Andrew Long

Legal Adviser, HSBC Bank Oman

Standard Chartered and HSBC have leveraged their global presence and strong networks to change Oman's financial landscape over the last five decades. Both banks are currently disrupting the space with support for government policies and green bonds.

What is Standard Charter’s strategy in Oman, and what role does it play in the Tanfeedh program?
HUSSAIN GHALIB AL YAFAI Standard Chartered has been operating in Oman for 51 years. Our strategy has evolved through the years to where we are currently assisting the government in meeting its financing requirements, especially after the decline in oil prices. We have been involved in the financing of every strategic public infrastructure project financing as well as budgetary deficit financing. We have also acted as transaction advisors on many projects. We have acted as advisor to and structuring bank on most of the independent water projects and independent power projects in the country. We have also been mandated on all of the government’s bond and sukuk issuances. Moreover, we maintain a strong relationship with the World Bank, which enables us to attract other sources of international capital. We complement the government’s strategic vision through direct financing support as well as supporting strategic GRE entities.

How has the global economic landscape impacted Oman’s macroeconomic environment?
ANDREW LONG Globally, we are witnessing an economic slowdown. The current global situation has a direct impact on the Middle East because it affects oil prices. As such, meeting the KPIs of diversification strategies highlighted by Tanfeedh, becomes extremely vital for the long-term sustainability of Gulf economies. The Omani economy, in particular, has witnessed its debt-to-GDP ratio grow from 4.93% in 2014 to around 55% in 2019, with further expenditures on infrastructure putting pressure on the budget balance goal of the newly established Tawazun program. Despite this challenging national context, in 3Q2019, HSBC Bank Oman reported a 3.2% increase in net profit, driven primarily by 3% growth in revenues. Net trading income increased by 22.7% YoY. Through our wholesale banking business, we supported OCTAL to secure its USD625-million financing facility, one of the biggest private-sector financing deals in Oman in the last decade.

What is your perspective for the capital markets moving forward?
HGAY Oman has built an active borrowing curve in the international market, but locally, there has been gradual progress, with only a few issuances through sukuks and perpetual bonds, and modest engagement with local capital markets. The central bank is working extensively with the Development Bond issuance, and the Capital Market Authority, in conjunction with the Muscat Securities Market, is working on putting the right infrastructure in place to ensure that investors are comfortable, thus creating a market for investment, debt market, and liquidity. Now that the government is pushing for privatization, many companies will eventually be listed. This will add depth to the stock market and debt capital markets. Once you have this monetization happening locally, it is a win-win for everyone.

In 2020, Oman is set to enter a new economic cycle. Where are the main opportunities for the banking sector?
AL Today we can count on strong relationships with major family businesses, as well as a wide array of multinationals, with little exposure to industries such as the contracting one, which has been suffering the most from the recent liquidity crunch. Looking at the industry, there is a sizeable opportunity in the middle market, especially in some of the strategic sectors outlined by Tanfeedh, such as tourism, logistics, and the downstream segment. Agriculture and fishing still have to make more strides to gain attractiveness, just like mining, which is perhaps bound to witness some action with the new law. Among the other developments we are watching closely, there is the new PPP Law and the new target of privatizations which has overall taken a long time in the utilities segment, but that can soon involve sectors such as education and healthcare.

Where do major opportunities for impact investing lie in Oman?
HGAY International investors are allocating a significant portion of their portfolio into sustainable and green financing. We are a global leader in sustainable finance and are in the top-five banks globally with regards to issuing green bonds. We have handled several transactions in the bond market and sustainability-linked syndicated credit facilities, and we will do more of that in Oman in the future.

AL Sustainability plays a vital role in our banking operations, and companies must think about how to position their activities to meet environmental, social, and governance pillars. The future of investment definitely lies in this direction, and while instruments such as green bonds may not offer financial advantage today, soon they will. In the meantime, they offer a considerable reputation advantage.



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