Global Insight : Both Japan and Oman have continuously shown their commitment to strengthening bilateral ties, with a landmark being Shinzo Abe’s visit to Oman in 2014, the first trip of a Japanese Prime Minister to the country in 24 years. And, at the end of last year, the Minister for Foreign Affairs, Taro Kono travelled to Oman to strengthen ties between the two nations. Kindly give us an overview of the nations’ relationship.
A: Japan-Oman diplomatic relations started in the early ‘70s, but the relationship between the nations started long before. Princess Buthaina, Sultan Qaboos’ aunt, was the daughter of a Japanese woman that married the late Sultan Taimur, Sultan Qaboos’ grandfather. After Sultan Taimur abdicated, he travelled the world, and his travels took him to Kobe, Japan where he fell in love and married Kiyoko Oyama, a Japanese lady.
The Japanese imperial family has a great friendship with the Sultanate of Oman and this also provides a basis for the friendship of both countries. When I was appointed Ambassador to Oman, I had the honor to have an audience with the Crown Prince and Princess of Japan, who expressed their great memories of the warm welcome they received from Sultan Qaboos during their official visit to Oman in 1994.
In 1971, our diplomatic relations officially started and they have an economic focus. For example, Japan buys roughly 200,000 barrels of Omani oil a day, which is around 20% of the Sultanate’s oil production. Furthermore, Japan also buys around 30% of Oman’s liquid petroleum gas. For Oman, Japan is a very important customer.
If you drive around Muscat, you will see how many Japanese cars there are. I would say this is very exceptional in the Gulf Cooperation Council (GCC) countries. In the streets of Riyadh or Abu Dhabi you will see more Mercedes or BMWs, but here Japanese cars are the ones you see the most. The market share of Japanese cars is about 70% in Oman. Omanis see something made in Japan on a daily basis and this is creating a positive image of Japan in the country.
Furthermore, Japanese-led consortiums generate about 60% of Oman’s electricity, through independent power producer (IPP) schemes. And Japanese-led consortiums, through independent water project (IWP) schemes, also produce 20% of Oman’s drinking water. There are four Japanese companies investing in Oman Liquefied Natural Gas, one Japanese company has an oil concession in Oman, five Japanese companies are operating in five IPP consortiums and two in IWP.
This demonstrates the importance of Japan to Oman, but it also brings a challenge to me, as Japan’s Ambassador to Oman. With respect to oil, from the Japanese point of view, Oman only represents 1% of Japan’s oil imports. In the GCC area, Saudi Arabia’s share is 36%, United Arab Emirates 24%, Qatar 9% and Kuwait 7%. As for liquid natural gas imports to Japan, Oman only represents 3%. The same for vehicles — although 70% of Oman’s cars are Japanese, Oman is only the 13th largest exporting destination of Japanese vehicles.
While Omanis are very eager for further Japanese investments, from the Japanese side, I am afraid, Oman is not very significant. My mission is to persuade business people in Japan that it is in their interest to come and invest in Oman. Not too many people in Japan know about Oman — when thinking about the Middle East, Japanese tend to think about Saudi Arabia or Dubai. Also, the Japanese community here is very small; there are only 150 Japanese nationals in the Sultanate.
GI : There are two important bilateral economic agreements that have been signed between Japan and Oman, the Avoidance of Double Taxation Agreement of 2014 and the Bilateral Investment Agreement of 2015. How could they be further exploited?
A: Unfortunately, these two agreements have not been functioning quite well enough. This is not only the case with Japan, the US also signed a free trade agreement with Oman, which also seems to be not functioning as it should. Omanis are expecting more Japanese investments and I do my best to bring in that investment, but there appears to be room on the Omani side to make further efforts. Oman should keep working to become a more foreign-investment-friendly country. And if Oman wants Japanese investment, it needs to take a more proactive approach to Japan.
Although the aforementioned agreements should, and will, bring in more Japanese foreign direct investment, Oman has to work further in facilitating this investment and be more investor friendly. There is too much bureaucracy that has to be reduced, too many institutions involved that consume the investors’ precious time. In this regard, I am eagerly waiting for the start of Oman’s new one-stop service” that is part of its National Program for Enhancing Economic Diversification (TANFEEDH).
There are also advantages in Oman compared to other GCC countries. The geographic location is privileged, facing the Indian Ocean. For logistics and container in transit businesses, there is a lot of potential. Furthermore, I have previously been based in three other GCC countries and I can say that Omanis are the hardest working and the friendliest people in GCC. Unlike other nations that have a Bedouin background, Omanis face the sea, so they have always been engaged in trade and know how to interact with other people — they are more open. This is a distinctive advantage over other countries in the GCC area.
GI : What role could Japan play in supporting the sultanate’s economic diversification efforts?
A: Here, I also have a challenge. As Oman is considered a rich county, according to the Organisation for Economic Co-operation and Development’s guidelines, it is not eligible for Japan’s Official Development Assistance. So it is not possible to help grow diversification through technical assistance from the Japan International Cooperation Agency (JICA) to Oman in general.
Indeed, Japan must help Oman to diversify its economy through other means — but first, Oman should approach the Japanese side more proactively. As I explained before, the bilateral economic relationship is unbalanced at the moment: Japan has a lot of weight in Oman’s economy, but Oman doesn’t have so much in the Japanese one.
GI : Yusuf bin Alawi bin Abdullah, Oman’s Minister of Foreign Affairs, expressed Oman’s commitment to collaborate on Japan’s Free and Open Indo-Pacific Strategy in the Middle East, an initiative that will have a positive impact on Japan’s economic security. What are the opportunities that come with this strategy?
A: Oman has an important geopolitical location. For example, Oman has been supporting Japanese counter-piracy operations. We have a base in Djibouti, but our frigate and reconnaissance aircrafts visit Salalah or Duqm in Oman monthly for supplies. Oman has been supporting Japan in its Indian Ocean operations, but there is more potential and I am trying to draw attention to that. Since Oman is considered an important country in terms of security, this could in turn attract more attention and investment from Japan.
Oman strongly supports Japan’s Free and Open Indo-Pacific Strategy. When Japan’s Minister for Foreign Affairs Taro Kono visited Muscat in December, he promised he would send a high-level government mission to Oman this year. That mission will consist of two components, one security and the other one economic.
GI : Is Japan also interested in becoming involved in Oman’s port and harbor development areas?
A: When Oman was eligible for overseas development assistance, JICA carried out a series of port development projects in Salalah, Sohar and most recently Duqm. The problem again is that Oman is less visible for Japanese companies, because when they think about investing in the GCC region’s infrastructure, they go to Saudi Arabia, as it is a huge country with a big population; it is a bigger potential market.
And when a company thinks about trading, they go to Dubai — there is a big accumulation of foreign businesses there, so it is easier to find a business opportunity. However, I am convinced that Oman has a large potential in terms of port development, taking into account its geographical location and the ongoing governmental efforts to develop more investor-friendly policies.
GI : The Japanese are known as high-spending tourists and luxury tourism is one of Oman’s targets. How are you promoting Oman as a tourism destination to your fellow countrymen?
A: I was stationed in Thailand before Oman, where there are 60,000 Japanese nationals in Bangkok alone. The Japanese in Bangkok are quite active travelers, so in 2016, I organized a visit of Bangkok-based Japanese tourist agents to Oman. Now they sell Omani holiday packages to Japanese people living in Bangkok and I believe there are a few hundred of these people visiting Oman now. There are no direct flights from Japan to Oman, but there are three flights a day from Bangkok to Muscat.
In February, the Omani-Japanese Economic Cooperation SME Forum was held and, as a part of the event, the Japan Association of Travel Agents and the Japan Tourism Agency visited Muscat, and they will start selling packaged tours to Oman soon. Oman is rich in tourism resources that can be further explored and also developed.
GI : When you were appointed Japanese Ambassador to Oman in 2015, you said: “I believe the sultanate of Oman is the utopia of the Arabian peninsula.” Do you still think this?
A: Despite my initial remarks on the business environment, I would like to highlight the business environment in Oman, which is the best in the GCC region. Omanis are hard workers, open minded and very liberal. The business atmosphere is very good, but the problem is that Oman is not yet popular in Japan. Oman has great potential as an investment destination for Japanese investors and I would like more Japanese companies to look at Oman seriously. My aim is to fill the gap between the high expectations Oman has of Japan, with the little knowledge Japan has towards Oman.