The past decade has seen India become a significant trading partner for Oman, with bilateral trade rising from $200m at the start of the decade to almost $2.5bn last year. The year 2010 will see those trade relations become more important,
as Oman becomes the first foreign country to establish a joint fund to invest in India.
The India Oman Joint Investment Fund (IOJIF) was initially established by the signing of a memorandum of understanding (MoU) in 2008 between Oman's sovereign wealth fund, the State General Reserve Fund (SGRF), and the State Bank of India, India's largest commercial bank. Following round-table talks between the two countries in February however, it was revealed that Oman's minister of national economy, Ahmed bin Abdulnabi Macki, will shortly travel to India to sign a final agreement between the two countries concerning the fund.
The IOJIF is anticipated to have initial seed capital of $100m, although this figure is expected to rise quickly to $1.5bn, as the fund's articles enable it to take on this amount of additional debt and capital through partnerships. The fund is unlikely to find itself short of investment opportunities: India hopes to double levels of bilateral trade with the Arab world over the next four years from its current level of $114bn. The Indian government in particular is seeking Arab investment in sectors such as shipbuilding, infrastructure, pharmaceuticals, IT and energy. In total, the government anticipates India will require $500bn of infrastructure investment over the next three years.
The joint fund is likely to build on existing partnerships between Indian and Omani business. Such previous ventures include the Oman India Fertiliser Company, whose operating capital is shared between the Oman Oil Company and two Indian companies. The Oman Oil Company is also investing in a 6m tonne oil refinery in Madhya Pradesh, India, through its subsidiary, Bharat Oman Refineries. Meanwhile, several Indian companies have expressed an interest in investing in Oman, including Infoline in services, Taj and Oberoi Groups in hospitality, and metals giant Tata, which has floated a subsidiary, Reemal Mining Company, on a 70:30 basis with Al Bahja Group to mine limestone and gypsum in Oman.
While Oman remains the primary regional state to have enhanced its ties with the subcontinent, other Gulf Cooperation Council (GCC) nations are also pressing their claims. Saudi Arabia, for example, has announced plans to establish a joint fund with India that will have capital of around $750m. The announcement coincided with a recent visit by India's Prime Minister Manmohan Singh to the Kingdom, the first by an Indian prime minister since 1982. Meanwhile, Qatar is also reportedly planning to establish a $2bn joint fund for investing in India.
Bilateral ties with the subcontinent have become increasingly important across the GCC throughout the past decade, thanks in large part to sustained economic growth in the region that has led to an increase in the size of the middle class, and a resulting increase in demand for oil. With Western economies remaining sluggish, India is also proving a more dynamic investment environment for the excess liquidity once more being garnered by GCC nations as oil continues its recovery.
This is not the only story however: merchandise trade has also exhibited strong growth throughout this period. India now represents Oman's second-largest non-oil export market behind the UAE, with exports hitting almost $650m in 2008, while India is Oman's fifth-largest import market - the Sultanate imported over $1bn in goods from India the same year. Indeed, trade growth remained bullish in spite of the global downturn, registering 12% growth year-on-year for the first two months of 2009.
With strong ties across the board and a brighter trading outlook globally for 2010, Oman and India look set to see continued bilateral growth, with the Sultanate well placed among its GCC neighbours to take advantage of the best investment opportunities on offer in the subcontinent.
Global Arab Network
This article is published in partnership with Oxford Business Group