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BACK             Issue No. 3/2005
ECGA's support of the Omani non-oil exports
The level of the Omani non-oil export (excluding re-export) has grown up significantly by more than 38% between 2003 to 2004. Export Credit Guarantee Agency has continued through the years to support the exporters through its unique credit insurance and other services. In the following article, Mr. Nasir bin Issa Al Ismaily, the General Manager of ECGA assesses the performance on the remarkable growth of the Omani non-oil exports as well as contribution of the Agency in extending its valuable services to increasing number of Omani exporters.

The performance of Omani non-oil exports during the year 2004 compared to 2003 has been very encouraging and remarkable. Export Credit Guarantee Agency (S.A.O.C) has contributed its share through such encouraging growth of Omani non-oil exports by extending its valuable credit insurance services to large number of existing and new exporters.

Oman’s total non-oil exports (excluding re-export) during the year 2004 amounted to RO.420.3 million compared to 304.1 million in 2003 or an increases of almost 38.2%. As for the available statistics for the first 3 months of 2005, the level of Omani non-oil exports (excluding re-exports) has increased to RO.132.1 million compared to RO.106.2 million for corresponding period of 2004 or increases of 24.4%.


 
As per the Foreign Trade Statistics for 2004 publication, total Omani non-oil exports (including re-exports) to all countries in 2004 amounted to RO.958.5 compared to RO.904.9 in 2003 or rise of RO.53.6 million which was due to increases in the Omani non-oil exports (excluding re-exports). The Sultanate, during the year 2004 exported to 132 countries world-wide.
As regards the geographical distribution of Omani origin largest exports, GCC remains the single largest export destination in Omani origin products as it contributes 51 per cent of total non-oil Omani origin exports. This is followed by Arab countries (20 per cent), Asia(13 per Cent), Americas (8 per cent), Europe (5 per cent), and Africa (3 per cent).

Out of the total non-oil exports of RO.420.3 million in the year 2004, the largest exports were to UAE RO.126.7 million, Saudi Arabia RO.51.5 million, USA RO.32.1 million, Jordan RO.26.2 million, Yemen RO.15.4 million and remaining RO.168.4 million to other countries.

As for re-exports of non-oil products of RO.538.2 million from Oman, UAE constitutes RO.230.2 million, Iran RO.83.6 million, Saudi Arabia RO.343 million, Hong Kong RO.17.5 million, United Kingdom RO.22.0 million and remaining RO.150.6 million to other countries.

On world-wide basis, the Sultanate maintains trade surplus with 61 countries where its total exports were more than imports. As to the Omani non-oil exports to the 21 Arab countries in 2004, it amounted to RO.312.3 million which constituted 34.7% of total non-oil exports to all countries of the world. This is still very encouraging considering the inter-Arab trade is very small as it constitutes less than 10% of total trade. Thus, Oman is very unique considering more than one third of its total exports is towards the Arab World. As per the trade statistics for 2004, Oman maintains trade surplus with thirteen Arab countries and deficit with only eight.


UAE is the highest importer from Oman among the Arab countries followed by Saudi Arabia, Yemen and Jordan. It is worth mentioning that 73.4% of the total Omani exports to the Arab countries are to GCC countries of which UAE alone constitutes more than 59%. It can be observed that during 2004, among the GCC countries, the highest imports to Oman were from UAE alone followed by Bahrain, Kuwait and Egypt.

As per the import figures, UAE represents the highest source of imports to Oman as it constitutes 92.6% of total GCC imports followed by Saudi Arabia at 4.0%, Bahrain at 2.7%, Kuwait at 0.3% and Qatar at 0.3%.

The Omani imports from the GCC countries have actually declined by almost 21.6% in the year 2004 compared to 2003 due to decreasing level of re-exports. The United Arab Emirates is still maintaining its top position among the major importer from and exporter to Oman and thus it is the first trading partner for many years due to its geographical proximity.



The benefits to Omani exporters for availing ECGA’s services are several and have contributed to a certain extent to the growth of the Omani non-oil exports. These include minimization of risks through credit insurance, improving exporters liquidity through bills discounting under the Agency’s post-shipment financing scheme or through availability of working capital financing under pre-shipment export credit guarantee scheme arranged with the commercial banks.

The export credit insurance cover provided by the Agency also supports and follows the trade pattern between Oman and other GCC countries. As of 31st of December 2004, GCC countries represent 57.4% of credit limits issued or RO.89 million. This is very encouraging considering substantial portion of Omani non-oil exports are to the neighboring GCC countries. Within the GCC countries, UAE represents 28% of total credit limits followed by Saudi Arabia at 26.1%, Kuwait at 11.3%, Bahrain at 7.9% and Qatar at 6.3%. This is illustrated by the Pie Chart that follows:


Total business declared by exporters for exports insured as on December 2004 amounted to RO.73.4 million which represents 17.5% of total non-oil exports (excluding re-exports) of RO.420.3 million. Such percentage of credit insurance cover to national export is considered highly significant compared to less than 5% to most other Export Credit Agencies in other countries. Services of ECGA have provided excellent opportunities for Omani exports to utilize them effectively. The Table and Charts on next page provide the highlights of its contribution and support of the export sector. As on end of 2004, ECGA has issued total credit limit of RO.166.5 million compared to RO. 155.6 million in 2003 or an increase of 7%. The number of credit insured exporters in 2004 rose to 158 compared to 153 in 2003.  Moreover, number of overseas buyers rose from 3345 in 2003 to 3574 in 2004 while number of countries of credit insured exports reached 93 by the end of the year 2004. The list of countries where ECGA has insured Omani exports is provided on Page 4.  Such credit insurance services against both commercial and non- commercial risks further add impetus towards increases in the level of Omani non-oil exports world-wide.

The growth for export credit insurance has been characterized by an upward trend with continuous increases of the need by Omani exporters to avail credit insurance services to many buyers world-wide so as to support higher exports as well as at the same time lessen the risk of non-payment and enjoy other related benefits such as post-shipment financing by way of export bills discounting with the commercial banks at confessional interest rates and availing pre-shipment financing for working capital financing.

With the increases in the number of Omani exporters availing ECGA’s credit insurance services, this to a certain extent has contributed to the growth of the Omani non-oil exports through the last 13 years which has grown from RO.79.1 million in 1991 to RO.420.3 million in the year 2004, an encouraging cumulative growth rate of more than 431.3%. Hence apart from the tangible benefits that the exporters obtain from the credit insurance services, ECGA's credit insurance service has been one of the effective tools in encouraging and promoting Omani non-oil exports sector and contributed its share for such remarkable growth


Years
Credit Limits Issued by ECGA
(in Million RO)
Number of Exporters availing ECGA's Services
Number of Countries of Exports insured by ECGA
Number of Foreign Buyers insured to exporters by ECGA
1991
3.6
4
10
43
1992
10.2
30
23
154
1993
22.0
38
34
410
1994
30.3
50
39
696
1995
38.2
60
50
952
1996
49.7
68
58
1198
1997
63
81
64
1412
1998
86.7
89
70
1757
1999
98.7
97
76
2077
2000
117.1
110
80
2310
2001
138.5
134
89
2711
2002
143.8
144
89
3057
2003
155.6
153
91
3345
2004
166.5
158
93
3574



The following provide the list of countries where ECGA has insured Omani exports :-
1

Algeria

25

Greece

49
Mauritius
73

Spain

2

Angola

26

Guinea

50
Morocco
74

Sri-Lanka

3

Armenia

27

Hong Kong

51
Mozambique
75

Sudan

4

Australia

28

Hungary

52

Nepal

76

Sweden

5

Azerbaijan

29

Haiti

53

Netherlands

77

Switzerland

6

Argentina

30

India

54

New Zealand

78

Syrian Arab Republic

7

Bahrain

31

Indonesia

55

Nigeria

79

Taiwan

8

Bangladesh

32

Iran

56

Pakistan

80

Tanzania

9

Belgium

33

Iraq

57

PapuaNew Guinea

81

Thailand

10

Botswana

34

Irish Republic

58

Philippines

82

Togo

11

Brunei

35

Italy

59

Poland

83

Tunisia

12

Burundi

36

Ivory Coast

60

Portugal

84

Turkey

13

Canada

37

Japan

61

Puerto Rico

85

Uganda

14

Chile

38

Jordan

62

Qatar

86

United Arab Emirates

15

China

39

Kazakhstan

63

Romania

87

United Kingdom

16

Cyprus

40

Kenya

64

Russia

88

United States

17

Denmark

41

Korea (South)

65

Rwanda

89

Yemen

18

Djibouti

42

Kuwait

66

Saudi Arabia

90

Zambia

19

Egypt

43

Lebanon

67

Senegal

91

Burkina Faso

20

Eritrea

44

Libya

68

Seychelles

9

Vietnam

21

Ethiopia

45

Madagascar

69

Singapore

93

Malawi

22

France

46

Malaysia

70

Slovakia

23

Germany

47

Maldives

71

Slovenia

24

Ghana

48

Malta

72

South Africa





DO's & DONT'S
Please do
Please do not
1

Take all possible steps to minimize or prevent the loss and inform ECGA accordingly

Effect further shipments while previous export bills are overdue to the buyer.

2

Obtain ECGA’s approval in advance to a postponement of the due date of payment from the buyer

gree to postponement of extension of further period for payment by the buyer without consulting with ECGA
3
Must declare all shipments made during the previous month on or before the tenth day of each month
Delay in submitting monthly declaration to ECGA. This despite several written reminders from the Agency
4
Should inform the Agency all amounts which at the end of previous month remain unpaid for more than two months from the original due date.
Fail to inform the Agency of amounts outstanding which are overdue within the stipulated period.


Annual General Meeting of the Credit Alliance Shanghai - China
The annual general meeting of the Credit Alliance was held in Shanghai, China from 12th to 13th May 2005. Apart from COFACE and its owned subsidiaries, the Alliance consists of a number of ECAs from the emerging markets as well as partners from credit information agencies and other credit management companies. ECGA of the Sultanate of Oman joined the Credit Alliance in 1996 when the Alliance had only 16 members and since then it has grown to over 60 members. The Credit Alliance Network is now present in 93 countries representing more than 85% of the world trade. Prior to the annual meeting, both the Regional Committee and General Steering Committee Meetings were held for which the General Manager of ECGA, Mr. Nasir bin Issa al Ismaily was re-elected as Regional Coordinator and Chairman of Africa/Middle- East Group for subsequent period 2005/06. He was also nominated as the representative and member of the General Steering Committee of the Alliance.

The Public Service Initiative Award for 2004
ECGA was presented with the Public Service Initiative Award for 2004 at the Oman Awards for Excellence at a glittering ceremony at the Al-Bustan Palace Hotel in Muscat. It was a great achievement for ECGA to have won the award in its very first year of nomination. The Public Service Initiative for 2004 was presented by His Highness Sayyid Faisal Bin Turki Al-Said to ECGA's representative Mr. Imaad bin Soud Al-Harthy.

ECGA Officer Attended Course in Dubai on Risk Analysis
Mr. Saif bin Nasir Al-Mahdi, the Underwriting Officer of ECGA has attended a course on Risk Analysis organized by Institute of International Research which was held in Dubai. The main objective of this course is to discuss, analyze and evaluate all types of risks including commercial and non-commercial risks. Mr. Saif Al-Mahdi has been certified as a Certified Risk Analyst CRA™ which is an international certificate given by American Academy of Financial Management (AAFM) in USA and recognized worldwide. Mr. Saif commented: “During the course I learned different aspects of risk analysis and implementing them in real cases. I believed that the course helped me a lot in my work as it emphasized how the underwriter should be aware of all risk in the process of underwriting buyers’ risks and evaluate their credit and financial situation”


Prague Club Meeting held in Estonia
The Prague Club held its first bi-annual meeting of the year 2005 in Tallinn, Estonia hosted by Kredex -the Export Credit Guarantee Agency of Estonia from 26th May to 1st June 2005. The General Manager Mr. Nasir bin Issa Al Ismaily of ECGA of the Sultanate of Oman participated in the meeting and its workshop. ECGA became the first ECA from an Arab country to be a member of the Prague Club in the year 2000. The Prague Club which operates under the auspices of the Berne Union – that is the International Union of Credit & Investment Insurers consists of a number of ECAs from the emerging markets including Central and Eastern Europe, Africa, Middle-East and Asia.

Presentation of ECGA's Services to Oman Arab Bank SAOC
ECGA made presentation to Branch Mangers and Credit Officers of Oman Arab Bank SAOC on its export facilities and other services provided to the exporters. Two of the ECGA's officers- Mr. Imaad bin Soud Al-Harthy - Senior Claims Officer and Mr. Said bin Nasir Al-Mehdi - Underwriter participated in the presentation which also provided the forum for questions and answers.

ECGA acts as a catalyst for which credit insured exporters can use their Export Credit Policy as security to obtain necessary export financing facilities through the commercial banks by assigning the benefits under the policy to the banks.


COUNTRY PROFILE OF BUYERS OF OMANI INSURED EXPORTS
KINGDOM OF THAILAND
Thailand is situated in South-East Asia. The total area of the country is 514,000 square kilometers. The capital city is Bangkok. The population of Thailand is 64,865,523 (July 2004 Est.)
.
Export Credit Guarantee Agency (SAOC) has insured Omani exports to various products to Thailand including drugs and pharmaceutical products, fences, fresh and frozen fish etc. The Agency has not paid any claims to insured Omani exporters to Thailand yet.

During the year 2003, total Omani exports (excluding oil) to Thailand were R.O.2,878,536/-, while imports were R.O.24,333,51/-. The Omani exports and imports to Thailand for the last 6 years are listed below:-

Years
1999
2000
2001
2002
2003
2004
Exports*

1,906,999

3,145,813

2,001,362

2,916,627

2,878,536

3,818,989

Imports*

11,992,527

14,646,240

18,547,409

16,489,129

24,333,501

31,667,234


As per the latest publication of International Trade Finance Magazine September 2004, issue No. 455, in its survey highlights in Thailand it states as follows:-

“Two out of three shipments are on open account. One in six is covered by an l/c, and an equal number as draft acceptances. Although importers deposit payment promptly, banks do not transfer foreign currency until three months later”

As per D&B Country Risk Indicator, a number of ECAs provide full and short term cover for Thailand including US Eximbank, Atradius, ECGD and Euler Hermes - UK .

The maximum terms of payment are L/C’s with usual terms of 30-90 days.

ECGA of Oman signed Memorandum of Understanding on Cooperation Agreement with the Export – Import Bank of Thailand (EXIMTHAI) in June 25th, 2004.

Hint to Exporter
“ Nowadays, with the fierce competition among countries to increase their exports, the quality of a product and its competitive pricing are no longer enough to conquer foreign markets and win export deals. Credit insurance as well as other credit facilities are increasingly indispensable component of any deal structure and a particularly attractive incentive for foreign buyers”


Q. What action to be taken by the exporter if the buyer request for extension of due dates of payment?
A. If a buyer who is unable to make payment on the due date requests for more time to pay the amount, the exporter should make a good commercial judgment on the request, based on facts and circumstances of the case. If it appears that extending the due date of the bill is the proper course of action, the exporter should seek the approval of the Agency, giving in detail the reasons justifying such action. He should also pay the Agency an additional premium for the extended terms of payment.

Q. Should policyholder make further shipments to buyer in default?
A. In the normal course, no exporter should make further shipments to a buyer who has not paid the bills relating to earlier shipments. If, however, it is considered advisable to effect further shipments to such a buyer, prior approval in writing of the Agency must be obtained. The Agency will not admit liability for any shipment made to a buyer in default without its approval.

Q. In case of disputes will the Agency admit such a claim?
A. If the buyer raises any dispute regarding the execution of the export order or if he raises a counter-claim, the claim for the resultant loss will not be admitted by the Agency until the exporter obtains a decree in his favour from a competent court of law in the buyer's country. This is because the Agency cannot pay claims for losses caused by the exporter's own failure to supply the goods as per contract. If, however, he considers legal action either inadvisable or impracticable, the exporter should explain to the Agency reasons for the same. If the reasons advised by the exporter are acceptable to the Agency and if the Agency is satisfied that the exporter is not at fault, the Agency may waive legal action and settle the claim.


Q. When should the claim be filed due to diversion of voyage outside Oman?
A.Claims due to diversion of voyage outside Oman can be filed as soon as the exporter is in a position to produce to the Agency the necessary documentary proof of the cause and extent of loss.

Omani Insured Exporter by ECGA
POLY PRODUCTS LLC

Poly Products LLC, Oman, has been one of the active Omani exporters availing ECGA's services fro many years. With a turnover of 20 million US dollars, it began on a humble note in 1979. Today, it has blossomed into a state-of-the-art manufacturing complex spread across an area of 45,000 square meters in the Rusayl , manufacturing and marketing a wide range of products like mattresses and beds, pillows and comforters, sofa sets, polyurethane foam and polyster fibre. The company’s products cater to the needs of both the domestic household segment as well as the institutional segment of hotel chains.

Raha, the company’s flagship brand, is not only a highly reputed name in the Middle East but also enjoys a brand equity that is truly international, with customers spanning the Middle East, Europe and Southeast Asia. More than half of the company’s turnover comes from the export market, which is proof of their product quality.

The export performance figure of Poly Products LLC for the last 5 years is illustrated by the graph below:
Figures are in million
US Dollars
 


To maintain these high standards, the company sources a variety of inputs from reputed manufacturers in Europe, Turkey, the US and the Far East. In October 1999 the company signed a licensing agreement with Simmons of USA, to be its sole licensee to manufacture and market the Simmons range of specialty sleep products in the Middle East. Simmons USA is one of the top ranking bedding manufacturers in the world and their choice of Poly Products LLC as their licensee is an endorsement of the company’s strengths.

Recently Poly Products LLC has signed a joint venture agreement with a company called Calia Italia to form a new company by name Emporio Calia LLC to manufacture and market premium leather sofa sets through the Middle East. Calia Italia is a US $ 90 million turnover company, based in Italy, manufacturing and marketing the world’s finest leather sofa sets in exquisite and contemporary designs.

ECGA appreciates greatly for being awarded with the prestigious Public Service Initiative 2004 during the occasion of the Oman Awards for Excellence. This is recognition and a manifestation of the commitment to excel in what we do in extending our valuable services to Omani exporters.

ECGA would like to dedicate this award to our exporters and others who have given true meaning to our achievement. We will continue to strive hard to exceed in the quality services we provide.

The Omani exporters have long recognized and appreciated that one of the major keys to success is to insure with ECGA for safe export business. As exporters focus on exports, ECGA covers the risks. The Agency provides confidence, encouragement and incentive in support of its services to exporters.

ECGA is here to help you minimize your risks

BUYER’S RISK
COUNTRY RISK
   buyer’s insolvency/bankruptcy

   buyer’s failure to pay

   buyer refusing delivery of goods


   foreign exchange transfer delay

   import bans or cancellation of import licence

   payment moratorium

   war, civil disorder, natural disasters


Other benefits of service provided to credit insured exporters include domestic credit insurance, post shipment financing through bills discounting by commercial banks as well as issuance of guarantees to commercial banks for pre-shipment financing needs of the exporters.

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