Month: March 2012

Oman’s Economy: Insurance Ebbs and Flows

Growth in Insurance Company Profitability

There has been a substantial profit escalation for Oman’s insurance companies compared to last year.  The figure for 2011 was 12.2 percent in gross premium income – an increase of 30.66 RM million from 2010.

Which companies are the main players in this growth spurt?  In first place, comes the Dhofar Insurance Company, boasting a gross premium of RO52.23 million; second, National Life Insurance with RO35.21 million and third, Al Ahlia Insurance with RO29.52 million.

Infrastructure Projects Boost Insurance Demand

What might be leading this boost in profit margin for Oman’s leading insurance companies?  There are different reasons for each of the companies, but for Al Ahlia Insurance it seems that the huge infrastructure development projects that are being undertaken in the country have been influential. Infrastructure projects currently in progress are: railway plans; developments for ports and airports and more.  Of course, with such extensive projects in place, insurance will be required.  Indeed, as the CEO for Asia and the Middle East of the RSA Group (that has a major stake in this insurance firm) said, there will be an increase in demand for insurance both during the construction and throughout the entirety of the project.

Medical and Auto Insurance

Then there is the increased demand for both medical and auto insurance.  According to the GM of National Life Insurance, S. Venkatachalam, since the economy was improving so that salaries increased and there was a reduction in unemployment levels, people had more disposable income. This resulted in them being able to buy more cars and thus requiring insurance for that.  However, Venkatachalam does not believe that this is necessarily the reason for the major demand increase.  He said that most years the growth is just as high – standing at around 12 percent for the automobile market.

In addition, it seems that a recent report has shown that people living in Oman are quite satisfied with the medical insurance available in their region. This could be due to the fact that governments under the Gulf Cooperation Council (GCC) umbrella, have poured significantly more financial resources into the healthcare industry in the countries riddled with serious chronic health issues such as diabetes, obesity and heart problems.   Coming just behind Qatar and the UAE, was Oman, boasting a satisfaction rate of 78 percent. While indeed there are other issues to be overcome in this industry – such as staffing and quality control – this should still be good news for those living in Oman and indicative once more of how the country’s economy is improving.

Satisfaction Not Guaranteed

But it’s not all that clear.  Just recently, around 500 Nagarjuna Construction Company employees tried to strike about how badly they are treated (but were prevented from doing so by ROP officials). One of their grievances is that even though the company is making large profits, their salaries are not increased (they get paid an average of between RO55 and RO75), and get no healthcare, insurance or quality food provisions.  If they get sick they do not receive any treatment from the company and they claim the food provided is unhygienic (which will also lead to sicknesses).  Although the actual profit margin of the construction company is somewhat hard to prove.  According to an article written last month in NDTV Profit, share prices for the company plummeted more than 10 percent.

Ultimately while at first glance it looks like insurance companies are faring well in Oman due to improved economic/employment conditions, there is a lot more going on than meets the eye.  Thus while Oman is on the right tracks, there is more work ahead to ensure improved insurance and customer satisfaction levels.

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Pakistani Potentials: To Invest or Not To Invest?


Global business news items are constantly filled with the doom and gloom of investing in Pakistan.  We therefore thought now would be as good a time as any to investigate just how true this is, or, if perhaps there has been some exaggeration in the perils of Pakistani businesses.

If you ask the country’s Foreign Minister, Hina Rabbani Khar, she’ll tell you that the country has a lot to offer potential investors abroad, but there again she’s probably just a little bit biased in favor of her country.  Chairing a business roundtable in the country with Alistair Burt, the England’s Minister of State for Foreign & Commonwealth Office, she explained about her government incentives for companies, pointing out how Pakistan is always looking to make things easier – and more attractive – for foreign investors.  She also pointed out the needs of the country vis-à-vis creating more business opportunities, especially in the field of energy.  Despite the country’s pitfalls however, Burt did comment that he found British businessmen making significant profits when bringing their businesses to Pakistan and indeed many more are set to start working there in the near future, given this environment.

Pakistan’s Problems

Talking of environment, even though the country hasn’t exactly got the best track record for natural disasters (like the high level flooding it encountered in 2010-11), terrorism, political crises and economic instability, it seems there is still reason to look to invest there.  But let’s look at the stats. Let’s look at the good news: between 2001-7, there was a 10 percent reduction in poverty levels, but an increase in unemployment in 2008-9.

Nonetheless, this still doesn’t have to discourage British investors.  Clearly, the political relationship between Pakistan and the UK are in a good place.  For example, as noted by Tweeter glenoglazaSky, Pakistan's Foreign Minister, meeting William Hague, expressed his gratitude to the UK for giving "650 pounds sterling" to the country’s education aid, although the Tweeter did note that she probably meant 650 million pounds sterling!  So if Pakistan likes the Brits, it could be a pleasant place for them to take their businesses.

Global Pakistani Business: Pros and Cons

In the middle of last year, Helen Coster of Forbes took a trip to Pakistan, meeting with members of the Lahore chapter of The Indus Entrepreneurs, an entrepreneurs networking group.  She discussed the pros and cons of conducting business in the world’s sixth most highly populated country. There are problems for sure: legalities don’t seem to be implemented – there is somewhat of a free-for-all-anything-goes mentality which certainly doesn’t bode well for foreign investors unfamiliar at best with the workings of the country.  It seems there is a large gap in knowledge on who will be there cracking the whip when a contract is broken or business ideas stolen.  Further, it’s not easy finding quality workers since many choose to go abroad for jobs. As well, getting a commercial loan is virtually impossible and all this culminates in huge frustration.

Moreover, if you’re Indian, don’t even think about trying to strike it rich in Pakistan. The Reserve Bank of India has forbidden Indian nationals from investing in Pakistan's manufacturing sector.  It seems to have made no difference that New Delhi is sticking by its claim that no Pakistan-specific Non-Tariff Barriers (NTBs) have been imposed. It seems a bit bizarre, especially given the fact that those in India are not restricted vis-à-vis making investments in any other part of the world.

Pro-Pakistani Profits

So what other hope remains for those seeking to invest in Pakistan?  There are some great stories actually.  One just has to take a look at what Concentrated Solar Thermal Power has achieved.   Head of the company Samir Hoodbhoy initiated and successfully directed the creation of the Central Design Bureau of Pakistan Steel Mills in 1988-92. It wasn’t easy back then, but over the last two decades-plus, he has been able to establish the groundwork for three leading educational institutions in the field of ICT and been on the Board of Advisors of several other civic and educational organizations.  In the field of wind power and solar energy, Concentrated Solar Thermal Power technology has been hugely successful, providing an alternative to Photovoltaic cells; boasting conversion efficiencies of 30 per cent.  And that’s all in Pakistan – the region we seem to be led to believe is not the place to invest in without a whole lot of trouble and strife.

In conclusion, it seems that yes indeed, there are challenges in Pakistan; no-one can deny that, but as the Chinese symbol of “challenge” states “challenge is the same as opportunity.”  Clearly as we have seen, there are plenty of business opportunities in Pakistan as well.


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