Sunday 17 / November / 2024
Muscat: Oman’s exports will not be affected by Brexit, but a weaker pound could create a challenging scenario for the Sultanate.
The country’s direct exposure to the Brexit fallout is “insignificant”, according to the head of the government funded agency responsible for insuring exports.
Khalid Al Jashmi, acting general manager of Export Credit Guarantee Agency of Oman, (ECGAO) does, however, fear a weaker pound could cause problems with the Sultanate’s existing trading partners.
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Less than a week after Britain’s decision to quit the European Union, financial analysts across the globe have been crunching numbers to assess potential risks and benefits.
Even media baron Rupert Murdoch has pitched in, believing that a weaker UK currency could put the UK in the driving seat economically.
It’s a view shared by Al Jashmi, who warns that Oman’s biggest trading partners might be tempted to exploit the weaker currency and trade with the UK instead of Oman.
The challenging scenario comes as officials revealed that slowdown of 25 per cent has been witnessed by the policy holders of the ECGAO in the first quarter of this year compared to the same period last year.
One said: “The problem of falling exports started before the end of 2015. Finance is the main reason for the exports falling.”
Consequences
If the country’s biggest trading partner, currently China, opts to head west, the consequences for Omani exports could be severe.
The total volume of exports to the UK is a mere 0.16 per cent of Omani export business, according to Foreign Trade Statistics Report 2015, as opposed to 49 per cent in export trade with China.
The UK stands at 34th position in terms of oil and non-oil exports from Oman.
Trading partners
“It’s insignificant. Our major trading partners are China, UAE, South Korea and Taiwan. The Brexit poll results and the subsequent economic upheaval will have no direct bearing on the Sultanate,” Khalid Al Jashmi told Times of Oman in an exclusive interview.
Oman’s major exports to the UK include minerals, military grade cables, steel and batteries.
In 2015, goods worth OMR17,417,633 were exported to the UK, according to Foreign Trade Statistics Report 2015.
Export to China, however, stood at OMR5,304,689,889 in 2015. “If it’s political turmoil in, say, India, or China or UAE, then Oman exports will be affected,” Al Jashmi added.
“Indirect” repercussions, however, are already on his radar.
“For example, our leading business partners in certain areas may want to buy stuff from the UK, since the pound rate has gone down and things will be a little cheaper. Then it will start hampering us,” he added.
Officials also fear payment defaults may increase during the turmoil. “Hence the role of ECGAO is important, as the government’s credit agency is responsible for promoting non-oil exports through its credit insurance, guarantee and financing services to exporters,” another senior official of the ECGAO said.
Britain’s exit
Some business leaders fear that Britain’s exit from the EU is likely to impact Oman in multiple ways — demand weakness on account of potential slowdown in the EU and the UK, volatility in commodity prices, currency impact on account of the potential depreciation of the euro and the pound, and balance sheet impact on account of exposure to unhedged overseas borrowings.
“We need to see how things go, then we can comment,” said a businessman, who imports a huge quantity of cosmetics, stationary and toiletries every month to Oman, he said.
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