Document of

The World Bank FILE cOpFOR OMCIAL USE ONLY

Repot No. P-2782-OM

REPORT AND RECOM ENDATION

OF THE

.PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

TO

OMAN TELECOMMUNICATION CORPORATION (OMANTEL)

FOR A

FIRST TELECOMMUNICATIONS PROJECT

June 4, 1980

Tbis docmet hba a resktictd disbeloe ando be _ued by recipients esly In the performace oftheir official dutis. Its coatets may na ohrwise be dwcloed without Word lbak authobIaton.

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SULTANAUTE OF OMAN

CURRENCY EQUIVALENTS

Currency Unit - Rial Omani (RO)

US$1 = RO 0.345RO 1 = US$2.895

FISCAL YEAR (FY)

January 1 - December 31

LIST OF ABBREVIATIONS AND

ACRONYMS USED IN THE REPORT

C & W : Cable and Wireless, Ltd. (British company)DELs : Direct Exchange LinesITU : International Telecoimnnication UnionOMAITEL S.A.O. : Oman Telecommunications CompanyOMANTEL : Oman Telecommunication CorporationPABX : Private Automatic Branch ExchangePBX : Private Branch ExchangePCOs : Public Call OfficesPDO : Petroleum Development Oman, Ltd.PTm : Ministry of Posts, Telegraphs and TelephonesUNDP : United Nations Development Programme

FOR OFFICIAL USE ONLY

SULTANATE OF OMAN

FIRST TELECOMMUNICATIONS PROJECT

Loan and Project Summary

Borrower: Oman Telecommunication Corporation (OMANTEL)

Guarantor: The Government

Amount: US$22 million equivalent

Terms: 10 years, including 4-1/2 years of grace at 8.25 percentp.a.

ProjectDescription: The proposed project consists mainly of the works included

in the first three years of the first phase (1980-1985) ofOMANTEL's 1979-1990 development program and includes theinstallation of: (a) 15,700 new direct exchange lines(DELs) and the replacement of 3,900 lines of obsolescentequipment; (b) ducts and main cables to provide for about16,000 new DELs and capacity for future growth; (c) tele-phones for about 14,000 new subscribers and about 5,500new private automatic branch exchange (PABX) extensions;(d) about 350 public call offices to be located in bothurban and rural areas; (e) about 6,000 lines of switch-ing capacity in new private branch exchanges; (f) inter-national and national switching and transmission systems;(g) switching and miscellaneous equipment to increasethe automatic telex network to about 1,800 subscribers;(h) construction of buildings, provision of motor vehicles,training and testing equipment, and furniture and fittings,and (i) consultants' services and technical assistance tostrengthen the management, training and engineeringcapabilities of OMANTEL. For this purpose two experts(one with technical and one with financial background)would be retained by OMANTEL for about 2-1/2 years, at anaverage man/month cost of $8,500, including internationaltravel and subsistence. Benefits resulting from theproposed project are expected to be felt, directly orindirectly by all segments of the Omani society. Theproposed project presents no special risks.

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Estimated Costs: US$ Million, EquivalentItems proposed for

Item Local Foreign Total IBRD financing

Local switching 2.55 6.14 8.69 6.1

External plant 11.42 3.38 14.80 3.4

Subscribers' plant 1.94 2.13 4.07 2.1PABX switching 0.50 1.24 1.74 -Transit switching 0.26 1.25 1.51Telex and telegraphs 0.39 6.32 6.71 -

Long distance terrestrial 3.07 8.20 11.27 8.2Long distance satellite 2.40 5.99 8.39 _Technical buildings 1.30 2.90 4.20 -Non-technical buildings 1.42 3.42 4.84 -

Motor vehicles 0.60 3.42 4.02 _

Furniture and fittings 0.27 1.86 2.13 -

Medical equipment 0.01 0.03 0.04 -

Training equipment 0.06 0.43 0.49 ) 0.6

Test equipment 0.02 0.16 0.18 0Consultants' services andtechnical assistance - 0.50 0.50 0.5.

Total Base Cost 26.21 47.37 73.58

Physical Contingencies 1.26 2.21 3.47Price Contingencies 8.50 11.67 20.17

Total Estimated Cost 35.97 61.25 97.22

Unallocated 1.1

Total 22.0

Financing Plan: US$ Million EquivalentLocal Foreign Total

OMANTEL 36.0 31.2 67.2Government - 8.0 8.0Bank - 22.0 22.0

Total 36.0 61.2 97.2

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Estimated Loan US$ ThousandsDisbursements: FY81 FY82 FY83 FY84 FY85

Annual 300 3,900 9,700 6,600 1,500Cumulative 300 4,200 13,900 20,500 22,000

Rate of Return: 18 percent

Staff AppraisalReport: No 2727-OM dated April 8, 1980.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRDTO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN

TO OMAN TELECOMMUNICATION CORPORATION (OMANTEL) WITH THE GUARANTEEOF THE SULTANATE OF OMAN FOR A FIRST TELECOMMUNICATIONS PROJECT

1. I submit the following report and recommendation on a proposed loanto Oman Telecommunication Corporation (OMANTEL) with the guarantee of theSultanate of Oman for the equivalent of US$22 million, to help finance a FirstTelecommunications Project. The loan would have a term of 10 years including4-1/2 years of grace, with interest at 8.25 percent per annum.

PART I - THE ECONOMY

2. A report entitled "Oman: Current Economic Position and Prospects"(2528-OM) based on the findings of a mission which visited Oman in January1979 was distributed to the Executive Directors on October 16, 1979. Anupdating mission visited Oman in April 1980. The main findings of bothmissions are given in the following paragraphs. Country data sheets areattached in Annex I.

3. Prior to 1970, Oman was a traditional society which had not beenexposed to the impact of the modern world. Since July 1970 when Sultan Qaboosbin Said came to power, Oman has been undergoing major structural changes; inthe short span of eight years, economic infrastructure has been built up froma very rudimentary stage and Oman has made impressive gains in education,health and housing. Unprecedented increases in personal incomes and the rapidexpansion of public services have substantially improved the living conditionsof the Omanis, particularly those in the urban centers. These improvements inthe material welfare of the Omanis have been accompanied by a visible changein the social structure and values. The pace of social change is, however,much slower than that of the economic change, and century-old traits of atraditional society persist. Income distribution in Oman remains highlyskewed. Oil revenue, the major source of income, accrues to the Governmentand is channelled to the economy through public expenditures, mainly onconstruction and purchases of goods. Thus, benefits from economic developmenthave, so far, gone mainly to a minority of the population in the urban centers,with little impact in rural areas. During the same period, a modern governmentcomprising various technical ministries and executive agencies was created.While no representative bodies exist in the country, the traditional tribaland social structure is represented in the Government and allows a measure ofconsultation. However, the Southern province of Dhofar was subjected since1963 to a long period of guerilla warfare which was not ended until 1975.

4. Prior to the commercial exploitation of oil in 1967, the Omanieconomy was at a subsistence level based largely on agriculture and fisheries.Although oil exports began in 1967, government expenditures remained at lowlevels until 1970 and foreign exchange reserves accumulated. With the launch-ing of major investment projects and increased civil and military spending,the government expenditures rose by more than fivefold between 1969 and 1973.

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The balance of payments and the Government budget turned into a deficit in1972. There was a significant liquidity crisis in 1974 because of the rapidgrowth of expenditure despite the sharp increase in the oil prices at the endof 1973. Efforts to control rising budgetary deficits included introductionof various administrative measures such as establishment of a planning organi-zation and a tender board. The need for a rational long term approach todevelopment led to the preparation of the Five Year Development Plan, 1976-1980.

5. The main objectives of the Five Year Development Plan, 1976-1980,are to:

(i) shift the concentration of investment from infrastructureto income-generating projects, particularly in the sectorsof manufacturing, mining, agriculture and fisheries, inorder to supplement and eventually replace oil revenues;

(ii) effect a wider geographical distribution of investment inorder to improve regional income distribution and reduce therate of migration to major urban centers;

(iii) develop local human resources to increase Omani participa-tion in the economic activity;

(iv) achieve the basic requirements of a free market economywith the private sector playing a leading role throughthe provision of an appropriate legal and incentivesframework;

(v) pay more attention to the development of water resources; and

(vi) improve the efficiency of the government administration.

6. The Plan projected an annual average GDP growth rate of 1.6 percentand a GNP growth rate of 3.1 percent in real terms during the 1976-1980 period.Higher GNP growth is due to the projected decline in factor service payments.Fast growth in non-oil sectors, i.e. mainly agriculture and manufacturing, wasexpected to more than offset the projected decline in oil production. In linewith declining oil revenue, government investment was projected to decline by19 percent annually along with a sharp cutback in defense expenditures. Witha projected annual average decline in imports of 11 percent, the Plan projectedthat current account of the balance of payments would be in surplus in 1980.

7. During the first four years of the Plan, the Omani economy did notattain several of the targets. Public investment declined faster thanforecast in the Plan mainly because of constraints in project preparation andimplementation in the productive non-oil sectors; the projected cutback indefense expenditure was not achieved although it has decreased slightly inreal terms since 1976. Major projects highlighted in the Plan such as acement and a copper plant and an industrial estate suffered delays of up tofive years.

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8. Oil was the leading growth sector until 1977. Oil output startedto decline in 1977; the annual average rate of decline was about 3.7 percent

during the 1976-79 period. While agriculture is the major source of incomefor the majority of the population, its value-added accounts for less than 3

percent of the GDP. After two years of strong expansion in 1975 and 1976, theconstruction sector has reflected the drastic slowdown in the developmentexpenditure begun in 1977. Oman's manufacturing sector is still small; itaccounted for only 1.5 percent of the GDP in 1979. Government servicescontinued to increase rapidly throughout the Plan period. Overall, there may

have been an annual average increase of 1-2 percent in the GDP in real terms

during the 1976-79 period.

9. Oil revenue accounts for more than 90 percent of Government revenue.

Non-oil revenues, composed mainly of corporate income tax, customs duties andincome from public utilities have shown modest increases since 1976. Defense

expenditure accounted for about 60 percent of current expenditure during thisperiod. Civil recurrent expenditure rose by an average of 23 percent since

1976 while public investment declined rapidly. In 1977, in sharp contrast

to the previous years, an overall surplus of RO 72 million was registered.It was caused by a substantial rise in grant receipts and shortfall in devel-opment expenditures. In 1978, a deficit of only RO 45 million was incurred

compared with the budget estimate of RO 223 million; this largely reflectslower expenditures than budgeted. Reflecting a 54 percent oil price hike over1978 and a shortfall in budgeted development expenditures, the budget surplus

was RO 121 million in 1979. This has helped the Government to improve itsposition vis-a-vis the monetary system by repaying almost all of the domesticdebt and increasing further its deposits with the banks. Similarly, Oman was

able to repay in advance a large part of external loans with relativelyhard terms. Oman's balance-of-payments reflects the performance of the oilsector and public expenditure policy. The balance-of-payments showed deficitsbetween 1972 and 1976. Following a surplus which resulted mainly from arecord level of grant receipts in 1977, a deficit of $97 million was incurredin 1978 as grant receipts fell sharply and capital account showed net paymentson external loans. In 1979, oil price increases brought an additional oilexport revenue of about $730 million. Furthermore, inflow of previouslyconmmitted grants was at $150 million. Overall, the balance-of-paymentsshowed a surplus of $330 million in 1979. Consequently, net foreign assetsrose to $543 million at the end of 1979 (equivalent to 4.4 months imports).

10. In 1980, the decline in oil output can be arrested as the technicalproblems for the decline in the northern fields are solved and some of the newsouthern fields are expected to come into production. The rest of the economy

particularly the construction sector is also expected to benefit from increasedoil revenue and Government expenditures. The 1980 budget provides for a 43percent increase in overall Government expenditure. Because of absorptivecapacity, it may be difficult to reach the budgeted investment level in 1980(RO 245 million compared with 1979 actual investments of RO 130 million).Government oil revenue is expected to reach RO 1.05 billion in 1980. A

Reserve Fund has been recently created to which 15 percent of the oil revenueand budget surpluses will be deposited. In 1980, in addition to 15 percent ofthe oil revenue which will automatically go to the Reserve Fund, a budget

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surplus of RO 200 million is anticipated. The Reserve Fund account thus, is

expected to reach RO 345 million (nearly $1 billion) by the end of 1980.

11. Oman's long-term development objectives are basically those of the

Five-Year Development Plan. These objectives are expected to be reemphasized

in the next Five-Year Development Plan (1981-85) which is now under prepara-

tion. In view of the expected further decline in oil production after 1981,

the long-term prospects of the Omani economy depend on the country's capacity

to diversify its productive base in non-oil sectors, to shift the concentra-

tion of investment from infrastructure to productive sectors (i.e. agricul-

ture, fisheries, manufacturing) and to eliminate the two key constraints

which, so far, have hampered such diversification. First, skilled manpower is

the most critical constraint: its scarcity at technical and professional

levels, and the limited effectiveness of expatriates in an administration

environment which cannot fully use them, is behind the lack of project prep-

aration, evaluation and implementation capacity which has been a principal

cause of the drastic decline in public investment since 1976. Alleviation of

this constraint would reduce the growing dependence on expatriate labor at

all levels. Second, the lack of clearly defined sector policies in agriculture,

fisheries and industry has severely hampered realization of the Plan's growth

targets.

12. Although the limited natural resource base such as water and

minerals and the small size of the domestic market are further constraints

to diversification in agriculture and manufacturing, the growth potential in

these sectors needs to be exploited to the maximum. In agriculture, given the

present low crop yields in Oman, relatively large increases in yields appear

technically feasible through timely application of fertilizers, improved plant

spacing, weeding, pest and disease controls. In manufacturing, selectedimport substitution industries for non-durable consumer goods and down-stream

copper products (from the copper mine expected to enter into production in

1984) would not only be feasible but would have a significant impact on the

balance of payments. In fisheries, the prospects are extremely good as the

fish resources off the country's 2,000 kilometers of coast are rich.

13. Prospects for the oil sector are better than forecast previously.

Official estimates of Oman's proven oil reserves stood at 2.2 billion barrels

at the beginning of 1980; this would last about 21 years at the 1979 rate of

extraction. With the improved reservoir performance and the use of secondary

recovery techniques in the northern fields and the development of southern

fields, it is possible to maintain an output level of 350,000 bbl/d throughout

the 1980's (average output was 295,000 bbl/day in 1979).

14. Bank projections given in Annex I which are based on the recent

developments and orientations of the Development Plan are intended to provide

an illustrative scenario. One of the important elements behind the projections

is the level of investment. Given the absorptive capacity constraints and

initial investment allocations for the 1981-85 Plan, non-oil investment is

assumed to grow at an annual average rate of 13.5 percent in real terms during

the next Plan period with emphasis given to productive sectors. Furthermore,

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a 7 percent growth in real terms is assumed for public recurrent expenditures.

With the assumption that the 1979 level of oil extraction would be maintaineduntil 1985, the projections show a real GDP growth of 4.2 percent during the

1981-85 period. The projections are based on a crude oil price of $32/bbl in

1980 and contingent on the oil price projections which assume an averageincrease of 2.8 percent p.a. in real terms. The balance-of-payments based on

the foregoing assumptions show that the current account would produce increasing

surpluses until 1985 and possibly thereafter, despite rapid increase forecastfor factor service income outflows (workers' remittances and profit transfers)

in response to increasing investment levels. Rapid accumulation of reserves

would take place by 1985 in line with the "Reserve Fund" policy.

15. In the case of a higher international inflation than assumed here,

accumulation of reserves would be less than projected. Similarly, higher

investment levels than assumed here would absorb some of the projected surpluses.The above projections, therefore, point to the need that Oman could pursue a

balanced oil extraction policy which takes the country's absorptive capacity

into account, and should, at the same time, make all efforts to increase itsabsorptive capacity for productive investments. As mentioned above, the

projections are merely illustrative; the actual pattern of oil production will

be determined, among other factors, by the public expenditure and developmentpolicies to be adopted for the next five year Plan, 1981-85.

16. In addition to the large but erratic inflow of grants, Oman hasborrowed since 1974 $904 million on a commitment basis (outstanding and

disbursed debt at the end of 1979 was $486 million) in order to finance itsdefense and development expenditures. Loans from commercial banks accounted

for the major part of borrowing in 1974 and 1975 with relatively hard terms.

Concessionary borrowing in the recent years has softened the average terms

of Oman's external debt as the share of bilateral and multilateral loansincreased. In view of the economic prospects described above, the projected

external assistance requirements would be small. Oman's debt service was16 percent of exports of goods in 1979 as a result of advance repayment on

most of the commercial loans. The ratio of debt service payments to exports

of goods and non-factor services is expected to decline from 6 percent in 1980

to 2 percent in 1981, and remain around 1-2 percent thereafter. However,

unlike its borrowing needs, Oman's technical assistance and training require-

ments in the next decade will be significant. Scarcity of technical andmanagerial manpower necessitates external technical assistance in economicplanning, project preparation, evaluation, and implementation as well as in

improving the organizational capabilities. Oman remains creditworthy for

continued Bank lending.

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PART II - BANK GROUP OPERATIONS IN OMAN

17. Oman joined the Bank in December 1971, and has since received fourBank loans totalling $24.95 million. Two were approved by the ExecutiveDirectors in FY1974 (Education and Technical Assistance) and two in FY1977(Highways Maintenance, and, Power and Water Engineering Studies). Annex IIcontains a summary statement of these loans as of February 29, 1980 and noteson the execution of ongoing projects. No loans were processed in FY1978and FY1979 mainly because projects contemplated for these years were eitherdelayed or alternative sources of financing were obtained. In FY1979, IFCapproved a $2.0 million equity participation (representing 7 percent of theshares) in the newly created Oman Development Bank (ODB).

18. Although 1-1/2 years behind schedule, implementation of the Educa-tion project proceeded satisfactorily and all schools financed under theproject became operational in September 1979. This project was part ofan integrated program of assistance by the Bank, UNDP and the United Kingdom.The latter and UNDP/UNESCO financed technical assistance and overseas fellow-ships.

19. The second Bank loan, made in FY1974, provided $2.75 million for aTechnical Assistance Project to help finance three specialist teams fo? (i)economic planning and management, (ii) agriculture and fisheries, and (iii)transport. The work of these teams has been of considerable value to theGovernment. The planning team prepared the country's first Five-Year Develop-ment Plan, 1976-1980. The team continues to play a central role in economicanalysis and management of the country. In addition to introducing an aware-ness of the financial constraints likely to be faced and shaping many of thebudgetary and fiscal procedures being followed by the Government, the team iscurrently preparing the second Five-Year Plan (1981-85). The transport teamhas provided advice to the Ministry of Communications in road transport anddevelopment, and prepared feasibility studies which formed the basis of thefirst highway maintenance project. The agriculture team, after a slow start,assisted the Government in carrying out a program of tubewell drilling andtesting to determine water availability for developing larger farms nearSohar and Saham. With the exception of the economic planning and managementteam which continues its activities, the other two components have beencompleted. At Government request, $75,000 was reallocated under this loanfor the preparation by consultants of a Master Plan for the development ofTelecommunications up to 1990, from which the proposed project is derived.

20. Implementation of the Highways Maintenance and Training project isproceeding satisfactorily, and its institution building impact is well recog-nized by the Government. Under the Power and Water Engineering Studies,consultants have completed their final reports covering electricity and watersupply development needs for the capital area in the near and long term, andthe water supply needs in a number of other towns and villages in northernOman. The consultants have also submitted their report on the organization ofthe electricity and water sectors.

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21. All Bank financed projects have had important technical assistancecomponents and the Government has come to value increasingly the Bank'stechnical advice. The recent increase in the oil prices has considerablyimproved Oman's financial outlook and reduced the need for external financing.The need remains strong, however, for strengthening of economic institutionsand for technical assistance in project implementation as well as in sectoralpolicies. Further assistance is expected to be provided through the secondhighways maintenance and training, and possibly through the proposed watersupply projects currently under preparation. In these projects, importantinstitution building and technical assistance would be involved.

PART III - THE TELECOMMUNICATIONS SECTOR

Background and Organization

22. The Ministry of Posts, Telegraphs and Telephones (PTT), which until1978 was a Department within the former Ministry of Communications, is cur-rently responsible for the regulation of telecommunications services. From1939 until 1975, public telecommunications services in Oman were operated bythe British company, Cable and Wireless Ltd. (C&W), which was granted anexclusive license to provide international telecommunications into and outof Oman. In 1975, the Government of Oman acquired C&W's telecommunicationsassets in the country and set up the Oman Telecommunications Company (OMANTELS.A.O) to operate and maintain all public national and international tele-communications services. C&W has provided limited management assistance toOMANTEL S.A.O. and holds 40 percent of its shares; the Government holds59.9 percent and the Central Bank of Oman 0.1 percent. On June 17, 1979,under an agreement between the Government and C&W, the Government notified C&Wthat it intended to acquire all C&W shares in OMANTEL S.A.O. and fixed July 1,1980 as the termination date for the required twelve months notice. TheGovernment has also decided that on that date a new Government-owned company,OMANTEL Corporation (OMANTEL), will be created to own and operate all tele-communications facilities presently owned by the Government and operated byOMANTEL S.A.O. The management, staff and net assets of OMANTEL S.A.O. will betransferred to the new corporation. A Royal Decree providing for the creationof OMANTEL on the basis of a specific charter has been signed. The charterprovides for a management structure which is substantially the same as that ofOMANTEL S.A.O. The corporation will be managed under the supervision andcontrol of a Board of Directors, chaired by the Minister of Posts and Tele-communications, and composed of representatives of relevant ministries and thePresident of OMANTEL who is its chief operating officer. The corporation isauthorized to borrow locally or abroad. The Government is held liable for thecorporation's net liabilities up to four times its capital.

23. Responsibility for radio broadcasting and television services iswith the Ministry of Information and Culture which leases relay transmissionfacilities from OMANTEL S.A.O. The Civil Aviation Department, the DefenseDepartment, and Petroleum Development Oman Ltd (PDO) maintain and operateprivate telecommunication systems required to meet their specialized needs.

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OMANTEL S.A.O. provides some leased circuits to these three entities and issupposed to meet the telecommunications needs of all other government agencies.Oman has no local telecommunications manufacturing industry and nearly all thematerial requirements for the sector are imported. Most of the installationwork is contracted to foreigners. Operation and maintenance activities, aswell as telephone instrument installations, are covered by the staff of OMANTELS.A.O.

Telecommunications Services-Availability and Demand

24. Because it is only recently that significant levels of telephoneservice were introduced in Oman, access to telephone service is inadequate,particularly in the rural areas. On May 31, 1979, there were about 10,700direct exchange lines (DELs) in Oman of which, 67 percent were in the capitalarea of Muscat, 15 percent were in the southern city of Salalah, and only 18percent in smaller rural settlements. Oman's density of 1.9 telephones per100 population coincides with the average for Middle East countries, and isslightly above that for Africa and Asia, excluding Japan. Due to strongdemand and insufficient investment in the sector, there is a long list ofregistered waiting applicants in the capital area and Salalah. Unsatisfieddemand is higher, however, since the number of potential subscribers remainsunknown in other cities and in rural areas where the network has not yetpenetrated.

25. Of the existing telephones, 55 percent are residential and 45 per-cent business. However, numerous residential telephones are used primarilyfor business, due to past and current difficulties of obtaining connections inthe business districts. There are virtually no public call offices (PCOs) inOman and there is no domestic telegraph service in the country. The telexnetwork is currently manual and has about 350 subscribers. The recorded wait-ing list is 150, but the unsatisfied demand is estimated to be considerablyhigher. An automatic electronic telex exchange is being installed in Muscat.The quality of the existing telecommunications service and the maintenancestandards are generally acceptable. There are, however, shortages of junctioncircuits in parts of the capital area, and of national trunk circuits. Thissituation causes congestion during working hours in local, long distance andinternational calls.

26. The registered demand for telephone service largely exceeds thecurrent supply. Based on the demand study that has been undertaken by theteam of Bank-financed consultants who prepared OMANTEL's Master Develop-ment Plan for 1979-1990 (see paragraphs 28 and 29), overall demand for tele-phones is expected to grow from 1979 to 1990 at an average annual rate ofabout 14 percent. During the same period (1979-1990), the long distancetelephone traffic is estimated to grow at a rate of 35 percent from 1980 to1981 and at 20 percent per year thereafter. The annual telex growth rate isestimated at 25 percent over the next decade, declining to 15 percent peryear, in the late 1980s. Experience in similar countries regarding the growthof demand for telecommunication services, and forecast changes in economicactivity and income level support the demand forecasts for Oman.

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Sector Goals and Constraints, and the Bank's Role

27. Telecommunications sector goals are in harmony with those of

national development plans which, by resolution of the Development Council,are required to give priority to income generating projects in non-oil sectorsto supplement oil receipts, and to effect a wider geographical distribution ofinvestments in order that the benefits may be shared by different regions of

the country. There are two main thrusts in the objectives of the Governmentfor the sector. The first is to provide an effective national telecommunica-tions service as a prerequisite to economic diversification. The second is toestablish OMANTEL as an efficient organization, with effective and competenttechnical and financial management. This includes working towards Omanizationof management and operational staff as quickly as possible, becoming finan-cially self sufficient within the next decade, raising necessary capitalthrough its own borrowings, improving the budgeting and control systems and,training of its technical and middle management staff with the view to improv-ing efficiency and enabling it to carry out installation works. The major

sector constraint in developing telecommunications services has been OMANTELS.A.O. which has had inadequate capacity to formulate technical and financialdevelopment programs. This is mainly due to the short time OMANTEL S.A.O.has been in existence and to its limited responsibilities under its pastCharter. The Bank's role in the sector started by assisting OMANTEL S.A.O.through the preparation of terms of reference for consultants to prepare anational telecommunications plan (see paragraph 29). The proposed project, byhelping the Government to strengthen OMANTEL is primarily focused on institu-

tion building and on providing independent technical and economic advice.With the technical assistance proposed, OMANTEL is expected to have the

capacity to implement the project.

PART IV - THE PROJECT

28. The proposed loan of $22 million would be the Bank's first tele-communications operation in the country. The proposed project was prepared byOMANTEL S.A.O. with the assistance of consultants partly financed by the Bank

under the Technical Assistance Loan No. 985-OM of 1974, as amended in June1978. The project was appraised in June 1979. Negotiations were held inWashington in March 1980. The Omani delegation was headed by Mr. NoorMohammed, President, OMANTEL S.A.O. The main features of the project aredescribed in the Loan and Project Summary and in Annex III of this report.The staff Appraisal Report entitled "Oman-First Telecommunications Project"dated April 8, 1980 is being distributed separately to the Executive Directors.

Project Objectives

29. The proposed project is part of the 1980-85 phase of OMANTEL'stwelve-year (1979-1990) Master Development Plan, which was accepted by theDevelopment Council and the Finance Ministry in Oman and which was prepared tosupport economic development. The proposed project would help to: (i) improvethe quality of service to existing subscribers and provide access to new

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subscribers; (ii) extend telecommunications services to other small urbancenters and rural areas through establishment of Public Call Offices (PCOs)which are virtually non-existent in Oman; (iii) improve OMANTEL's trainingcapabilities by providing training equipment and annually reviewing itstraining program; and (iv) strengthen OMANTEL's financial, engineering andmanagement capability through provision of technical assistance.

Project Description

30. The proposed project provides for:

(a) 15,700 new lines of subscribers' local telephone switchingequipment and the replacement of 3,900 lines of obsolescentequipment;

(b) ducts and main subscribers' cables to provide for about16,000 new DELs and provide capacity for future growth;

(c) telephone terminal equipment for about 14,000 new sub-scriber services and about 5,500 new PABX extensions;

(d) about 350 public call offices (PCOs) to be located inboth urban and rural areas;

(e) about 6,000 lines of switching capacity in new privatebranch exchanges (PBXs);

(f) international and national trunk switching and trans-mission systems to carry the projected traffic loadswith acceptable congestion standards;

(g) switching and miscellaneous equipment to assist inincreasing the automatic telex network to about 1,800subscribers, in starting the public telegraph service in1981-1982, and in catering for any data transmissionrequirements;

(h) construction of buildings, provision of motor vehicles,training and test equipment, and furniture and fittings;and

(i) consultants' services and technical assistance in areasincluding finance, management,training and engineering.

31. Up to the limit of the loan amount, the proposed Bank financingwould cover the foreign exchange cost of items (a) through (d) above, thetransmission systems included in item (g), the training and test equipment,and the consultants' services and technical assistance. These componentsconstitute the critical items in the early stages of OMANTEL's developmentplan.

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Project Cost and Financing

32. Total project cost is estimated at about $97 million equivalent.The foreign exchange cost is estimated at about $61 million equivalent andthe local cost at about $36 million. A detailed cost table appears in theLoan and Project Summary. An allowance of 4 percent has been added to thebase cost estimates for physical contingencies to cover possible increases inplant requirements, which might be found necessary on completion of detaileddesigns. Annual price contingencies have been used on differing escalationrates for local (10 percent per year) and foreign costs (7.5 percent peryear). Physical and price contingencies represent about 25 percent of theestimated total project cost. Consultants' fees are estimated on the basis ofabout 60 man-months, at an average man/month cost of $8,500, including inter-national travel and subsistence.

33. The proposed Bank loan of $22 million would be made to OMANTEL withthe guarantee of the Government, and would finance about 36 percent of theforeign exchange cost of the project. The balance of $39.2 million foreignexchange would be financed by OMANTEL's internal resources ($31.2 million),and by the Government from its budget ($8.0 million). The local cost of $36million would be financed by OMANTEL's own resources. OMANTEL's net internalcash generation is expected to contribute about 74 percent of total financingrequirements during the period 1980-1985. During negotiations assurances wereobtained that the Government would fund from its own resources, on terms inaccordance with Government policy and satisfactory to the Bank, any requiredforeign or local expenditure necessary to complete the project (GuaranteeAgreement, Section 2.02).

Procurement and Disbursements

34. All material or equipment items to be financed from the Bank's loanwould be procured through international competitive bidding in accordance withthe Bank's guidelines. This form of procurement would apply to all equipmentand materials used for the proposed project except for equipment to increasethe capacity of the national trunk switching center and that for the growth ofthe telex system. These exceptions are justified on standardization groundsand it is not proposed that these items be financed by the Bank. Up to thelimit of the loan amount disbursements would be made against the foreignexchange cost of the items listed in paragraph 30. The estimated schedule ofdisbursements is given in the Loan and Project Summary. The closing date forthe loan would be December 31, 1985.

Project Implementation

35. OMANTEL will be responsible for the execution of the proposedproject. The management, training and engineering capabilities in the presentorganization need strengthening. OMANTEL S.A.0. and the Finance Ministryrecognize the managerial shortcomings within OMANTEL S.A.O., and have proposedthat they be defined in more detail, and that remedial actions be specifiedand implemented by experts retained by OMANTEL. Job descriptions for twointernationally recruited experts, one with technical and the other with

- 12 -

financial background, were discussed, and agreed upon, during negotiations.These experts are expected to assist OMANTEL's management to design andintroduce effective management, training and technical planning systems over aperiod of about two and one half years. During negotiations assurances wereobtained from OMANTEL that these experts, or consultants who shall includesuch experts, would be appointed, in consultation with the Bank, not laterthan September 30, 1980 (Loan Agreement, Section 3.02).

36. In December 1978, OMANTEL S.A.O.'s staff of 952 represented a ratioof about 45 per 1,000 telephones, or 85 per 1,000 DELs. Both ratios, whichare high, result from two factors: first, the network is very small atpresent and diseconomies of scale are incurred, and second, there is over-staffing because of the need to employ untrained and partly trained people.In the course of project execution, improvement in operating efficiency can beexpected, due to a growth of operations and to staff training; during negotia-tions, an understanding was reached on the performance indicators to be usedto measure improved efficiency. A staff training plan has been developed byOMANTEL S.A.O. for implementation under the project, through the constructionof a new training centre and the acquisition of appropriate training equipment.

37. The accounting system in OMANTEL S.A.O. is on a cash basis andits finances are part of the Government budget. OMANTEL S.A.O. has begunpreparatory work to convert from present cash accounts to accrual accounts.The financial expert, proposed to be retained by OMANTEL (see paragraph 35)would assist in the implementation of the commercial accounting system. Theexpert is also expected to set up appropriate budgeting and management informa-tion systems, and will be responsible for the development of a trainingprogram for the accounting and finance staff. OMANTEL S.A.O.'s accounts areaudited internally by its internal auditor's office, and externally by a localaccounting firm. In order to improve the efficiency of the internal auditing,it is proposed that the financial expert review the internal audit and controlprocedures. During negotiations, assurances were obtained that OMANTEL wouldengage an independent external auditor, acceptable to the Bank (Loan Agreement,Section 5.02(ii)). Assurances were also obtained that, for FY80 through FY82,OMANTEL would submit its unaudited financial statements to the Bank within sixmonths of the close of each fiscal year, and its audited financial statementswith auditor's report within eight months of the same fiscal year, and thatfrom FY83 and onward, OMANTEL would submit its unaudited and audited financialstatements with auditor's report within four and six months of the fiscalyear, respectively (Loan Agreement, Section 5.02(iii)).

Economic and Financial Justification

38. One of the major thrusts of the second Five-Year Economic Develop-ment Plan (1981-85) is expected to be the establishment of a broader base forthe national economy than at present. It is the Government's objective todistribute the benefits resulting from the country's oil reserves over a widegeographical area, so as to narrow the gap in the standard of living betweendifferent regions, and between different groups of population. The MasterPlan for the development of telecommunications in Oman has been prepared

- 13 -

against this background, and its implementation program provides for a signif-icant expansion of telecommunications services in all its forms and throughoutthe country as a whole. Without improved and extended telecommunicationsservices, improvements in other sectors of the national plan would be diffi-cult and more costly. The telephone network design has been based on standardengineering and economic techniques for minimizing capital and recurring costsand represents the least cost solution.

39. The internal financial rate of return on the investment for the* 1980-85 program is 18 percent. This rate has been calculated as the discount

rate, which equalizes the present value (in 1979 prices) of the stream ofrevenue based on existing tariffs with the stream of capital and operating

* costs attributable to the program over the life of the installed equipment.Sensitivity analysis shows that, on the most unfavorable combination of theiain parameters considered, the rate of return would be not less than 12:krcent. The use of conversion factors is not required in deriving an esti-mate of the economic rate of return from the internal financial rate ofreturn. This is because, in Oman (i) the Omani currency is freely convertible;(ii) import tariffs are negligible or nil for most goods; (iii) trade restric-tions do not exist; (iv) there is no major distortion in terms of pricingstructure; and (v) there is no restriction on labor mobility, and wagesreflect international market prices. The internal rate of return of 18percent, however, understates the real efficiency and social equity benefitsto be derived from the proposed project, partly because this rate is based onthe existing tariff for services. Hence, it does not reflect part of theconsumer surplus which new subscribers, and other customers receive, nor doesit reflect a portion of the indirect benefits received by the total communitythrough better, faster and more far-reaching communication.

40. With the expansion of its services, OMANTEL S.A.O's operatingresults have been improving steadily; preliminary figures for 1978 show a cashsurplus of about $5.2 million. The Government objective for tariff policyis that OMANTEL should become financially self-sufficient. Telecommunicationstariffs have increased twice since 1976, and financial projections indicatethat the Government's objective can be achieved during the next decade. Con-sequently, no tariff increase is required during the project period. OMANTEL'sfinancial situation over the project period is satisfactory; the operatingratio would be about 70 percent, the current ratio above 2.0 and the debtcoverage ratio will be above 6.0. Current forecasts show that a 10 percentrate of return on revalued assets would be adequate to meet OMANTEL's futurefinancial requirements. During negotiations, assurances were obtained thatOMANTEL would take all necessary action to provide revenues sufficient tomaintain such an annual rate of return (Loan Agreement, Section 5.04(a)).This was guaranteed by the Government (Guarantee Agreement, Section 2.01).For the purpose of calculating the rate of return, OMANTEL agreed duringnegotiations that it would review and determine the value of its fixed assetsannually, starting as from FY81 and, if necessary, revalue its fixed assets inaccordance with methods acceptable to the Bank; the latter would be notifiedof the results not later than June 30 of each fiscal year (Loan Agreement,Section 5.04(b)(iii)).

- 14 -

41. OMANTEL S.A.O is curren-ly evaluating its fixed assets and storesassociated with its telecommunications operations. The final result will beused to determine the amount of the Government's equity in OMANTEL. Anymodification in OMANTEL's future capital structure would be made in consul-tation with the Bank (Guarantee Agreement, Section 3.04). In addition anunderstanding was reached during negotiations that due allowance would be madefor OMANTEL's requirements for debt service, contributions to investmentprograms, working capital and any statutory requirements before transferringnet profits to the Government.

42. In 1979, the overdue portion of OMANTEL S.A.O.'s subscribers'accounts receivable was estimated at about three months of the year's revenues.This situation would be eased by the introduction of the expected computerizedmonthly billing process. Regarding the overdue accounts by government sub-scribers, the Government has requested OMANTEL S.A.0 to identify the accountsthat should be paid, and has made the necessary budgetary provision. Duringnegotiations, assurances were obtained that the Government would cause allpublic agencies to settle their future accounts within two months of thebilling dates (Guarantee Agreement, Section 3.03), and that OMANTEL wouldmaintain the overall level of its accounts receivable at about three months'billings from FY81 through FY83, and at about two months' billings from FY84and thereafter (Loan Agreement, Section 4.01(b)).

Benefits and Risks

43. Benefits resulting from the proposed investment program are expectedto be felt, directly or indirectly, by all segments of Omani society. Theupgrading of health services, and greater efficiency in business, transporta-tion and in the building industry, are some of the benefits which would flowfrom improved communications. The proposed investment would also increase theefficiency of government administration and public sector corporations. Inaddition, it would make a significant impact on the access to telecommunica-tions service in currently unserved provincial areas and rural communities.The establishment, for the first time in Oman, of about 350 PCOs in both urbanand rural areas, will extend public access to telephone facilities to a broadspectrum of the population, both in geographic and economic terms. In Omanthe rural settlements are tightly clustered units of population and onetelephone in the center provides immediate access to all inhabitants. Thesites for PCOs will be selected taking into account population size, geo-graphical distribution and maintenance requirements. Furthermore, the expan-sion of the long distance network will provide television relay to severalrural areas, and the establishment and upgrading of microwave radio longdistance links will provide the skeleton structure, from which small capacitysingle channel radio links may be subsequently extended to many more isolatedvillages and settlements.

44. There are no major risks associated with the project. The riskinvolved is inherent in any project of this type, where the implementing orga-nization needs strengthening, where virtually all materials and most of thelabor have to be imported, and where there is little past growth and develop-ment to provide data for economic and demand projections. The development

- 15 -

program and the project have been designed in a manner which allows periodicchecks on assumptions and forecasts against actual events. The experience ofOMANTEL S.A.0. in its operations to date indicates that, with the technicalassistance proposed, OMANTEL will be able to implement the project.

PART V - LEGAL INSTRUMENTS AND AUTHORITY

45. The draft Loan Agreement between the Oman Telecommunication Cor-poration (OMANTEL) and the Bank, the draft Guarantee Agreement between theSultanate of Oman and the Bank, and the Report of the Committee provided forin Article 3, Section 4(iii) of the Articles of Agreement are being distri-buted to the Executive Directors separately. Special features of the Loan andGuarantee Agreements are referred to in the text and listed in Section III ofAnnex III.

46. I am satisfied that the proposed loan would comply with the Articlesof Agreement of the Bank.

PART VI - RECOMMENDATION

47. 1 recommend that the Executive Directors approve the proposed loan.

Robert S. McNamaraPresident

AttachmentsJune 4, 1980Washington, D.C.

OMAN - 16 - ANNEX IPage 1 of 6

TABLE 3AOMAN - SOC50 INDICATORS DATA SHEET

LAND AEA (THOUSAND SQ.M. OKM REFERENCE GROUPS (ADUStED A RACESLAND AREA tTHoU5AND SO. R4X.) S - Y05~~~MOT RLECENS 51AETOT 300.07 SAM SAME NEXT HIGHERAGRICULSUIAL 10.4 45ST RECENT COCWHIC INCOMZ INCOME

1960 /b 19T0 /b ESTIMATE lb REGION /c GROUP /d GROUP /,

GNP PER CAPITA (USS) 300.0 1260.0 2570.0 1532.5 3075.3 6987.1

ENERGY CONSU9PTION PER CAPITA(KILOGS Jr COAL EqUIVALEST) .. 200.0 696.0 838.1 2518.6 4668.8

POPULATION AND VITAL STATISTICSPOPULATION ID-AR (MILLION5) 0.50 0.65 0.81/fURAN POPULATION (PERCENT OF TOTAL) .. .. .. 49.0 72.1 75.1

POPULATION PROJECTIONSPOPULATION LN YEA 2000 (MILLIONS) ..STATIONARY POPULATION (MILLIONS)TEAR STATIONARY POPULATION IS REACED ..

POPULATION DNSITYPER SQ. RM. 2.0 3.0 4.0 19.9 33.5 141.6PER SQ. KM. ArRICULTURAL LAND 48.0 67.0 77.0 99.0 91.3 251.4

POPULATION AGE STRUCTURE (PtECENT)0-14 YES. 44.5 45.0 43.0 45.6 33.3 23.3

15-64 YRS. 52.9 52.4 53.0 51.4 57.5 64.265 YES. AND ABOVE 2.6 2.6 4.0 2.8 5.7 11.3

POPULATION CgROVT RATE (PrCNT)TOTAL 2.0 2.6 3.1 3.0 2.1 0.5URBAN .. .. .. 5.2 .. 1.3

CRUDE BIRTH RATE (PER THOUSAND) 51.0 50.0 48.0 43.7 31.4 13.8CRUDE DEATH RATE (PER THOUSAND) 25.5 22.0 19.0 13.5 8.2 10.4GROSS REPRODUCTION RATE .. 3.5 3.5 3.2 1.9 0.9FAMILY PLANNING

ACCEPTORS, ANNUAL (THOUSANDS) .. .. ..USES (PERCErNT OF MAMRIED WOHRN) .. .. ..

FOOD AND NUTRITIONINDEX Of FOOD PRODUCTION

PER CAPITA (1969-71-100) .. 100.0 95.0 90.8 98.7 104.0

PER CAPITA SUPPLY OFCALIORIES (PERCENT OP

REQUIRLE5NTS) .. .. .. 9.0 112.7 128.7PROTEINS (GRAMS PER DAT) .. .. .. 63.6 70.3 92.0

OF WHICH ANIMAL AND PULSE .. .. .. 16.0 .. 60.1

CHILD (ACES 1-4) NORTALITY RATE 48.0 37.0 29.0 15.9 2.5 0.9

HEALTHLIFE EXPECTANCY AT BIRTH (YEARS) 40.0 44.0 48.0 53.8 68.7 72.8INFANT MORTALITY RATE. (PER THOUSAND) .. .. .. .. 20.8 12.6

ACCESS TO SAFE WATER (PERCENT OFPOPULATION)

TOTAL .. .. 32.0 56.4 73.9UREAN .. .. 100.0 83.4 94.6RURAL .. .. 28.0 34.3 64.6

ACCESS TO EXCRETA DISPOSAL (PERCENTOF POPULATION)

TOTAL .. .. 12.0 59.1URJAN .. 100.0 100.0 78.2RURAL .. .. 5.0 26.4

POPULATION PER PHTYSCIAN .. 8690.0 4938.0 3677.0 981.8 652.4POPULATION PER NURSING PRSON .. 5150.0 1850.0L 1730.6 397.8 243.8POPULATION PER H0SPITAL MD

TOTAL .. .. 640.0 577.0 240.6 95.2UR3AN .. .. ..RURAL .. .. ..

ADMISSIONS PER HOSPITAL BED .. .. 52.0 21.8 19.2 14.1

HOUS INCAVERAGE SIZE OF HOUSEHOLD

TOTAL .. .. .. 5.8 3 3.0URBAN .. .. .. 5.5RURAL .. .. .. 6.0

AVERAGE NUMBER OF PERSONS PER ROOMTOTAL .. .. ..UR3AN .. .. ..RURAL .. .. ..

ACCESS TO ELECTRICITY (PERCENTOF DVELLINGS)

TOTAL .. .. .. 45.1URBAN .. .. .. 67.9RURAL .. .. ..

OMAN - 17 - ANNEX I

Page 2 of 6TABLE 3A

OMAN - SOCIAL INDICATORS DATA SHEET

OMAN REFERENCE GROUPS (ADJ'STED AERAGES- MOST RECENT 'SS7"ATE) -

SAME SAME NEXT HICHERMOST RECENT GEOGRAPHIC INCOME INCOME

1960 /b 1970 lb ESTIMATE lb RECION /c GROUP Id GROUP Ic

EDUCATIONAD3USTED ENROLLMENIT RATIOS

PRIMARY: TOTAL .. .. 44.0 85.0 107.6 101.4MALE .. .. 103.7 .. 103.4FEMALE .. .. .. 66.0 .. 103.5

SECONDARY: TOTAL .. .. 2.0. 27.6 39.7 83.9MALE .. .. .. 39.2 .. 84.0FEMALE .. .. .. 20.8 .. 83.8

VOCATlONAL ENROL. (: o0 SECONDARY) .. .. 10.0 4.3 .. 20.3

PUPIL-TEACSER RATIOPRIKARY .. 35.0 24.0 32.6 .. 21.8SECONDARY .. .. 5.0 23.4 .. 15.1

ADCLT LITERACY RATE (PERCENT) .. 20.0 20.0/h 41.4 .. 98.8

CONSUMPTIONPASSENGER CARS PER THOUSAND

POPULATION .. 4.0 18.5 16.7 68.1 292.5RADIO RECEIVERS PER THOUSAND

POPULATION .. .. .. 147.9 210.3 465.4TV RECEIVERS PER THOUSAND

POPULATION .. .. .. 36.0 117.7 274.7NEWSPAPER ("DAILY GENERALItTEREST") CIRCULATION PERTHOUSAND POPULATION .. .. .. 17.9 .. 363.0CINEMA ANNUAL ATTENDANCE PER CAPITA .. .. 1.0 2.9 .. 3.3

LABOR FORCETOTAL LABOR FORCE (THOUSANDS) .. 178.0 240.0/i

FEMALE (PERCENT) .. .. .. 8.6 27.2 35.3AGRICULTURE (PERCENT) .. 67.3 63.4 43.0 23.8 9.2INDUSTRY (PERCENT) .. .. .. 23.7 .. 40.6

PARTICIPATION RATE (PERCENT)TOTAL .. .. .. 26.7 40.1 43.5MALE .. .. .. 46.4 55.7 58.9FEMALE .. .. .. 5.1 24.7 28.1

ECONOMIC DEPENDENCY RATIO .. 1.9 1.6 1.8 1.0 0.8

INCOME DISTRIBUTIONPERCENT OF PRIVATE INCOMERECEIVED BY

HIGHEST 5 PERCENT OP HOUSEHOLDS .. .. .. 21.4HIGHEST 20 PERCENT OF IOUSEHOLDS .. .. .. 48.6 .. 42.6LOWEST 20 PERCENT OF HOUSEHOLDS .. .. .. 5.3 .. 5.1LOWEST 40 PERCENT OF HOUSEHOLDS .. .. .. 15.0 .. 16.1

POVERTY TARGET GROUPSESTLMATED ABSOLUTE POV'ERTY INCOMELEVEL (USS PER CAPITA)URBAN .. .. .. 201.3RURAL .. .. .. 134.2

ESTIMATED RELATIVE POVERTY INCOMELEVEL (USS PER CAPITA)

URBAN .. .. .. 288.6RURAL .. .. .. 170.0

ESTIMATED POPULATION BELOW ABSOLEPOVERTY INCOME LEVEL (PERCLEIS)URBAN .. .. .. 22.9RURAL .. .. .. 31.2

Not availableNot applicable.

NOTES

/a The adjusted group averages for each indicator are populatien-reighted geomctric means, excluding the extrnsevalues of the indicator and the most populated country in each group. Coverage of countries among the

indicators depends on availability of data and is not uniform.

/b Unless otherwise noted, data for 1960 refer to any year belvwen 1959 and 1961; for 1970, between 1969and 1971; and for Most Recent Estimate, between 1974 and 1977.

/c North Africa & Middle East; Id High Income (over S2500 per capita, 1978); /e Industrialized C@uauttfCsIf In the absence of population census, population estimates for 1975 ranged from 0.77 (based on UNestimate) to 1.5 million (government estimate for planning purposes); Ig Including midwives; /h 1972;

L1 Including police and military personnel; /I Official figure, UN estimate 212.5 sq. km.

Most Recent Eatimate of GN? per capita is for 1978.

August, 1979

OMAN - 18 - ANNEX I

ounINITI Or soTAL. neICATORn Page 3 of 6Nots, ltoug th dta rmdrems fea no ges generally ju,dged the most outhoritatre and rela.ble, it Shoul also be noted that theyw W totha iterust-

fl~.iyc~aah.e eeamof he acka!stadarIsd dfiaitioms sad _oncpts aNed by diffrent co-trtea io colet"ing the aa h aa r oebla

saito describe order. of "aiue,idcte trde, so ehaNra`terine certain majsi difference betwee onantriwa.. doT.at r,nehlss

The ~a ~ p aver fe tar ac indicator are popnlatins-eei9bted geWtasti, means, emoluding the e-trese values of the ind toatc and the Ncot populatedc-Oanrjin ac grSsog . heONDD to lack of date, grnp aeae of aid indicators for Capital turpio Oil inPorter sad of indicato.rs of Mot..s c Water sad sortta

Disosa, Hnin, icom Ditribution and Poverty for othsr coutr7 grctnPa ar poPulatios-"ighted geahstrit -mes without ecxliuse of the e-treme values andthe scat porilated enuntry. Since. the ca0as Of OnUntriea wagla the indicatara d.eneds aavlaityodtandsntuifr, cation =mut be enercised

indlentcr at a tine among the country and reference asringtuhte,.ln.

LAMD AREA (th-snad aq.Am..)Acn ofoealnon ecn iyplto(-ttl ra n utTal- Ttal nufte no -ae ocwpiainc landearea and O-a-d -tetr.. leNierof people (ttl rw,sd ua)sro y vrt ita.ltctotuw.-VTOt eowot estimate of aicriolturl are -wed tepv ' Pece.ageIo their re-peoti-e popol.ti.i- --crta ilopoc-1 nay -Itol

orprmnet for crops, pastures, -krt sad kitcher gardeta or to tie -o11-tiot sad dispoas. oith r ittIout tvstne.tt ofl oua oo-tlie teflon, an~~~~~~~~~~d snets-at-f y otter-b-te nytteno or tie ocr If Iot -ri-'e o tl,

bne talltttostsPO :~APItTA tS)) - PN Per capita satiahtes at curret avErt prices, %Z J.. per PtJaid4a - Pe,lati-o d-ivided vy ouner of pr-otiolog o,wcoiea-

cacltdby cm* co-vrio- aethod as World tak Atlas iI-77 basis); uaified from. a dical cohcti at univerity Le-el i960, 19070,-ad 1.977 data, Psasslatios er (Sursit Peso- -Ppu.to divided iy oaeer of pra-tiobig sole

cetYAiiJGfO 4l-- naa oaatono aril ~ ad female, graduate -uw, pratical cuae,ed -aiotant une'l '. gite, petroleu, natura gas and bydra-, osclwar and ge-Pnatopr totita ed - toltal. uran. an rurl - Populattot totl uban

th.esulslettricity) in kilogram of coa equdLeat per o.pit.; 1960, and 1renal dvie hrterrscoi uo fbeil bwde viabeii970, and i976 dat. pblio and private general and apeialited boatpital ao rehbiiiitstbooeatrs

Hospitals are -atablIshests peranetly staffed by at least co pysicianPOPULATION AND VITAL STATISTICS Etablishmecta providing priseipaLly ouctodia1 cae artttoided ur-1.

Total Ppo950io Odd-ter igillcos) -AN of JoclY i; i960, 1970, and hospitals ioesvr, ianude bealti and medical ... t-r Ic per-nalp -tfted1977 data, ~~~~~~~~~~~~~by a pbysician hut by a medical assistanot, tura, m1dsift, etc abioh off-r

urban P'cpsatloa (P.-eet of totalW Ratio of urban to total population; in-patient sceid.tiot and proide a Inited range of medl.oa faciiitit..d.ifferent defioitioce of rban arena Np offe-t -apnraility of data OdmNdWis net H ioao.tai d - Total tunher of adianioi.. to or dicchances fromsonog -trots; 1960, 1970, and 1975 data. hospitalo divlIde by th ,tnkber of bes*.

Pessaltido ProsotltamP - urvewo popultion projecti-s are based on ous nTG

flVVbbIi"ioiuAtu by1 ag n saad their mortality sad fertility Avrgeht af onue-ld (cera... cerhouehold) - ttal,. urban an coa -rae.roeto paateefor onrceity rates compise of three Aieuheold cossso ru f idividul wh 1sar 1ioig quarer ndIt.velsmaauing iife eapeotany at birth issreasig with ooustry'c their sm. meals.. A boarder or lodger y or may tot he inloded Ic tieper caPita iccon 1e-s, and fesslo life eopootany tobilteing at houseold for otatisti-l P-Pr-e..77.5 years iTh parameter for fertillty rats ala here three lees vrgeo-bro pron e room - total; ran n ttl- orgscmea-tirqt de-lit it fertility accoding to i.eas level and past of erson pe roa in .11 urban, andrua ooied o.v.ntiti - wiinsfamily el anig performance. Each .- utry ie then assigned on of the.e Iepttvly, D.elliags e-clds ta-permnent ttrut-e and scaoopied parts.site. -omimtions of mortality and fertility arenas for proJectionhoas A ptoi-etict 'roto of leelns oa,ura.adcrl-ltPpus-oss. ventiasl dwsllingo iteetroty in living ioater as pe-stage of

itatiean-porolatie - t a tati-say poplatics there is 00 growth totl, urbn, and rura deLlingtv...pwctivsiy.cita h it rateb equi t the death -tat, ond clot the age

otrotut nats ontant. Tbit c acievd oci after ferility rmien EDL5ZATIONdelts to the repleacemet I-ce of uit cet rpdoiort,h.. ilsedd lmetRto

-hi eeatoIof nom.o replnoes Itself -atIy. The s.taioary popa- Piaytco- toa, alanfele - r... total, tale too Ieale e-o1-.intiot cioew a e.tmtlatd cc the tsoio of tie projected oharntero.ttb- watc --ee6t i roer.ce ovrotae ;t' respective r-Oryof th pcpcuati-t it the year 20000, ed the rate of deolior of fertility achool-age populatiots; tormally i-clode ohilret gegr c-il year ctt

rte-orpiteoenea leve. adutdfor differen le-gth of prilwfly edostiot; fo ovotessoYetrctttconr poaccctiot s .e. bed -ahiy0 haaatoaypounto nvra oducatis- -ai.l-e 'ta s-ced :10 per-to cioce soe oilt

cioz e I er renbto ae celo ,r...o.. tie ff4IcIanbc age.'to -atonltcii.. Secndryochil - -totl, male and female - bnputedaoavceue-t-ry

ccr to . - MAOy-fa topoostico Per tqc- kbioeter (100 hetares) of odccatio require ot itat fot -er ofapProved ernary- -tcorsti-ctotal errs ~~~~~~~~~~~~~~~~~~~~~~~~~protidwe -e.erI -ootio-a, or -cnohr trainig iv--rcto- for p.p;

1u

Per eu. n.agriculturl bad - Computed as abve for agiutrlbnd 'sull f 12 to 17 Ytao. of age; ... rr.spndsa- -t-r are g-rarlLy

Ptssatco Se tr-oar 'orre-t) - Childret I-lu4 peaceI), workig-age Voostoco arlat or-,o of -rcodary) - ic-otioa .. t. tiacroIcP-oc Year), end retired A)Ye- sd ove) a- p-rotagts of aier ttohncil,"indutrial, orote program o-h operate cdepeadeotlport

pojp.laioc; 1960, 1970, and 1977 dt.depytmeto of eIconday icotitutot.sFoculatina lr-th date pr-Wat)- total1 Annua growth ratos of total aid- 11Putileaner ratio -trIriMr rod et.ocdoy - Total ocetcarlied.t

pecpopol-i... for i195-ol, 1lc-TO, an 1970-77. prmcLn eodr ceshOe fcobrsof t-th ere trecrePoclittiot.~hRtteprcot un A nco. growth rates of urban-oda eea

popoitis fo 950-0 E'- t-70, an 970-75. Ad.l Ieaytt ee)-'trt diosi cea n ro)aMrod Oirth hate pee th-cond) - Maccal Ive cirtos per thoosad If id- peretage of total adult pocilati- aged 15 yea o n core

yerpoPulatiot; 150, 1970, end 1977 data.-rde Death Sate perthboacnd) - Annul ectic per thcosnd of nb-yea ZOlElOtoic5t

oopulaoloz; 1500 190, sod i977 data. Pas-ffc, -ac -er thoucand ooo.btio)- Psegrcn oposmtrortrc epocotc ar-croracveo .ontvasanolIba caig eetanoot eso; oldw 'en.rrsesleoitr

-teurmirp-odco- perood If she oeite rsetoe tdlooc"iofoc 'e-tolityr-t.e; -acfly fiv-pent avrae eadi ic l6o, Radio Osceter per cic-asa population - All types of er--er for radIo1970 and 1975. hrosdonuta ccgnrloit e Ihutd of popu.latIo; co-1udea cloeno-

F'L~ly PIianoig - AccePtors. An-nual thousanos - dAccocl o..ie o. f recivr soocatrieepb an yc far shI regoctrati. on c rdi cr0 t h iaoceptors of hirti.-ooti Seneca ocdev -copoce cf .titool femlly offect data for recentjec ass tot be -cowyrahie cioce eve -otrteplcacs.o 0r-u-n ahoiltedtice-oo.

family PI nbog- ieopreto tried.c; o-Sretaeo:ere VTueer e th-usnd pooultdoa) ,-.TV rwsvwnfr Orsctetge-aow foldhaIfgae 5-oyar)oh s cith-cctroi dedcn-uio thusn.ppcltlc,s; etlde unlicesdifrciesi cnrs

to a11 -atd oso c am age -oP. and in year -nn vgiot-atton of I7 sets mn1effect.

000 ARE NUTNITIfE Nrsamrlroltc tsr obuadc?snio)-it h nrgMicltcindex of 969-71-130) ~ ~ ~ ~ ~ ~ fdols enrl ntrstcesapr efsd a eodi-onl b -uiotlos

''!lRErrsocfiodiotic ore CPita 199i liO - Indet of per capita leented orimaily to recording general ores. It is osidered tc de dlys'anaca prdution o1f ti d ooiditi-s Produti-a eolcdee seed end if It appears it iast fou tins a area.feed and tocclendar year basis. Comditiws con prisary goods isoIs tedaoprCct e er-Sedo ths noaho of cadete~.g. cugarcshe ist-ad of on9a) ohich ar eoe Idib d onti ctiet0acd lrn tIle year,ia-lcdi e Minlcs to von-ca cieasad -oilee~.g. ccffee and tea ar saclded). Aggregate prod-atiot of eanh cotnstpyrsta.

Is based ut maticaclIaverge drtdoerpiewihsPer capita -aa11f aoia sos f aP olrnstn) - fopsted from LAtoR fOft

energy oqhvalent of et food e pplds aailbl .in coutry per caia Ttldhrfretoons onmclyatv eos,ooidngareprday. uAs.1.lal Iuppli-o ocmprtse domestIc produtia, imports les ocead'uemlyed but .o.lodlag hoar-ve, dstudeta eto- Dfi.itloas

o.nprta, sad changes in otck. Net appilie cciude -nIma feod, aeedm, in varIou coantries ar cot o-mp-bie.q_netitiso used in toad prv-oing, and lose in. L d-trlhbti-a sqalre- -saspretr - Female labor f-ro as p-eeetegs of total labor torte.nest a'er etlmated by TAO based on ptsysiclogi-c .. osds for ormab Siuti -erost -Labor force is famig forestry, Ountog andactiviJty sad health -onid-roc cvi-oet.mtal temperature, hody weights, Tihn speentage of total labor force.age sad -e dbotribotoc- of ppstc,ad a11lloeg 10 peersat for - indutytrwt at e otinoing,catrtt, maoaeutgad

tasteat boosebcld leve. elc ct,ctr sald gas.n' p-rentoge cf total icier furo..Per caoics ouppi of orotsa ~gram 0er day) - protein cotent of per yatconisRte 'peret.)-&total sae,ad femle - Partioipatio or

capita e uppo odpr day. Net ouppiy cf food to definsd as anivt rte.sare optda total,al, sad femaeL. c ro as owe-anov. tequirasets tar all comtrir eatabliotd by USDAn provde tor a -wtages of total, saLe and femaed pop.lation of all ages -epetirey;ii-ona allownce of do game of total protein per day and 20 gram of 1960, 1970, sad 1975 data. These er lid s partocopatio rates reflecting

an.mI and pulse protein, of ehch L0 gras should is sninl protein. ag-eItotr f the pouaio,sd long tIne tread. A few estimatesThree standardsare bower than those of 75 gram cf teta1 Protein and ar fetmtinnl eao23 grams, of snima protein aN an avrage far the -Ird, prapuaed by fAC RensDsdna ai atio of popsltin under IS sad 5 and Over toon the Third World Food Surry. telbrfteiage group of !5-64 years.

Per canota orotein opply fro soima and pulse - protein supply of foodlerived fro cml and1 pulse it gram Per dgy. DISTRlflON

ChIld ae I-s ortlity Oats $oe thoonsd) - dA-as deaths per thcusnd Pero- aeo Piaehca obi cs a Ind eevdb ihs,a ae. gtP 1-u y-ar, t0 ahlldrt in this age grop; For most devel- 9 rcet PAprost, pooes St2 Pernnt, and p-ooret oO portent

oplo cotries data denied from life takes.. af hasseholds.

nLITE OAtnT! 71117 EI P~ife Eeteny atRith .-rars - Averag enuber If year of life Estimated Abe-lute Poverty 'ao lve '10$ Pir capita - uban and rorl-reneini.g at birth; 10 1971~, and 197.dta. Absolute poverty inom leosI is bat Ina evlDle hs mnm

afant Mortality hate pertouad - sua .eths of infants under onotrit-oanaly deqoate diet plu ess.. zenil -o-earquIrmets tyear at age per th-ouadlv I-ten. affcrdQls

Access to Oafs Hatr 'percent of ounuatica) - tstai, uban sad rurl - Eti-ted R.eltIve Poverty Incas trowi (Tins tsLr osta), - urb endrua-

eafe eater supply :isolude treaed surface oateor. untreated but pesnl .tmes of the coutry. Urban isvei is derive from the rurl leveuncotaminted 'ater such as that from protected hrolec, spins,wth ed,Astment far tigher cost of living oiuhn area s .-and saitary nle) as psenettges of their v-petiv- poPuLatlcao in Ztl-tad plotulatr eo bouePvryIcm level perTent -rbNo andan ursa are a ssbli founas.n or s-tsdea Insate. ant morn than donrL - Pret of pulton caranandrua-l7,roMarZ'ssite poo-tmr from a house may be asasidere as being within reasenak aces

of that Aosms. in rurl arsam rmsomhbla metas unaIld ihapy thmt tbsh..-eif. or escer cf the h-esholdd he am ban to spod * dlp-orspr Bectsd and dacial Data Divisiontiotat pare of the day In fetabig the SlBy's eaje eject. ' Neasu Aalsi sad Prtjaettaw. Deparat

-19-

OMAN ANNEX IECONOMIC DEVEL0P51NT DATA SHEET Poge A of 6

Annual Average Growth Rate 1979Eatomatad Projected 1974 1976 1985 Snore of GOP

1973 1975 1l978 19 1980 1979 1980 19A1 (e)

A. NATIONAL ACCOINTS(USS millions 1976 prices)

Irons domestic prodoct 1531.6 2205.8 2383.3 2317.5 2329.Z 2454.0 2503.B 2692.5 3019.7 7.3 2.2 4.2 100.2leon from terce of trad -810.4 -33.9 6.0 -124.8 Z16 A843.9 918.3 1002.0 1123.0 . . . 9.4CronS d-estic incme. 713.2 2171.9 2389.A 2138.7 2546.0 3297.9 3422.2 3695.3 4142.7 23.5 8.7 4.7 109.4

Ilporto 357.0 1065.4 1099.0 1033.3 10C9.A 1173.2 1190.5 1296.5 1476.6 IE.9 2.0 4.1 43.3Etporto - volure 1280.0 1965.3 1465.3 1428.9 1328.9 1325.7 1323.6 1335.2 1405.6 0.7 -2.0 1.2 57.0lopoeto - TT edjooted 461,4 1402.4 1459.4 1253.1 1546.5 2169.6 2247.6 2337.5 2528.7 22.5 9.1 3.1 46.4Resource gap -104.4 -337.0 -360.4 -223.8 -536.5 -994.5 -1051.5 -1040.2 -1092.1 . . . 23.0

Total reseurcas 608.8 1834.9 2029.4 1914.9 2010.5 2303.4 2370.7 2655.1 3050.6 27,0 4.6 5.8 86.4

C.noueeptio 433.4 1220.8 1363.0 1327.5 1330.2 1469.3 1580.0 1820.9 2127.1 20.4 3.8 2.2 55.3PuSlun 248.7 922.7 1012.2 1058.8 955.4 1835.8 1103.3 1252.4 1453.8 25.0 2.3 7.0 41.0Private j/ (84.7 298.1 350.8 268.7 174.8 434.3 477.7 571.5 644.3 12.5 7.8 9.2 14.3

Fiond -nestetent 175.4 614.1 666.4 587.4 800.3 883.4 760.5 810.6 955.4 25.5 5.5 3.5 29.2Public 175 476.5 428.8 337.3 396.6 451.6 405.3 405.3 463.2 22.5 -2.1 2.5 17.0Prionte 57.9 137.6 237.6 250.1 283.7 351.8 355.2 405.3 492.2 30.3 23.5 7.0 12.2

Change) it 000kg a 30.7 292 15.6 1-31.National EeoJnga 33.4 608.3 836.6 490.2 902.3 1366 2 1412.9 0457. 1600.3 72.7 1726 3.3 38.7DerOgeti eaningo 279.8 951.1 1026.8 811.2 1216.8 1828.8 1841.2 1866.4 2015.6 27.6 14.0 2.0 52.2

GD1Stf0 .urrent pr-nee 1427.6 2180.1 2529.0 2506.3 3404.2 5062.2 5703.0 7102.2 9033.0 15.6 18.4 12.3r-oed dn..ot-eIt at current prive- 127.3 445.6 656.6 610.1 054.1 0244.0 1285.0 1581.0 1965.0 37.7 14.0 9.0Fi.ed I-note..t/GDP (%) 0.9 29.6 26.0 24.6 25.1 24.6 22.5 22.2 22.0

8. SECIDR 0U?IPU(Oos08i11uFoh on percentage.;

1976 -onotant pricey)

Agrioultur- 4.2 2.8 2.6 2.6 2.8 2.2 2.8 73. 3.2Oil 90.2 64.0 59.8 57.4 53.7 51.3 50.3 46.8 41.7Eoo truntuon 7.2 10.0 10.4 10.4 12.0 13.5 12.5 12.4 13.0Othelr ndu_trn 0.3 0.7 1.9 2.5 2.6 2.9 3.2 3.9 7.2Serv ces 0.1 20.9 23,7 27.5 28.9 29.6 31.2 33.9 34.9

Non-- I -entono 19.b 35.2 40.2 .2.6 46.3 40.7 49.7 53.2 58.3

C. PRlCES (1976-150 on US dollars)

Coponi prior dnl 26.1 90.1 810.5 110.0 .69.5 268.1 300.8 360.1 422.7 36.5 22.2 9.5I"po.l price mIdc 72.4 101.2 10C.6 127.6 45.7 163.7 177.6 205.7 234.9 12.4 13.1 7.5Term of trade ondac 36.0 96.9 99.9 87.7 .16.3 167.7 169.4 175.1 173.9 21.5 11.0 0.9GDP dIflator 32.2 98.a 126.1 100.4 148.5 206.2 227.7 263.5 299.1 29.0 15.4 7.8Average eovh-nge rote .3454 .3454 .3454 .3454 -

D. SELECTED INDICAITRS(conpotrd at 1974 .onotoot prirc ) 1974-78 1979-85

IElR mon-oil) 5.6 4.6Import elast vit 7 2.76 1.25AOtrage nat-oral n-v1j99 2/ 2.37 D.49Hargonal - ot-onol ouvungs rote/DoY 0.32 0.56Import/GODY 0.46 0.35Inveotmeot/C9Y 0.28 0.23aenourve gap/lIP -0.18 0.37

E. PUBLIC FINANCEToes !: CP r curront prncto) 1973 1975 1977 1978 1979 1980

Curr-nt revenue 40.2 61.0 70.2 59.9 64.2 70.5DJI 35.9 49.5 55.2 52.9 54 0 62.6Dther 2.2 1.3 4.4 5.2 4,9 4.7Cromto 2.1 9.5 10.6 0.7 5.3 3.2

Current Iopenvtuore 36.5 42.8 43.5 50.5 37.4 3C.5qf ohooht defer -opeoditurn (24.6) (32.5) (27.1) (30.6) (21.4) (17.4)

Cov-rent -nvoogo 3.7 18.2 26.7 8.3 26.8 53.1

Capital e-ptodttur- 17.3 23.0 16.7 14.2 16.5 15.1O-eroll bOlanon -11.5 -5.2 0.2 -5.9 10.3 39.0

F. LABOR FORCE (on thPo..nds) 1975 1978

Agrj Iltore 86.0 02.0Non_egr ooltort 123.0 159.0

(Eopoleontn( (71.C) (98.0)(Qeamo) (57.0) (61.c)_ .~~~~~~~O .

1/ Includen otatootical do erepe-n-no chenge it sto-ks thrwgh 1979. EMENA CPIIBj/ Cotputed am eon year log bnetnes -moe-t-ent and outPut. April 1980

- 20 -

ANNEX IOMAN PAGE 5 of 6

BALANCE OF PAYMENTS AND EXTERNAL ASSISTANCE(Millions of US dollars: current prices)

Actual Est. Projected

1974 1975 1976 1977 1978 1979 1980 1981 1983 1985

A. SUMMARY OF BALANCE OF PAYMENTS

1. Exports (including NFS) 1216.3 1419.2 1598.7 1622.5 1598.9 2284.0 3553.4 3981.8 4809.3 5940.0

1. Crude oil exports 1212.2 1413.1 1574.4 1580.5 1510.7 2158.9 3454.1 3877.4 4665.3 5633.72. Imports (including NFS) -658.1 -1065.7 -1179.8 -1210.2 -1313.5 -1479.2 -1925.0 -2114.7 -2670.3 -3375.33. Resource Balance 558.2 353.5 418.9 412.3 285.4 804.8 1628.4 1867.1 2139.0 2564.7

4. Net service and private transfers -402.4 -503.5 -519.9 -441.5 -376.4 -401.2 -711.6 -730.7 -817.7 -914.5 s

4.1 Profit remittances -310.1 -294.7 -251.0 -194.8 -149.9 -136.0 -365.6 -387.0 -468.5 -536.0

A. Oil companies -144.2 -96.4 -59.9 -45.5 -35.3 -48.0 -150.0 -165.0 -197.0 -225.08. Contractors and others -165.9 -198.3 -191.1 -149.3 -114.6 -88.0 -215.6 -222.0 -271.5 -311.0

4.2 Net interest income 19.1 -0.6 -2.0 -0.6 6.9 16.2 25.0 76.0 212.2 358.04.3 Workers' remittances -111.5 -208.2 -266.9 -246.1 -233.4 -281.4 -371.0 -419.7 -547.9 -716.54.4 Other services - - - - - - - - -13.5 -20.0

5. Balance on current account 155.8 -150.0 -101.0 -29.2 -91.0 403.2 916.B 1136.4 1321.3 1650.22

6. Private direct investment -87.5 29.2 34.7 20.8 40.0 34.4 84.4 85.4 50.0 50.0

7. Official grants 24.0 207.3 52.1 268.4 19.4 149.7 162.1 133.2 - -

Public M & LT loans8. Disbursements 128.7 142.2 191.8 161.3 81.5 117.8 193.7 9.7 12.7 19.79. Amortization -5.9 -28.1 -24.3 -56.2 -114.8 -205.5 -191.9 -51.1 -94.6 88.7

10. Net disbursements 122.8 114.1 167.5 105.1 -33.3 -87.7 4.8 -41.5 -81.9 -69.0

11. Short-term capital -158.4 -106.0 68.6 18.8 15.6 - -

12. Capital transactions n.e.i. -92.6 -98.9 -234.5 -164.4 -47.7 -170.613. Changes in reserves (- = increases) 35.9 4.3 12.7 -219.5 97.0 -329.0 -1165.1 -1313.5 1289.4 1631.2

14. Net foreign exchange reserves 108.6 104.2 91.5 310.9 214.0 543.0 1708.1 3021.6 5650.8 8810.2

B. GRANT AND LOAN COMMITMENTS

1. Official grants 24.0 207.3 52.1 268.4 19.4 149.72. Total public M & LI loans 246.4 278.3 305.6 51.4 22.4 175.0

2.1 IBRD 8.5 - - 16.5 - -2.3 Other multilateral - - 46.2 - - -

2.4 Governments 92.6 185.4 156.8 34.9 22.4 175.02.6 Suppliers 145.3 28.7 4.4 - - -

2.7 Financial institutions - 64.2 98.2 - - -

C. MEMORANDUM ITEMS

1. Grant element of total 12.6 23.4 23.2 6.1 52.0 60.2commitments

2. Average interest (percent) 6.1 5.S 5.7 8.4 2.0 4.03. Average maturity (years) 6.6 9.9 12.1 9.4 19.3 7.0

- Nil or less than half of unit shown EMENA CPIIB... Not applicable April 1980

- 21 -

ANNCX I

OMAN Paqe 6 of 6

DEBT AND CREDIIWORTHINFSS

Actual Prelim.

1974 1975 1976 1977 1978

A. MEDIUM AND LONG-TERM DEBT (DOD end of perio(d) I/(millions of US dollars)

1. Total debt outstanding (disbursed only) 165.7 270.0 423.5 552.9 547.8

2. Including undisbursed 343.1 571.1 825.9 864.2 821.8

3. Public debt service 9.5 34.6 34.3 81.3 135.0

1. Interest 3.6 6.5 10.1 25.2 20.2

B. DEBT BURDEN (percentages)

1. Debt service ratio 0.8 2.4 2.1 5.0 8.4

2. Debt service and direct investment income ratio 26.3 23.2 17.8 17.0 17.8

3. Debt service/GDP 0.6 1.6 1.4 3.2 5.5

4. Debt sservice/Government revenue 1.1 2.6 2.3 4.6 9.6

5. Total DOD/GDP 9.7 12.4 17.4 21.9 22.3

C. TERMS 'percentages)

1. Interest on total DOD/total DOD 2/ 8.6 3.9 3.7 6.0 3.7

2. Total debt service/total DOD 2/ 22.8 20.9 12.7 19.2 24.4

0. DEPENDENCY RATIOS FOR M & LT DEBT (percentages)

1. Gross dibursements/imports 19.6 13.3 16.3 13.3 6.2

2. Net transfer/imports 18.1 10.1 13.3 6.6 -4.1

3. Net transfer/gross disbursements 3/ 92.6 75.5 82.1 49.5 -65.6

E. EXPOSURE (percentages)

1. IBRD disbursements/total disbursement - - 0.6 0.5 5.5

2. IBRD DOD/Total DOD - - 0.3 0.3 1.1

3. IBRO Debt service/Total debt service - - - 0.4 0.5

F. EXTERNAL DEBT (disbursed only) Outstanding December 31. 1978

(millions of US dollars) Amount Percent

i. IBRD 5.9 1.1

2. Other multilateral 29.0 5.3

3. Governments 335.9 61.3

4. Suppliers 94.6 17.3

5. Financial institutions 82.4 15.0

6. Total public M & LT debt 547.8 100.0

7. fotal public H & LT debt (including undisbursed) 821.8 150.0

1/ Projected debt amounts exclude US$51.2 million - Nil or less than half of unit shown

which was not reported in 1978EMENA CPIBR

2,_ DOD at the end of previous year April 1980

- 22 - Annex IIpage 1 of 3

STATUS OF BANK GROUP OPERATIONS IN OMAN

A. STATEMENT OF BANK LOANS (as of February 29, 1980)Amounts

US$ Millions

Loan Net ofNumber Year Borrower Purpose Cancellations Undisbursed

980-OM 1974 Sultanate of Oman Education 5.70 -985-OM 1974 Sultanate of Oman Technical

Assistance 2.75 .61441-OM 1977 Sultanate of Oman Highway

Maintenance 15.00 13.41442-OM 1977 Sultanate of Oman Engineering

Power/WaterStudies 1.50 .5

TOTAL .. 24,95of which has been repaid(including amount sold & repaid) .. 1.04

Total now outstanding 23.91Amount Sold .3Of which has been repaid .3 0.0

Total now held by Bank 23.91

Total Undisbursed 14.5

B. STATEMENT OF IFC INVESTMENT IN OMAN (as of February 29, 1980)

Amount in US $ MillionYear Obligor Type of Business Equity Total

1979 Oman Development Bank Private SectorDevelopment Bank 2.0 2.0

Total Gross Commitments 2.0

Less cancellantions, terminations,repayments and sales 2.0

Total commitments now held by IFC 2.0

Total undisbursed 1.0

- 23 - ANNEX IIpage 2 of 3

C. PROJECTS IN EXECUTION 1/

Ln. No. 980 Education Project: US$5.7 million Loan of April 25, 1974;Effective Date: March 31, 1975; Closing Date: June 30, 1980.

The project consists of construction, furnishing and equipping ofone primary teacher training institute/national education center, two prep-aratory schools including basic skill vocational training, one agriculturaltraining institute; and, related technical assistance. After initial delays,overall implementation has substantially improved and all institutions havebecome operational in September 1979. A completion mission is tentativelyscheduled for Fall 1980.

Ln. No. 985 Technical Assistance Project: US$2.75 million Loan of May 15,1974. Effective Date: December 11, 1974; Closing Date: June 30, 1980.

This project provided Technical Assistance through consultantsand experts for the formulation of three teams of specialists to deal with(i) Economic Planning and Management; (ii) Agriculture and Fisheries; and(iii) Transport. The transport component was satisfactorily completed andthe Government is expected to send soon the final withdrawal application.Following some difficulties faced by the agricultural advisory team, it wasagreed to use part of the agricultural component to carry out a program oftubewell drilling and testing to determine water availability for developingfarms in Sohar and Saham. The program was completed last year. Upon Govern-ment's request the unused balance under this component (US$270,000) wasallocated to the Unallocated category of Schedule I of the Loan Agreement.The Economic Planning and Management team has been very successful in prepar-ing Oman's First Economic Development Plan for 1976-80. It is currentlypreparing the second five year Plan. The closing date was extended to enablecontinuation of the team's work.

Ln. No. 1441 Highway Maintenance Project: US$15 million Loan of June 20, 1977;Effective Date: September 30, 1977; Closing Date: September 30, 1981.

This project consists of two parts. Part A has three components:(i) procurement of highway maintenance equipment and spares; (ii) construc-tion of six highwey maintenance workshops and a training center; and (iii) theoperation of seven workshops. Part B has two components: (i) consultantsservices for maintenance management and training; and (ii) general technicalassistance to the Ministry of Communications. Implementation of this projectis proceeding satisfactorily.

1/ These notes are designed to inform the Executive Directors regardingthe progress of projects in execution, and in particular to report anyproblems which are being encountered, and the action being taken toremedy them. They should be read in this sense, and with the under-standing that they do not purport to present a balanced evaluation ofstrengths and weaknesses in project execution.

- 24 - ANNEX IIpage 3 of 3

Ln. No. 1442 Engineering-Power/Water Studies: US$1.5 million Loan ofJune 20, 1977; Effective Date: September 14, 1977; Closing Date:June 30, 1980.

While disbursements have been lagging owing to delays in the submis-sion of disbursement requests, overall execution of the studies is nearlycomplete. The studies are in three phases designed to identify power/watersupply needs in the short term (through 1980) and medium term (through 1985)and to propose institutional reforms. The consultants have produced the finalreport covering short-term and medium term water supply for the capital areaand are in the process of finalizing their report on water supply for 22 othertowns and villages. Their report is expected to be completed shortly. Theconsultants have also produced an interim report on institutional recommenda-tions. For power, the consultants have completed their power planning reporton short and medium term demand. Further work on the organizational proposalsis postponed at Government's request until the objectives and needs of theMinistry of Electricity and Water are better defined. The closing date wasextended to permit finalization of the consultants' work.

- 25 - ANNEX IIIPage 1 of 2

OMAN - FIRST TELECOMMUNICATIONS PROJECT

SUPPLEMENTARY PROJECT DATA SHEET

Section I - Timetable of Key Events

(a) Time taken by the Borrower to prepare

project: Seven months (August 1978 toMarch 1979)

(b) Agency which prepared project: OMANTEL S.A.O. with the assis-tance of consultants, partly

financed by the Bank

(c) Date of first presentation to Bank: January 1979

(d) Bank missions: (i) preparation March 1979

(ii) appraisal June 1979

(e) Date of completing negotiations: March 1980

(f) Planned terminal date of effectiveness: October 1980

(g) Special conditions of effectiveness: None

Section II - Special Bank Implementation Actions

None.

Section III - Special Conditions

The following assurances were obtained during negotiations.

(i) The Government would provide OMANTEL with funds necessary

for project completion (para. 33);

(ii) OMANTEL agreed to employ, not later than September 30, 1980, inter-

nationally recruited experts with technical and financial back-

ground, or consultants who shall include such experts, satisfactory

to the Bank, for assistance in the design, specification and imple-

mentation of appropriate management systems (para. 35);

(ii) OMANTEL agreed to engage an independent auditor and to provide the

Bank with unaudited and audited financial statements with auditor's

report, respectively within six and eight months of the close of the

fiscal year from FY80 through FY82, and within four and six months

from FY83 and thereafter (para. 37);

- 26 - ANNEX IIIPage 2 of 2

(iv) The Government and OMANTEL agreed that they would set, and maintainOMANTEL's tariffs at levels sufficient to achieve at least 10percent rate of return on revalued average net fixed assets inoperation (para. 40);

(v) For the purpose of calculating the rate of return OMANTEL agreed toreview and determine the value of its fixed assets annually, start-ing as from FY81 and, if necessary, revalue its fixed assets inaccordance with methods acceptable to the Bank; the latter would benotified of the results not later than June 30 of each fiscal year(para. 40);

(vi) Any modification in OMANTEL's future capital structure would be madein consultation with the Bank (para. 41);

(vii) The Government agreed to promptly settle existing arrears, andintroduce procedures to ensure that all Government agencies paycurrent bills within two months of the billing date (para. 42);

(viii) OMANTEL agreed to maintain the overall level of its subscriberaccounts receivable at about three months' billings from FY81through FY83, and at about two months' billings from FY84 andthereafter (para. 42).

I8RD 14564

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