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IDSA COMMENT

Indian PM’s Visit to Oman and Qatar

December 02, 2008

During his November 2008 visit to Oman and Qatar, Prime Minister Manmohan Singh signed two memoranda of understanding with Oman and three with Qatar. The MOUs with Qatar were on defence and security, investment, energy and manpower development.

India’s stake in the Gulf region is quite high. It sources 60 per cent of its total commercial energy from the region and receives around US $9 billion in remittances annually from its 4.5 to 5 million expatriates living and working in the region. The GCC (Gulf Cooperation Council) as a block ranks as India’s second largest trading partner, approximating $40 billion in both oil and non-oil trade.

Though Oman and Qatar contribute comparatively less to India’s total commercial energy requirements, their economic and strategic importance cannot be de-emphasized. Today, Qatar is the largest LNG supplier to India, and during Prime Minister Manmohan Singh’s November 2008 visit, India expressed its wish to source an extra 2.5 million tonnes of LNG from this Gulf state. For its part, Oman is one of the key countries that meet India’s requirements of fertilizer. In one of its largest investments abroad, India has invested US $980 million in the Oman India Fertilizer Company (OMIFFCO). In the field of manpower, both Oman and Qatar are home to some 20 per cent of total Indian expatriates in the GCC. 420,000 Indians live in Qatar and half a million in Oman, and together they remit about $1 billion every year.

Total non-oil bilateral trade between India and Oman has grown seven fold since 2000, from a mere $ 200 million to $ 1.2 billion in 2007. During his visit, Dr. Singh expressed the hope that trade would touch $2 billion very soon. Since 2000, India has experienced a favourable trade position with Oman and bilateral trade is no longer confined to oil and gas. India exports foodstuff, textile, manmade yarn/fabrics, meat and meat preparations, species, tea, coffee, machines and instruments, electronic items, and imports crude oil, fruits and nuts, non-metallic mineral manufactures, other commodities, metal-ferrous ores and metal scrap, artificial resin, plastic materials, and so on.

Bilateral trade between India and Qatar stood at $3.3 billion in 2007. It is heavily biased in favour of Qatar because of its energy exports to India, which constitute almost 80 per cent of total bilateral trade. India’s imports from Qatar stand at $2.6 billion, while its exports add up only to $700 million. India’s export basket to Qatar is fairly diversified and includes consumer items, foodstuff and industrial equipment, readymade garments, jewellery, light engineering goods, steel pipes and consumer electronics. The diversifying composition of India’s export basket indicates that Indian goods are now competing with those from other countries in the branded market which was quite absent in the 1980s.

Though the total volume of India’s trade with these two countries (Oman and Qatar) is quite insignificant, not more than one per cent of India’s total trade, in recent years there has been a quantum jump in terms of percentage growth – around 568.3 per cent and 849 per cent respectively during the last four years (2002/03 to 2007/08).

A key agreement arrived at during the Prime Minister’s visit to Qatar was on defence and security. The agreement covers maritime security, piracy, intelligence sharing on terrorism, money laundering, narcotics and transnational crimes. Indian officials have described the agreement as “just short of stationing troops”. This agreement assigns India a unique position in the region. It allows the Indian Navy to operate in the region and ensure the security of the sea lanes through which 15 per cent of the world’s supertankers pass. Although patrolling without a base in the region would mean considerable expenditure, it would be worthwhile to assume this responsibility. Operating in this region also provides India an opportunity to further strengthen its ties with the United States, which has a dominant presence in the whole of the Middle East. Overall, India’s ability to serve as a reliable, co-operative, protective and non-interfering power in the region has been strengthened.

In the field of investment and manpower development, India signed two MoUs with Oman. The two countries have agreed to establish a support system in the form of the India-Oman Joint Investment Fund with an initial seed capital of $100 million (Dh. 367.4 million), with the expectation of raising this up to $1.5 billion over the next two years. The joint fund is designed to identify projects in infrastructure, tourism, health, telecommunications, utilities, urban infrastructure and other sectors in both countries. The Indian Prime Minister also expressed his wish to explore investment opportunities in Qatar’s financial centres and special economic zones (SEZs). He underlined that “in this period of turmoil, I feel that the complementarities between our two economies provide an opportunity for counter-cyclical strategies for growth in both the countries.” He added that “we should exploit opportunities for investment in Qatari financial centres and special economic zones, including in the information technology and communication sector. There is scope for Qatar to invest in the infrastructure (sector) in India. I feel that emerging economies like India, with a strong and well functioning financial system may hold the key to any global recovery process.” The Prime Minister also urged that energy ties be transformed into more meaningful reciprocal relations.

Both Oman and Qatar have experienced a surge in their oil incomes by 70 per cent and 68 per cent respectively during the current calendar year. Some studies estimate that because of high oil prices the oil revenues of GCC countries have increased remarkably and could approximate to some $600 billion during 2008. India seeks to attract some of these in the form of investments in its infrastructure sector, which can absorb an estimated $500 billion in the coming five years. At the same time, the GCC countries themselves are, as part of their ‘look east’ policy, looking for non-Western economies in which to invest their surplus funds and they are also keen on diversifying their petroleum-based economies by moving into the knowledge industry. It is here that India can play a leading role given its leadership in information technology and skilled manpower. The success of the Joint Fund with Oman would be most crucial, as it would set a precedent for other Gulf countries to forge similar arrangements with India.

GCC countries have embarked upon huge developmental projects and have planned to invest $300 billion under their diversification programmes in both the petroleum and non-petroleum sectors. Besides governmental efforts, several studies have also pointed that the private sector in these countries have also planned to invest around $2 trillion in construction, energy, fertilizer, IT, tourism, etc. This provides huge opportunities for Indian private business to inter into agreements with entrepreneurs in the Gulf region. The same sentiments has been noticed during the Indian Prime Minster address to Oman business community when he said, that “there is vast potential for cooperation in energy, fertilizer, IT, tourism and education sectors. You should actively work with your Indian counterparts to explore possibilities of joint ventures in third countries.” He also added that “India sees Oman as a natural partner in progress that benefits not only our two countries but also the Gulf region as a whole.”

Keeping in view the large number of Indian expatriates, India and Oman signed a manpower development agreement that will open further employment opportunities for Indians. The MoU stipulates that the terms and conditions of employment shall be defined by a contract between the employee and employer and authenticated by Oman’s Ministry of Manpower. Among other things, the group will interpret the terms of the MoU in case of dispute and exchange information on illegal recruitment and illegal trafficking. It will meet alternately in India and Oman at least once a year. The accord seeks to protect the interests of Indian expatriate workers in the Sultanate, especially housemaids and household employees. In Qatar, where around 420,000 Indian expatriates live, an agreement to secure the interests of Indian workers was signed way back in 1985, to which an additional protocol was added last year. The manpower agreements signed with Oman and with Qatar have ensured a better welfare policy to the large number of expatriates working in the Gulf. This pact would naturally minimize, if not fully mitigate, some of the glaring problems encountered by Indian expatiates such as underpayment, delayed payment, cheating and altering of the provisions of contracts to their disadvantage, as well as ensuring better protection to women migrants, particularly those engaged in the household sector and which does not come under the purview of labour laws.

During Dr. Manmohan Singh’s visit, Indian Petroleum Minister Murali Deora requested the Qatarian Deputy Prime Minister, Abdullah Bin Hamad Al-Attiyah, to supply an additional 2.5 million tonnes of LNG (liquefied natural gas) under an agreement that was signed a decade earlier. India also expressed the wish to set up a gas-fired fertilizer plant in Qatar to meets its urea needs. Currently, Qatar meets 25 per cent of the total fertilizer consumed in India. Given the rising trend of gas consumption in the world on the one hand and the massive gas deposits on which Qatar is sitting (the third largest in the world at 25 trillion cubic metres) on the other, the Gulf region is going to have two dominant energy players: Saudi Arabia with a quarter of the world’s oil reserves, and Qatar with one third of the global gas reserves. Against this backdrop, India’s expanding ties with Qatar is of great significance. Qatar, being a small country with limited human capital, needs an emerging big economy and market for its gas like India. At the same time, India is also keen to take advantage of a reliable source of natural gas situated close to its own consuming centres.

The MoUs signed covering strategic, energy, economic and manpower areas in fact carry a lot of weight in widening and deepening India’s relations with the two Gulf countries in the immediate term. In the medium term, it is hoped that India would be able to similarly attract other Gulf countries which have also benefited from the massive inflows of oil revenues. All the Gulf countries are working to diversify their economies and have repeatedly expressed the wish to obtain Indian help in developing their own knowledge sectors. This provides a golden opportunity for India and the Gulf countries to build up mutually reciprocal and complementary relationships.