Analyzing and forecasting the Gulf Cooperation Council's geopolitical environment

Oman’s Look to ASEAN

By Muhammad Zulfikar Rakhmat
April 12, 2017

Unlike other Gulf Cooperation Council (GCC) members, the Sultanate of Oman has a relatively limited relationship with the Association of Southeast Asian Nations (ASEAN). Yet historically, as a maritime mercantile power with an orientation toward the Indian Ocean, Oman has enjoyed commercial, cultural, and political partnerships with countries across the Asia-Pacific region. This legacy, still evident in the vestiges of the Bu’ Saidi Empire of the 17th and 18th centuries and the Non-Aligned Movement throughout the Cold War, enables Muscat to overcome obstacles it would otherwise encounter in strengthening ties with the ASEAN countries.

Oman-ASEAN relations in the modern era date back to the 1950s, yet formal diplomatic relations did not commence until the 1970s and 1980s. The ascendancy of His Majesty Sultan Qaboos in 1970 marked the beginning of Oman’s opening to the world. Unquestionably, nations throughout East Africa and the Indian subcontinent benefited the most from the Sultanate’s opening. But Southeast Asian nations also became of growing interest to Muscat, beginning with Indonesia (1978), the Philippines (1980), Thailand (1980), Malaysia (1983), Singapore (1985), and Vietnam (1992). The establishment of official diplomatic missions by ASEAN countries in Muscat, and by Oman in most Southeast Asian capitals, followed these openings. To this day, Omani-Southeast Asian relations have continued to deepen. This partnership is informed to some degree by different multilateral and organizational frameworks, such as the GCC-ASEAN and the Asia Cooperation Dialogue among others.

Oil and Natural Gas

Over the years, the Sultanate’s relationship with ASEAN has been mainly about energy, although less so compared to the more oil-rich GCC members. Based on the expansion of Oman-ASEAN energy relations, it appears that these limited ties could develop further as Southeast Asian nations seek to diversify their energy sources.

In 2011, Shell Malaysia Trading Sdn Bhd inked a sale and purchase agreement with Oman’s National Gas Co SAOG (NGC) to divest its LPG business in west Malaysia. Petronas, Malaysia’s state-owned gas and oil giant, has also concluded a production and sharing agreement with Muscat for the exploration and selling of liquefied natural gas (LNG) from Block 63 in al-Dhahirah and al-Dakhiliyah regions. In addition, Indonesia’s PT Medco Energy International (MEDC) has been operating its wholly-owned subsidiary Medco Oman LLC, which has a 55 percent participating interest in Karim Small Field. MEDC, a publicly listed oil and gas company in Indonesia, was planning to acquire assets in the Sultanate, according to the Jakarta Post. Reportedly, Pertamina, another major Indonesian oil company, was also negotiating with Muscat for the takeover of oil and LNG assets in the region. Meanwhile, Thailand has also expressed interests in developing Oman’s refining and storage projects in Duqm, a port town on the Arabian Sea which the Sultanate is developing to become a major regional trading hub.

Indeed, trade is another crucial component of the Oman-ASEAN relationship. As of 2012, Singapore and Thailand each made up 4.4 percent of Oman’s total exports. Malaysia and Indonesia’s trade with Oman sits at around USD 700 million.Other ASEAN countries trail behind. Yet indicators point to potential for significant growth in the future. In tandem with increasing trade, investments from ASEAN countries to Oman have grown noticeably.

In 2008, Brunei and Oman signed an agreement to establish a USD 100 million investment fund which is shared by the two Sultanates and based in Oman. The fund aims to increase investment opportunities between the two countries, especially in tourism, industrial, and commercial sectors. The MoU set up a joint venture firm, the Oman-Brunei Investment Co., to facilitate investments in infrastructure, tourism, health, telecommunications, and other sectors in both countries, as well as in neighboring markets. Since 2015, Bruneian and Omani sovereign wealth funds have been partnering in a venture, Oman Brunei Aviation Leasing Co., that aims to invest in and manage the purchase and lease of commercial aircraft operated by airlines in the region and beyond.

In addition to a USD 472 million deal for Oman to import frozen chicken from Malaysia, the Omanis have reportedly expanded their investments with Vietnam on different sectors, including power plants, toll roads, water supply, ports and logistics, consumer goods, healthcare, agriculture, and manufacturing. In 2014, the PetroVietnam Insurance Corporation (PVI) and the Oman Investment Fund signed a deal allowing the latter to acquire an approximate 12.6 percent stake of the enlarged share capital of PVI, at USD 1.75 per share, for a total consideration of USD 42.4 million, and to become the foreign strategic investors in PVI.

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*Muhammad Zulfikar Rakhmat is an advisor at Gulf State Analytics.