We consider the first period to run from pre-1914 to 1920. The Government in the era of our grandfather, Sultan Faisal bin Turki, and in the era before him had only a simple way of despatching all the affairs of the country; no budget, no planning and no organisation. Improvisation was the basis of all that was done and said.  This was the situation prevailing at that time in most Arab countries.

In 1913 (1331) our beloved father, Sultan Taimur bin Faisal, succeeded to the throne on the death of Sultan Faisal bin Turki. He inherited a legacy of many debts and a Government burdened with loans due to be repaid to the merchants of the country.  This situation continued and the debts increased until 1920, when, realising it was not easy to rule the country with its finances in such a state of weakness and disorganisation, he determined to improve the State finances by introducing modern methods.  Finally it was clear that his Government could make little progress until it was freed of its burden of debts which, as we have said, were to a number of merchants in the country.  He realised that it would be best to negotiate one major loan which would enable him to liquidate the old debts and still leave a surplus which could be used to achieve the desired reforms.  The only body able to meet his request was the Government of British India, which agreed to lend him the money necessary to free himself from his debts on the understanding that it would be repaid in 10 years. He decided at the same time to ask the Egyptian Government for officials to reorganise the Customs.  The Egyptian Government agreed and sent him three Customs experts who set about their work with a will.  He also engaged an English official, Mr. D.V. McCullum, to supervise the reorganisation of the Finance Department. Thereafter the finances of the Government slowly recovered; there were no deficits in the annual budgets and the loan instalments were paid off regularly.  The English official engaged in 1920 stayed for only six months, however, and, in the absence of a successor, Sultan Taimur appointed Mohammed bin Ahmed al Ghashan, then Wali of Matrah, as his Minister responsible for financial affairs. This situation prevailed until the end of 1924, when there was a deficit due to the negligence of the responsible officer and the maladministration of the Treasury Officer, as a result of which the State finances were so shaken as to make it impossible to continue to repay the instalments of the loan at the proper time.

The second period begins in 1925 when, in view of the poor state of Government finances, Sultan Taimur bin Faisal decided to engage a new official to reorganise them. He selected an Englishman, Mr. Bertram Thomas, whom he appointed as Finance Minister, on a five-year contract, with a view to his improving the financial position of the Government. (Mr. Thomas was the first Westerner to cross the Empty Quarter, doing so from Dhofar to Qatar in 54 days.)  At the outset he exerted considerable efforts which produced a measure of improvement in financial affairs but unfortunately this improvement was not maintained for more than three years, after which the financial situation again deteriorated and the Government ceased to repay the instalments of the loan.  This was due to the maladministration of the official referred to in the previous period for he allowed Government spending to exceed the approved Budget. This led to a deficit and disorder in State finances.  The balance of payments was upset and unpaid instalments of the loan, and other expenditure, piled up, constituting a new debt, additional to the balance of the previous one.

In 1930 an economic slump struck the world. This affected the trade balance, resulting in a sharp fall in Customs revenues, which were virtually the Government’s only source of revenue. While great hopes were pinned on Mr. Thomas to repair what others had destroyed, he in fact brought the finances to ruin and left them in an even sorrier state.

Thereafter Sultan Taimur bin Faisal considered engaging a financial expert to put right what was wrong.  In 1931 he engaged as his Financial Adviser, Mr. Hedgecock, an Englishman and a senior official of the Iraqi Finance Ministry, who immediately set to work with great vigour and determination to rescue the finances from the state they were in as a result of Bertram Thomas’ maladministration.  He reduced salaries and cut expenditure and was eventually able to put the financial records in order and to organise proper Budgets.  We reveal no secrets if we say that at that time the Government’s Budget was no more than Rps.700,000 (£50,000) from which the Sultanate had to pay the cost of the Government machine, repay the balance of the loan and meet various other items of expenditure, including the customary gifts and presents to the tribal Sheikhs and delegations, since, outwardly, the Government appeared very rich. Mr. Hedgecock deserves admiration and respect for what he did to reorganise the finances of the Sultanate.  Unfortunately however he did not stay long, resigning for private reasons after 8 months.

At that time we were Prime Minister with oversight of the Sultanate’s financial affairs. After the resignation of Mr. Hedgecock it was decided to appoint Mr. R.J. Alban, an Englishman, as Financial Adviser.  And then, on 2 Shawal 1350 (11 February 1932), we succeeded to power upon the abdication, for reasons of health, of our beloved father, Sultan Taimur bin Faisal.

We gave our special attention to finance but found that because of the effects of economic pressure on world trade we were compelled to reduce expenditure in various sectors, our first economy being to halve the Sultan’s Privy Purse.  The reader may be surprised to learn that when we took over the reins of power the Sultanate’s Treasury was completely empty.  No doubt many of our contemporaries will recall what the financial situation was like in those days.

However, thanks to painstaking efforts and close supervision of finances signs of improvement became visible, and, as 1933 neared its end, debts had been liquidated and the sums due to the merchants paid off.  At the end of 1933 the Financial Adviser resigned whereupon we assumed complete personal control of the Sultanate’s finances and the preparation of its annual Budgets.  The improvement in Customs revenues continued (the Sultanate having no other income to speak of) enabling us to raise officials’ salaries and to give attention to the welfare of the Sultanate.  The financial position has continued to improve until the present day.

The third period runs from 1939, with the outbreak of the Second World War, until 1945. During this period prices rose and consequently so too did Customs revenues.  We further increased officials’ salaries and undertook much needed reforms in various parts of the Sultanate.  From 1933 to this day there has been no financial deficit in the Government’s Budget and the Government has been able to build up reasonable financial reserves against emergencies, as well as meeting necessary expenditure in various fields, especially that of defence, which swallowed up about half the Budget.  We were anxious to intro¬duce various urgently needed reforms for the welfare of the country, but found that there was not enough leeway either in the Budget or in the reserves to support any sort of planning, for we did not want to overburden the Sultanate’s finances and weigh them down with new debts, after having paid off all the old ones.  Doubtless it would have been easy to obtain money in various ways, but this could only have been by a loan with interest at a set percentage rate. This amounts to usury, with which I completely disagree, and the religious prohibition of which is not unknown.

By now the financial position of the Sultanate will have been made plain to you by the facts which we have set out for you, and which account for the inability of Government of the time to bring the country up to date. We were fully aware of the many reforms which the country needed, but whilst the eyesight was long, the arm at that time was short. Despite all this, however, we were never at a loss to undertake any work which brought general benefit to the country whenever we found a way to do so.  For example, when the opportunity occurred in 1940, during the war, we built the Saidiya School hi Muscat, the first Government building constructed after getting over the difficult period.  Similarly we made a number of improvements to Government centres and forts in various Wilayets.

In 1958 our friends, the British Government, offered us financial assistance to strengthen the Sultanate’s Army; to introduce improvements in education; to set up Health Centres in some of the Wilayets along the coast and in the interior; to build Experimental Farms to raise the standard of farming in the country; to construct roads and other improvements.  We accepted this with deep gratitude. There was a time limit to it in that it was to continue only until the finances of the Sultanate improved. It continued until the end of March last year, ie, four months before oil exports began at the end of July 1967. During this interim period we depended upon such financial reserves as we had. Had it not been for our economy and for our reserves, we would not have been able to bear the burden of expenditure during these months.  In particular the allocation to the Sultanate Army took up a large part of our resources until the Government obtained its share of oil revenues.

Now the oil flows from the fields at Fahud and Natih through the pipes to the tanks at Mina al Fahl in Saih al Maleh (which ought now to be called Saih al Huluw).  Soon the product of another field at Jibal near Fahud will flow to join the output of the first two fields supplying the tanks at Saih al Huluw whence the oil is pumped out to the tankers anchored at Mina al Fahl to be carried away.  Thus our dear country becomes among the exporters of oil, and we can insert a new subhead in our Budget ‘Oil Revenues’.  Yes only now that we know that revenue from oil will be coming in steadily can we consider and plan and estimate how to put into effect the various projects which the country needs.  We hope these revenues will continue to increase each year.

We ought at this stage to mention the relationship between the Sultanate and the oil company.  The first agreement was concluded in the middle of 1937.  The Company paid a rent for the right to search for oil in Sultanate territory and this helped to strengthen the Budget somewhat. In 1964, when oil was discovered in commercial quantities in the Sultanate, the present Company suggested a revision of the agreement signed between the Sultanate and the previous oil company, the new agreement to correspond with similar agreements signed recently between various oil companies and the Governments of the oil exporting countries of the Middle East.  The Sultanate agreed and asked the Company to put forward a suggested revision for the Government to study.

In March 1967, after talks between the Sultanate and the Company, Agreements were concluded giving the Government 50% of the oil profits, and the right to 121/2% of all oil exported.  This accorded with the decision of OPEC, an organisation formed of some of the Middle East oil exporting countries.  The Agreement included many other matters bringing advantage and general benefit to the country.

All of this took place during the period in which Mr. F. Hughes was the Company’s General Manager and Representative.  He was appointed by the Company to negotiate the detailed revision of the Agreement and we found a complete understanding of the situation on his part.  Agreement on terms was reached with great ease, thanks to the efforts displayed by him so that the Agreement should benefit both sides.

God willing, 1968 will be the start of a new era for our country which will see the beginning of various plans which will be executed under the supervision of qualified technicians and experts.  Firstly we shall begin building offices for various Government Departments; then houses for officials who will come from abroad; then step by step will come various projects such as hospitals, schools, roads, communications, and other necessary works including the development of fisheries, animals and agricultural resources etc. until modern projects spread over the whole of the Sultanate, to each area according to its needs.  So long as oil flows the Government will match its flow with continuing development for the welfare of the country.  Naturally projects involve much effort and hard work.  The progress we see in other countries was not the work of a day, but the result of efforts over long years.  It takes time for the results of projects for improvement to be seen and there will be an unavoidable gap between the receipt of oil revenues and the appearance of benefits for the populace.  We are straining every nerve to improve the lot of the country both in general and in particular.

An initial task is to increase the salaries of Government officials which we consider need to be increased and to establish a cadre to regularise promotion. We shall reinforce the Government machine by adding to it a number of experts and technicians. This will ensure that the Government has a modern administrative machine.  The present situation requires changes in the existing Government set-up.
There are urgent schemes to which we consider we must give priority.

1. Water — work on this project is being pressed ahead, and we hope that a water pipeline to Muscat and Matrah will be laid within 21 months of the date of contract, making pure water available to all.

2. Electricity — all the preliminary stages have been completed and work is going ahead briskly. It is hoped that the Company to which the project has been entrusted will supply electricity to consumers in Muscat and Matrah next summer.

3. Matrah Port — because of Matrah’s outstanding natural location, secure commercial position and reliable communications with the various parts of the Sultanate, which make it the commercial capital of the country, we consider that we should make a start on the construction of port facilities in the near future, to which the general Customs Department will be transferred, and where steamers, sailing craft and motor boats may moor to load and discharge.  Sufficient warehouses will be provided for the storage and protection of incoming and outgoing goods.

4. Saidi currency — another project which will be given priority and special study is that of currency.  The Saidi currency will be based on the Saidi Riyal, sub-divided into 1/2 Riyal and 1/4 Riyal.  Baizas will be minted to meet the requirements of the people, denominations being of 100, 25, 20, 10, 5 and 1 Baiza.  The necessary announcement about this will be made at the appropriate time.

When we talk about planning we must not forget the oil-bearing area and the Duru tribe who live there.  They must be given special attention and must get the projects they need and which suit them.

Other plans will follow later, in order of importance. We must not forget that the area of the Sultanate is more than 100,000 square miles, that its coastline is no less than 1,000 miles long and that its population is estimated at more than half a million.

We shall appoint a body, known as the Development Board, to execute such plans as we decide upon.  This body will be responsible for drawing up a Budget for each project and for keeping in touch with experts, technicians and others whom it is necessary to consult in connection with any desired project.

We shall also appoint a special Board for the water and electricity schemes. It will oversee the progress of work and will ensure that the schemes conform with the regulations fixed by the Government to safeguard the needs of the people.

We are now passing through a preliminary planning stage for the projects which enjoy priority because they are for the benefit of all. We are looking forward to a bright future by which we guarantee raising the standard of living of the inhabitants of the Sultanate and increasing the income of the individual. We shall develop the country so as to keep pace with the cavalcade of present day civilisation.  We shall ensure every benefit and advantage for the populace and we shall pursue those developments which bring us that which is best and preferable and is consonant with our people’s heritage and ancient history.  However much we progress and move forward we must keep before our eyes our true religion on which we place our reliance and traditions which are our heritage. There are prohibitions of our religion which are inviolable for ever and there are customs which can be altered without infringing the basic traditions of the country which are among the glories of our worthy ancestors, which are a source of pride and which protect our very existence.  The Almighty said in his Book `Say “work” and God will see your work’.

We ask the Almighty whose works are great to inspire us to do that which is right, to crown our efforts with success, bring us success in our enterprises and grant us victory in our desires.  We are humble towards him whose power is sublime and brings us success in what is for the good of our Omani people and our country.