* Corruption fight seen partly motivated by 2011 protests
* Experts say good start but much more to be done
* Omanis hope crackdown will reassure foreign investors
By Sami Aboudi
MUSCAT, March 23 (Reuters) - Young Omanis who took to the streets in 2011 to demand jobs and better economic prospects failed to trigger the mass protests that transformed other parts of the Arab world in their own Gulf state.
But they may have had an impact all the same, as authorities are making a start on a task that, even if coincidentally, meets one of the protesters' key demands - fighting corruption.
Omanis say graft has long blighted their country, one of the least wealthy Gulf Arab Western allies. While most states in the region fare badly in global corruption perception reports, Transparency International groups Oman among the worst performers, together with Saudi Arabia, Kuwait and Bahrain.
"The government's campaign (is part of a response) ... to the 2011 popular demands, smoking out the termites that infested the structure and making Oman's economy more competitive through transparency and fair and free competition," said Ahmed Al-Mukhaini, a former assistant secretary-general for Oman's consultative Shura Council who advises on the country's political affairs.
An absolute monarchy run by Sultan Qaboos bin Said, Oman has been pushing cautious reforms, including widening the powers of the Shura Council. Rights groups say the Sultanate still restricts freedom of expression and the press is subject to state control, however.
In his first response to the February 2011 protests, Sultan Qaboos replaced ministers and promised to create 50,000 public sector jobs for its increasingly youthful population.
Since then the authorities have turned their focus to corruption, strengthening domestic laws by boosting the powers of the state auditor to investigate suspicious cases and referring a number of public officials and private sector executives to the prosecution. Nearly 30 people have been sentenced to prison terms ranging from one to 23 years.
It has also ordered public sector employees to meet financial disclosure requirements and signed the U.N. Convention against Corruption (UNCAC), which provides a framework for local institutions to draw up bylaws and executive regulations.
Analysts say the steps are among several signs that Oman's government is listening to its citizens following the protests, in contrast to some of its neighbours in the Gulf.
"The Sultan has taken a number of steps to respond to some of the grievances articulated by protesters, and the current corruption crackdown would seem to be part of this," said Jane Kinninmont, a Middle East expert at Chatham House.
Kinninmont said Oman's court cases offered "a striking contrast" to Bahrain, for example, where legal action relating to alleged corruption was taken overseas.
Experts say Oman has much more to do to ensure its campaign is a success, for example by empowering and properly funding the agencies that have proved essential to anti-corruption campaigns in countries such as Indonesia and Hong Kong.
"These are good first steps but (there's) still a long way to go," said Arwa Hassan, Germany-based outreach manager for the Middle East and North Africa at Transparency International.
If the campaign succeeds, the Oman government hopes to not only win praise at home and abroad but also reassure foreign investors about the rule of law in the country of 3.9 million people.
Some businessmen are concerned the crackdown could have a negative effect, at least in the short-term, by causing officials and executives to become wary of government-related contracts because of the possible legal repercussions, resulting in delays to investment projects.
An Egyptian businessman who operates in the country said there was a risk business could stall.
"If you go to board rooms, everyone is discussing it (the crackdown on corruption) and how it may affect their business," said an Omani banker, declining to be named because of the sensitivity of the issue.
TIP OF THE ICEBERG?
Transparency International's 2013 corruption perception index report ranked Oman at 61, far behind the United Arab Emirates and Qatar, which came in at 26 and 28 respectively.
Omanis blame a system that allows senior government officials to simultaneously hold positions in private sector companies, leading to a potential conflict of interest in contracts involving public projects.
Al-Mukhaini said the prosecutor's office appears to have been shocked by the extent of the corruption they had found over the past 12 months.
"We are only seeing the tip of the iceberg because they are still detaining people and are still investigating," he said.
An Omani government source said state auditors were targeting corruption in the energy and contracting sectors in "a state drive to fight corruption in all its forms and in accordance with the results of investigations by an independent judiciary".
Dozens have been taken to court since late last year on charges ranging from taking bribes in exchange for government contracts to appropriating state lands for themselves or for relatives.
In one of the earliest cases, the Al-Zaman newspaper reported last October that Swiss authorities had contacted Oman after noticing suspicious deposits worth "tens of millions of dollars".
Oman promptly launched an investigation, working closely with the Swiss, leading to the conviction on Feb. 27 of state-owned Oman Oil Company CEO, Ahmad al-Wahaibi, on charges of taking $8 millions in bribes, abuse of office and money laundering. He was sentenced to a total of 23 years in jail. Court documents showed the money had been paid into Wahaibi's Swiss bank account. [ID: L6N0LW3FY]
Swiss authorities declined to comment on the case.
"The government has begun to realise the extent of these violations and has begun a campaign to fumigate the system," said journalist Zaher al-Abri, who was the reporter on the original Al-Zaman story.
"I believe that Sultan Qaboos himself is following up on this file," he told Reuters.
In at least one case, corrupt practices could have a direct heavy financial price for Oman, court proceedings showed.
At a trial in January in which a finance ministry official was convicted of taking a bribe and sentenced to three years in jail and fined 600,000 rials ($1.56 million), court documents showed that a Turkish firm was demanding nearly $200 million in damages after a $743 million contract originally awarded to it was given to another local Omani contractor.
The company, Attila Dogan, confirmed it had sent a "Notice of Dispute to the Sultanate of Oman and (to) Sultan Qaboos under the Turkey-Oman Bilateral Investment Treaty, demanding some $183 million in damages and harm."
The compensation demand is still pending.
Omani political analysts are encouraged but not expecting big changes anytime soon.
For one thing, Oman lacks many of the civil society groups - trade and professional unions, pressure groups and non-governmental organisations - that can focus public pressure on the authorities for effective action, they say.
Oman has also not yet signed up to the OECD Anti-Bribery Convention, which Transparency International says is a key benchmark in criminalising the bribery of public officials in international business transactions.
"The private sector in Oman has been dominated, company executives have been the high-level officials in the state," said Mohammed al-Harthy, head of the Omani Economic Association, a civil society group that works to promote economic development in Oman.
"It is not realistic to expect to change this overnight." ($1 = 0.3850 Omani rials) (Additional reporting by Fatma AlArimi in Muscat; Editing by Sonya Hepinstall)