Interview : Ali bin Masoud Al Sunaidy
How can the government maintain a prudent fiscal policy while supporting local businesses?
ALI BIN MASOUD AL SUNAIDY: In light of low oil prices, the government started rationalising its subsidy policy. In January 2016 we decided to deregulate the prices for refined petroleum products, revising them on a monthly basis. The price for regular petrol, however, was capped until a compensation mechanism was established. In 2017 the Council of Ministers decided to apply cost-reflective tariffs on power supplied to major customers. To maintain its prudent fiscal policy while continuing to support local businesses, the government announced that public investment and the budget allocated to the National Programme for Enhancing Economic Diversification would remain unchanged.
Additionally, support programmes for small and medium-sized enterprises (SMEs) have been launched, and the Oman Technology Fund has been established. The fund was endowed with an initial capital of $200m, aimed at promoting new and innovative business ventures that help economic diversification.
What policies are being developed to support SMEs and improve conditions for new businesses?
AL SUNAIDY: The government established Invest Easy, a one-stop-shop service, and an online single-window system for trade. We also removed the minimum capital requirement to start a business and launched an SME development authority, Riyada. Riyada provides support to SMEs through a wide range of business advisory services and training programmes.
Other legislative frameworks and policies are currently being prepared to further encourage foreign investment, private sector participation and the creation of new companies. These include foreign direct investment and mining laws, a public-private partnership law and the privatisation of six state-owned enterprises. The government recognises the importance of SMEs when it comes to job creation and economic diversification. Enhancing SMEs’ contribution to diversification and private sector-led growth has been a principal objective in all our five-year development plans – including the most recent, our ninth development plan, which targets the removal of obstacles to doing business in general, with a specific focus on stimulating SMEs, to improve Oman’s global competitiveness.
We are also in the process of devising a framework for the Public Authority for Investment Promotion and Export Development to improve the business environment and create a national strategy for private sector development. The plan outlines the need to update trade regulations and processes, including simplifying cross-border trade procedures and implementing systems to improve efficiency; and enacting other policies, such as a bankruptcy law, to provide protection and flexibility to investors. We are also implementing a number of policies to meet the demand for highly specialised skilled labour, including the National CEO Programme, the National Training Fund, and the National Leadership and Competitiveness Programme.
Given that oil makes up nearly 68% of government revenue, to what degree do fluctuating oil prices impact the rollout of strategy?
AL SUNAIDY: Since the drop in oil prices in the second half of 2014 safeguarding fiscal sustainability has been at the forefront of the government’s economic development strategy. Previously, oil prices have been the major determinant in setting budgets, with little – if any – consideration to the business environment or business cycles. Accordingly, general budgets became highly correlated with oil prices. The government was obliged to introduce some fiscal disciplinary measures to reduce public expenditure and regain fiscal balance, which encouraged both local and foreign private investment. With the aid of sovereign buffers accumulated over the years, Oman can afford to spread its reforms over the medium term instead of frontloading them.
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