To enhance its economic diversification programme, Oman’s government has taken steps to prepare the workforce for new private sector-based industrial developments. Concern over the long-term future of oil reserves has sparked investment not only in industrial infrastructure – through industrial estates – but also into legal reforms, training programmes, financial products, research initiatives and entrepreneurship incentives, all aimed at gearing the economy toward diversification.
As the industrial parks grow in size and number, they have brought peripheral small and medium-sized enterprises (SMEs) that serve the major industries. The government helps foster this relationship through downstream incentives. For example, it has committed to the renewal of mining licences only to firms that export value-added materials, which create jobs in downstream processing. The government now has plans to construct eight new industrial estates throughout several governorates, in order to decentralise the current concentration of economic hubs on the coastal areas. As industrial activity begins to pick up in the interior, the emergence of SMEs in such areas will surely follow.
Employment
With a growing young population and a tightening public budget, Oman faces obstacles in ensuring employment opportunities. The newest labour law, announced by the Shura Council in July 2013, put a cap on foreign workers at 33% of the population. Other laws designed to promote local employment are being discussed, such as a new taxation on foreign worker remittances, according to the Economic and Financial Committee of the Shura Council. “Expatriates are difficult to hire due to Omanisation requirements, and finding local talent has proven problematic,” Jacob Kuruvilla, country manager at Hempel Paint, told OBG.
In addition to high Omanisation standards, measured at 35% for the industrial sector, such policies have lead to higher costs for firms to do business in Oman. Furthermore, the reliance on foreign workers illustrates the Gulf-wide lack of low-cost, skilled labour, and policies limiting the employment of foreign workers may create a significant gap in the labour market. At the same time, such policies are aimed at building up technical capacity among Omani citizens and tailoring their skillsets toward private sector employment. “The cost of manpower is the greatest challenge we face in Oman. Over the last five years the cost of labour has risen by 5%,” PK Raj, general manager for Oman at Asian Paints, told OBG.
SME Funding
Bolstering SMEs, a segment that accounts for the majority of Omani employment, is a strategic objective for the government. To address the high cost of loans, the Central Bank of Oman has stated that banks are to extend credit to SMEs at the lowest possible interest rate, and not be guided by collateral in credit decisions.
Aside from new SME-friendly banking regulations, various assistance programmes are also in place to spur employment. In November 2013 Bank Muscat implemented the Wathbah SME Non-Collateral Programme, which limits collateral requirements for SMEs. The programme ensures contract, supply and asset financing, and businesses with an annual turnover below OR2m ($5.2m) qualify for the scheme’s non-collateral financing, according to the Times of Oman. The roll-out of such schemes is expected to provide cash flow to businesses and entrepreneurs, helping to overcome one of the biggest inhibitors to SME growth in Oman.
Entrepreneurship
Historically, the abundance of public sector job opportunities – coupled with the prospect of working for a major private company – has attracted the country’s top talent, making the idea of a startup a secondary option.
Those who took on self-employment often did so out of economic necessity, rather than in pursuit of an opportunity. According to a 2012 report from the UN Conference on Trade and Development, “The problem is not lack of entrepreneurship, but rather a negative macro environment and infrastructure, which channels entrepreneurial activity into unproductive and destructive economic directions instead of wealth creation. This is especially visible in three core issues: opportunity to enter, access to capital, and access to skill and knowledge.”
Cultural Adaptation
Like other states in the region, Oman’s robust oil industry has limited private sector development and the entrepreneurial activity that arises from a diversified economy.
However, this trend is changing. While the support structure for budding entrepreneurs is still in its infancy, many government and privately funded programmes are now emerging aimed at nurturing the sector, and the cultural adaptation regarding acceptance of entrepreneurship as a primary professional option is beginning to take shape.
Sharifa Al Barami, the founder of Al Jazeera Technical Solutions & Training, recently launched Oman Entrepreneurs Network, which aims to create the sultanate’s first coworking space in order to grow the culture of startup work. “Entrepreneurs in Oman do need a focal point where they can gather, collaborate and cooperate, as well as just exchange ideas,” Al Barami told local media. Moreover, the gender split within the Network is 50:50, illustrating a telling correlation between today’s entrepreneurial culture and women’s empowerment.
Since its inception in 1998, the Fund for Development of Youth Projects has supported over 70 entrepreneurial projects. The Intilaaqah Enterprise Fund, recently merged with Shell’s Regional Enterprise Fund, also aims to promote entrepreneurship through extensive training and consultation programmes.
Further demonstrating the growing attention given to entrepreneurship, the Information Technology Authority (ITA) launched the Sas Programme and Centre for Entrepreneurship in March 2013. The aim of the ITA is to create ICT-focused incubators that will serve upcoming tech start-ups. The ITA anticipates incubating some 60 companies (30 virtual and 30 physical) over the next two years, according to the local press. In addition to the ITA’s role, the Ministry of Manpower plans to create incubator programmes across Oman’s five technical colleges.
Knowledge Oasis Muscat
As the epicentre of Oman’s IT services, Knowledge Oasis Muscat plays a big role in catalysing technology-focused entrepreneurialism. Aside from housing the major international technology companies such as Hewlett Packard and Microsoft, the 20,000-sq-metre science and technology park provides incubator services to start-up companies, including subsidised offices, utilities and business support services through its Knowledge Mine programme. As of January 2012 the programme hosted 15 new firms. The technology park is also home to two IT- and ICT-focused colleges, the Middle East College and Waljat College of Applied Sciences. Approximately 3000 students are currently enrolled as undergraduates in these programmes.
Read More from OBG
