Global Insight : The Government is making great efforts to enhance the ease of doing business and to improve Oman’s competitiveness. FDI in the Sultanate rose by more than 13 per cent in the first three quarters of last year over the previous year’s level, according to latest government data. How would you describe today’s investment and business environment in the Sultanate?
A: We have done a great deal in the ease of doing business, we have used a very stable and expandable platform called Invest Easy, which has taken into account the relationship between the Ministry of Commerce and Industry, the Ministry of Manpower, the Royal Oman Police, customs, visas, and now we are adding on environment, tourism, municipalities, etc. This has allowed us to jump three positions between 2016 and 2017; from 69th to 66th place in the Global Competitiveness Index. We also jumped fairly well in the starting a business category, we jumped 127 places in the World Bank’s Ease of Doing Business rankings from 159 to 32nd position in 2016. We are now the number one in the Arab world in the speed of starting a company. You cannot beat the speed of Invest Easy.
We have made changes to our law, especially in areas related to capital requirements at the starting of a company. This has all yielded good benefits, but we are going to work harder to move into the bigger index. We are in the process of upgrading the Invest Easy platform, which will make it even faster and will be connected to more agencies. That is a near-ending process. The numbers speak for themselves: 159th to 32nd place and 69th to 66th place.
GI : Oman is implementing a development plan that focuses on diversification, industrialization, and privatization, with the objective of reducing the oil sector's contribution to GDP from 46% at present to 9% by 2020. In the five-year plan, you will focus on five non-oil sectors, namely manufacturing and industry, minerals, tourism, logistics and fisheries. What are the latest efforts under your Ministry in order to contribute to this economic diversification?
A: As a nation, we have adopted a program called Tanfeedh. It is an imported experience that we have modified, localised and added value to here. We have identified five sectors, manufacturing, tourism, logistics, fisheries and minerals. We have already concluded what are called labs for Tanfeedh (Tanfeedh means implementation in Arabic). We have done it for manufacturing, tourism, logistics and fisheries and we are now doing it for minerals. We have also carried out two enablers: manpower development and innovative finance; we are not doing enough towards being more financially innovative. Another enabler is energy, where we are trying to look seriously into renewables.
We have been doing some work on restructuring the economy, we moved to the fair price of gasoline; we removed subsidies from petrol products and the business community has accommodated to it. Furthermore, we moved to cost-effective tariffs of electricity for big producers. We have done fairly well, now we are more efficient and we are starting to see factories that are using solar energy. For example, chicken farms are now moving into solar energy. Alternatively, in areas like Duqm, which is a very important free economic zone, windmills will do the job. Wind is so effective that we can combine the two with gas to create a solution to give us some of the most competitive alternatives in Oman. These are some of the new opportunities coming to Oman.
Currently, manufacturing represents 10% of GDP, logistics 6.8% and tourism 3%. Fisheries will be around 0.6% and mining at 0.5% by the time we complete the Tanfeedh project. Nevertheless, in terms of aggregate percentages, oil and gas still represents the biggest proportion of GDP and we are still discovering more gas as we speak. Therefore, we prefer to talk about values, not percentages. I will give you an example, manufacturing continues to grow above 3.5% and sometimes even 4%, reaching OMR 5.5 billion in the 2017 statistics. This has been a very stable sector even during the last three years whilst going through tough times. Our exports of manufactured goods are increasing. As we go ahead with our petrochemical businesses in Salalah, Sohar and Duqm you will see another leap jump in the manufacturing sector within the next years. Previously, the petrochemical business represented less than 5% of GDP, then we jumped to 6%, 7% and 10%. We are driving manufacturing to exceed 10% sooner than later.
Tourism is something to watch for; it has grown 16% in the last year and keeps growing. The appetite for investment in Oman is increasing; we have had an increase in the number of hotel rooms.
We have also seen how the lab of fisheries has changed the mentality of how the sector is being driven. Now, we are getting ports that are designed, build and operated by the private sector.
Regarding metal, we have expanded our capacity of steel, limestone and gypsum and we should see further expansion of steel and aluminium products.
We are starting to see innovative ways of financing health care. This is the beginning of moving healthcare to a new paradigm, where lifestyle will come in and where private companies will be encouraged to participate in healthcare through PPPs.
By the end of the year we expect to have a new PPP law, a new companies law and a new investment law. These three laws will set the scene for the next two years of the five-year plan as well as further down the line.
GI : Speaking about these laws, in October 2016 you announced that greater use of PPPs was an explicit goal of the ninth five-year plan, which also reaffirmed a commitment to collaborate more closely with the private sector on its public investment agenda, and to strengthen the private sector’s efforts to contribute to the development of the national economy. What is the role you envisage the private sector having in the future and development of the Sultanate?
A:The role of the private sector in the further development of Oman is huge. For example, we have already established the Real Estate Investment Trusts (REIT) in the stock market. Real estate, as well as ownership of properties and buildings will change hands between the government and private sector. You will see more entities renting as opposed to building and owning. REIT will allow us to offload a few of our hotels to the stock market without losing control and without losing capability of expanding them and stimulating them to grow. One area where the private sector will play a role is by becoming an owner of the REIT.
The second, which is equally important, is that we will expand into renewables through the private sector. Although power is already privatised, we will further encourage private companies with the new pricing, which will push them to sell renewables to each other in peak hours. It is already happening; the government is launching a solar and a windmill plant. The private sector will come and own them and do exactly what they did with gas combined cycle turbines.
From now on, you will not see government funding in industrial estates because we were crowding out private investment. As soon as we opened for borrowing and investments to come to free zones it flooded them. Most of the new housing buildings for the staff accommodation and a lot of offices are executed by the private sector. As soon as we started to say we will borrow for roads, banks ran to us and said they were interested, so we did a tranche of OMR 50 million in the industrial estates and we will do another one before the end of the year. We see big appetite.
Food security is another area where we see the private sector involved in. A lot of companies are now showing interest in food security projects whereby some of them are located in ports. Silos, for example, will be built by the semi-private sector in a PPP relationship, silos of wheat followed by silos of rice. We have a fund already established with Japan that looks at areas of food and food security and it is becoming participant of projects in Oman. Additionally, we have an interest from the Kuwait-based Gulf Investment Corporation (GIC), which is a Gulf Cooperation Council (GCC) fund. Both the farmers in Japan and the GIC are interested in funding food.
We see the private sector playing an increasing role in financing ports, airports and airplanes for Oman Air. We see new hotels coming and old hotels being sold by the government in the future, maybe sometimes a PPP. Finally, I see a PPP in water networks; as much as we see the Japanese interested in electricity generation, we will see them interested in water production, and further down the line with a regulated public utility of water that will be a PPP or some kind of financial scheme. The market has the appetite to do so and the government will try to accommodate. These are some of the changes that are expected.
GI : You are also the Chairman of the General Authority for SME Development. Independently from a country’s development plans, structural GDP change requires increased contribution from small and medium-sized enterprises (SMEs). How is the government supporting and growing the SMEs of Oman?
A: We have a fund that is called the Al Raffd Fund. It has given loans to 1,800 people in the last three years and automatically created 3,500 jobs. There are approximately 30,000 subscribers to the Riyada, which is the Public Authority for SME Development. Here we have seen a very good relationship with Japan, whereby SMEs came and worked with Omanis to create new products that are innovative and use local designs, but with materials and technologies that are widely used in Japan. Furthermore, we have made many connections with perfumeries in France, chocolatiers in Belgium, food and restaurants in Italy, ICT in Singapore, etc. We send people all the time to other countries; we are constantly looking at opportunities for these young people. The Chamber of Commerce and Industry has been very active over the last few years in taking SMEs abroad. The recently inaugurated Oman Convention and Exhibition Centre has attracted a number of SMEs to the market so we do a lot of shows for them. Within this ecofriendly environment we have induced entrepreneurship and innovation and it seems that a lot of the innovation comes from the SMEs now – logistics, ICT, food-processing, chemicals, 3D printing, construction, tourism, etc.
GI : Japan is Oman’s fourth trading partner and both nations have enjoyed healthy and mutually beneficial bilateral relations since the 1970s. Indeed, business links are constantly growing with encouragement from both parties to further explore business opportunities. On November 2017 you were conferred ‘The Order of the Rising Sun, Gold and Silver Star’, in recognition of your substantial contribution in promoting bilateral economic relations and mutual understanding between Japan and the Sultanate of Oman by H.E. Shinzo Abe, the Prime Minster of Japan in person. In which areas do you feel there could be a stronger corporation and how can Oman benefit more from this long-standing partnership?
A: Our move towards the agreements of promotion and protection of investments, avoidance of double taxation and higher education are all very important. The Omani Permanent Corner at Tokyo University, the Gulf Japan Food Fund (GJFF), the project of treating hazardous wastes from refineries; all are good projects that are leading us to strengthen the relationship.
In 2016, Japan was number three of 215 countries in terms of importing oil from Oman and the second biggest importer of LNG. This already shows that Japan is a great partner. We have seen general imports from Japan increase over the years. We had approximately OMR 500 million direct investment by the end of 2017 and we have about 32 Japanese companies working in Oman. As we complete our ports, become more attractive and discover more gas this relationship will continue to grow.
On the other hand, we are also seeing Japanese exports to Oman. Their cars, in particular, form a big chunk of our market, as do electronics, and initial thoughts show that exports are bound to increase due to gas, upstream and downstream indutries.
GI : Japan’s Foreign Affairs Minister Taro Kono said that his country seeks Oman’s cooperation under the Free and Open Indo-Pacific Strategy in the Middle East, which plays an important role for the economic security of Japan. H.H. Deputy Prime Minister Fahad expressed his support for this strategy. How do you think Oman could further help Japan to implement this strategy, which is supposed to bring prosperity not only to the Far East but the Middle East and Africa?
A: There is work to do at the bilateral level since at the multilateral level it has not been doing its best over the years. As our countries seem to want to look at bilateral connections I feel there is a lot they can do in downstream. Whether gas is used as a source or as energy, Japan can do a lot more than what they are doing now.
There are also niche markets like agribusiness, where Japan has been capable of providing state-of-the-art technologies over the years. We do not have a sufficient amount of water so we have to be very careful with it. Japan has those technologies. We could buy them from anywhere in the world, however, if Japan initiates an interest to become a co-investor they stand the chance not only to sell technologies but to make it work for the both of us. Japan also wants minerals and since Oman has a lot of them, it’s time for Japan to become active in owning some of the activities in minerals.
We hope that Japan will have an interest in the fisheries sector, as fish farms will increasingly become a feature of the economy. Our coastlines have plenty of space to accommodate everyone and Japan is well known for importing fish from all over the world.
We have an interest in any technology that will reduce the dependence on unskilled labour. Currently, we are fiddling with the technology of drones for the purpose of carrying out activities that only we Omanis can do, such as the pollination of date trees. We can test these technologies in places like Duqm. Therefore, I have been giving a thought to some countries and Japan could be included. We started with a technology fund of USD 200 million, which has been buying technology both locally and around the world.
We are planting one million date trees in Oman. We have planted 600,000 and we still have to do 400,000 more so we need the right technology to take advantage of everything from the tree. Some people would like to see us do more with our traditional partners in technology. With the exception of oil and gas we have done limited work with Japan.
Regarding the success of solar energy, it is not only the technology source per se but the financing of it. People shy away when we bring in a huge project from Exim Bank, for example. It is usually buying a factory or the equipment, but if you say we will bring you electricity it is considered a different game. However, what if this was bundled with manufacturing and energy, 2 in 1? This will change the relationship between Oman and many countries, when we feel they are giving us an extra mile, which is adding the favour of finance to the equation.
Furthermore, we have heard that some of the Japanese companies are very good at managing hospitals. They have to become competitive and make a bid that we cannot refuse. The management of hospitals is definitely something that can help Oman in a big way.
Societies like Japan have done a great deal with house care for example. These are all plug-and-go solutions. Maybe next year we see relationships in this area, which nobody has touched before. Our average life expectancy is now 78 years, soon to be approaching 80 years. We have changed, we have become healthier, live longer, suffer less car accidents, eat better, have more sanitary, better healthcare and medication; we start thinking about things differently. By the end of the 1960s the average life expectancy must have been 50 years. Thanks to His Majesty and his wisdom, his continuous efforts since then to transform this country into what it is today, we are proud to say that because of all this combined we have not entered any war since His Majesty came to power. Therefore, safety, healthcare, lifestyle, education, electricity, sanitary, water; all of this in 48 years has changed our average life expectancy from 50 years to nearly 80 years.
GI : There is this race of many countries to attract the much-needed FDI. Why should an investor or even a tourist choose Oman?
A: Tourists will undoubtedly have safety and beauty combined. We are a very welcoming country and safe in terms of everything, i.e. we are disease-free and have very good healthcare. We are adding more ambulances on the roads. Our roads are becoming bigger with three and four-lanes which adds to the safety. We are tolerant towards the outside world, we accept people the way they are and do not prejudge them. People realise this as soon as they arrive here, they feel welcome. It is in our nature and has to do with our location. Over thousands of years we always looked at the sea. We understand what it takes for a person to leave their home and come and look for a job, or come just to explore and trade. We, ourselves, have been away from home for a long time for all the three reasons so it is in our DNA.
We speak languages, when you go to a country that speaks different languages you understand the tolerance in thinking, because languages are merely the mirror of your thoughts. Therefore, languages carry attitude. We speak a number of languages: Arabic, English, Swahili, Urdu, Farsi. Whatever the language, we have a way of expressing ourselves in it and when you express yourself in someone’s language you tend to think like them. Oman is a tolerant and friendly nation because we think like others and we use their language to do so. This is one reason.
The second reason is beauty. His Majesty was sharp and clear regarding protecting the environment and our identity; our castles, mountains, beaches. If you come to the Arab world today Oman will give you a certain kind of Arab world, it has its own charm so it is slightly different from many although it has kept certain elements. We still have habits of cooking that go back 4,000-5,000 years. We have habits of performing music that can be traced back hundreds of years.
The visitors can have exceptional experiences that they have not encountered anywhere else in the world, which makes us unique.
Travelling around Oman you will see hospitals, educational institutions and shops that are similar to those in Muscat. This development has gone to the rural areas and encouraged people to discover new ideas, produce new things and sell them abroad from a small town. We tend to be happier this way as we are in the company of family and friends in our comfort zones. We allow development to take its pace; we do not force it upon our people.
The primary promise of His Majesty was to make people happier. When he started he went to people; people did not come to him. He knocked on door to door, went to every village and drove in harsh conditions but look at the results now. You can get 3G in the desert and download music on YouTube. You cannot get this in many places around the world. Some countries can be rich but you do not see a decent school or healthcare institution outside the big cities. Not in Oman.
More than 85% of our people own their land and houses and more than 95% are connected to the grid one way or another. Approximately 99.9% of our people have access to water through a tanker or through a pipe, no matter where they are. It is the law that we should provide them with water. We have a very solid basic law.
Why should anyone visit? There are a number of ambassadors, especially Europeans, who bought villas here and never went back. They even start acting like us, becoming more tolerant, losing some of their stringent beliefs, their character and slowly become a part of this floating, quiet, discreet character of Oman. They melt in the society. We are also tolerant to any religious beliefs. Fortunately, we also kept away from all the conflicts. In fact, we act in our capacity to become catalysts for peace. As a nation it is our policy to always move towards peace.