The key themes


May 11, 2015

Since this is my last article in the series, I would like to indulge myself a little by summarising some key themes.

Oman grew to be the wonderful and successful country it is by exploiting its hydrocarbon reserves within a progressive and modernising environment.

However, it is approaching a point where demand for services and infrastructure is beginning to outstrip the ability of the state to fund them, so the private sector needs to expand to the point where it becomes a much larger contributor to the non-hydrocarbon economy.

The government has long recognised this, starting with the tourism initiative and encouraging and funding new businesses. But more needs to be done - by the private sector itself. We need foreign inward investment in Oman to diversify from our oil and gas heritage.

This will only happen if the investment produces returns which are equal to, or better than, investments in other countries. You may not worry too much about this. However, increasingly markets can be accessed from anywhere.

Even if you have no international ambition for your business, international businesses may well have an ambition for yours. Because of the impact of globalisation, where the world is gradually becoming one marketplace, businesses therefore need to be judged against their international competitors - even if they do not compete internationally.

It is quite easy to be price competitive in the crude oil market since the price is set in dollars adjusted for quality and location. The non-oil sector is different. The use of the Internet provides price comparisons and one can bring in products from anywhere in the world quite easily.

Free Trade Agreements make it easy for a foreign company to invest in the country without a local partner. So even if you are a business which only operates in Oman, you will probably eventually face competition from outside, unless you are providing basic local services.

Given that our trade barriers are being lowered all the time, we have two choices: To compete internationally as a high-wage economy or as a low-wage economy. Oman is a medium-wage economy. There is therefore a danger of being squeezed from either side.

It can only survive in the new world either by committing to become a low-wage economy like, for example much of South Asia, or go for serious increases in labour productivity through capital investment, technology and training and create a salary headroom for Omanis to thrive in. The former would obviously be quite wrong: which leaves the latter.

The problem is that much of the management of companies and many senior civil servants in Oman have not been exposed to operating in high-wage economies and a lot of training in both skills and techniques is required. And not just training: there need to be changes to a whole raft of legislation and standards.

Unfortunately, while training people to be plumbers, welders and electricians is recognised, the need to train management is largely not appreciated partly because many of the attributes that well-rounded managers need are 'soft' skills and partly because they probably feel that they do not need to be trained.

The difference between having good, trained management and poor, untrained management is vast: The success of a company is largely dependent on the quality of its management. This is even truer in this harsh competitive world we are entering.

Clearly in a capital - as opposed to labour-heavy world, people require higher skill levels. They also need to be more work-oriented, since a sophisticated piece of equipment needs to be manned with greater commitment and concentration than, say, a spade.

While there are many Omanis who meet the highest international standards in terms of that knowledge, experience and commitment, there are many who do not. I believe this to be largely the fault of employers and their almost total lack of interest in staff development.

The difference between attitudes in Oman and those in many other countries is that here in Oman, many companies still believe that training is a cost, rather than a benefit and even a duty. While on the subject of training, around half of all Omanis are languishing on the minimum wage. This is plain wrong.

Why does it happen? Again, it is due to a lack of interest in, or perhaps knowledge of, the benefits of helping people to achieve their highest potential. They must be helped off the bottom through recognition and development of their potential skills.

Salaries will have to increase and in return they will be expected to commit their working day to their employer, whether company or ministry. For every one per cent increase in GDP, between 20,000 and 50,000 expats come into the country.

This is not sustainable since it creates extraordinary pressures on infrastructure, amongst other things. This is at a time when the number of Omanis employed in the private sector have been flat-lining (probably due in part to differential changes in minimum wage rates).

Obviously this must change. I absolutely believe therefore that most jobs should be filled by Omanis. However, one sees comments that all jobs of a certain seniority should be filled by Omanis.

This would not be helpful as companies need to be managed by the best people for the jobs. No country in the world operates restrictive practices like this, and for very good reasons. However, there has to be a real commitment to train Omanis to the highest levels and for the Omanis in return to be prepared to work their way through the system before they take a stint at the top.

So, it’s really quite simple. Invest in people, invest capital to replace labour, always seek out new technologies whatever your company produces, and develop all your employees so that they can achieve their maximum potential.