How has Al Arkan differentiated itself from competitors in recent years to position itself as a leader in Oman?
In this difficult market, we selected clients with whom we have good relations based on our past performance and did not spread ourselves too thin on too many projects. We knew how substantial an order book we needed for 2017 and the coming year, and we very narrowly focused on these particular clients. We book projects with our required growth margin, balancing overages and profit. At this stage, we do not take on any project where there is a high risk or where we suspect cash flow problems.
In which segments do you see the most growth?
Right now, many clients are not moving ahead with the new projects due to some pessimism in the market. There is lot of pressure on margins, and many construction companies are ready to work even at direct cost to keep their resources engaged. For many smart investors and clients, this is a good time to start projects as low margin quotes from construction companies will improve their ROI. So, we are hopeful that smart clients will keep on building new residential and commercial projects, hotels, schools, and shopping malls. A company like ours operates in a segment where project value ranges from OMR5-10 million and where private investors are more active. Larger companies, however, need bigger projects, around OMR50-100 million. Such investments for infrastructure projects like highways and the Duqm Special Economic Zone do not generally come from the private sector, but from the public sector.
How do you see the cash flow problem affecting the construction sector at large?
Many companies are facing cash flow problems. During good times, it was easy for all companies as new orders kept coming along with mobilization advances and timely payments of work invoices by the clients. However, at present there are few projects in the market and same numbers of construction companies chasing those projects. At the same time, projects are facing delays in payments from the clients' side, leading to cash flow problems for many companies. Any company that does not have enough bank support to withstand this period is definitely suffering.
Do you see the central bank's bond issuance helping this?
I believe the issuance will be a great lifeline. The government is continuously trying its best to support private sector. There will surely be a trickle-down effect of this USD5-billion injection of foreign funding. However, the budget has already been set for 2017, and there will be a deficit. USD5 billion is some relief, but ultimately it will not be enough. Many people predict that oil prices will be up by a reasonable amount by the end of 2017 and that the government's revenue will be back on track.
Do you have any expansion projects?
We have a plan for the next five years. We have identified some good clients with whom to work. We understand what they are planning over the medium term, and we are focusing on those projects. We have plans to explore opportunities in Salalah, Sohar, and Duqm areas and are actively working on some tenders in these locations. As we are a board-registered, excellent-grade construction company, we are also exploring opportunities to bid for government projects.