JOINT STEPS

Oman 2017 | DIPLOMACY | VIP INTERVIEW

TBY talks to Hafez Ghanem, Vice President of The World Bank for the Middle East and North Africa, on the areas of cooperation between the institution and Oman.

Considering Oman's push toward economic diversification, what is the scope of the recent technical cooperation agreement signed between the World Bank and Oman?

The World Bank has had a decades-long partnership with the Sultanate of Oman, providing technical assistance across several sectors and on important reforms. The agreement we recently signed with Oman focuses on supporting the implementation of the new development plan. Some of the areas for which the World Bank is advising the Omani government relate to the core development challenges facing the Gulf region, such as job creation and economic diversification. To address these challenges, the region must focus on reforms that give more room for private sector initiatives, improve education and skills, reform the non-targeted subsidy schemes, and improve labor market regulations. The bank is working with the Omani government to identify key impediments to private-sector growth and to improve the investment climate. We are advising on policy recommendations to enhance competitiveness, diversify the economy, and generate employment. The bank is also supporting improvements to the education system to ensure Omani students are equipped with 21st-century skills and enhancing officials' policy formulation and implementation capacity. In the Gulf, often times, public spending is not reflected in the outcomes; therefore, with the assistance of the bank, Oman's Ministries of Finance, Education, and Health are completing two public expenditure reviews in education and health to assess expenditures, the efficiency of inputs, and the extent of outcomes achieved. The World Bank is also supporting the Central Bank of Oman to develop a national payments system strategy to modernize the payment system in Oman. As it takes strides toward the future, Oman is also keen to bring its traditional industries forward. Omanis have requested the bank to link the government's investment program in the fisheries sector to their vision of private-sector led growth, while maintaining sustainable management of this natural resource. We are proud to work with the Omani government to ensure that our engagements transfer knowledge, develop institutions, and enhance capacity.

SMEs are seen as vital instruments in achieving sustainable diversification for GCC countries. How would you assess the Omani banking sector's support for SME growth and what further measures can the country take in this regard?

We know that two factors drive diversification and job growth: the ability of firms to start and their ability to grow. The Omani government has set up several programs to support financing for micro and small enterprises; however, SMEs still report “access to finance" as one of their top constraints. This limitation affects medium-sized firms more than small or large firms. Distrust by commercial banks and scarce equity financing create a “missing middle" of capital for medium and growing enterprises. Banks are less likely to finance medium-sized firms than small and large enterprises and, when they are financed, it is at higher interest rates and with higher collateral requirements. Legal and institutional reforms, as well as regulations, are still required to enhance access to finance for SMEs. Oman's credit infrastructure should be strengthened, which includes improving the credit information system and introducing a secured transaction law, as well as a modern collateral registry for movable assets. We need to make sure public sector programs that support SME financing are designed effectively and efficiently and that their results are continuously evaluated. Another measure Oman should consider is to encourage banking competition. While Oman's banking sector is less concentrated than other countries in the GCC, the top-five banks still account for 80% of total market share.

What were some of the advancements made in Oman that assisted the country in its 11-point jump in the World Bank's most recent Logistics Performance Index?

Oman has made major improvements to its trade logistics. With Oman's strategic location, it has the potential to become an important international sea transport route and a logistics gateway to the region. In terms of ease of trading across borders, it is a top performer in the region. In doing business 2016, it came second only to Jordan when compared to its neighbors, and Omani firms do not perceive customs and trade regulations as a major constraint. The Omani government has worked diligently on easing the processes related to customs and trade, which is reflected in its ranking. In 2016, the government established an online one-stop shop, “Bayan," for clearing customs. The Bayan declaration processing e-Service enables importers or exporters to declare and clear the goods with Customs, while the Bayan Manifest processing e-Service enables the online submission and registration of manifest for shipping agents and freight forwarders/consolidators. In 2015, Oman passed a major reform whereby it reduced the time for border compliance for both exporting and importing by transferring cargo operations from Sultan Qaboos Port to Sohar Port, which resulted in an improvement in seven ranking spots on Trading across Borders between the doing business in 2015 and 2016 reports.

What joint steps being taken to expedite the execution of the articles of cooperation between Oman's Ministry of Finance and the World Bank, as well as steps to develop public financial systems in Oman?

The Ministry of Finance is keen on connecting Omani entities to access World Bank advisory services. World Bank assistance always focuses on knowledge transfer and strengthening capacity across its engagements. Our support to Oman is focused on improving governance and institutional capacity in the country. The World Bank's ability to convene powers and facilitate dialogue among stakeholders on various economic and sector policy issues is well regarded. The World Bank has an excellent relationship with the Omani government and our programs with Oman have been wide-ranging. World Bank engagements range from support to the core economic entities in Oman, the Ministry of Finance, the Supreme Council for Planning, the Ministry of Commerce and Industry, and the Central Bank, including coordination among those entities as well as Ministries of Transport, Agriculture and Fisheries, Social Development, and Education. Our collaboration with the Ministry of Finance in the area of public financial management is progressing very well. I had excellent discussions with HE the Minister on these reforms during my last visit to Oman in April 2016 and during the World Bank/IMF meetings in Washington DC this past October. There is a clear vision and ownership for the reforms that HE the Minister and his team is championing and we are glad to be an effective partner to the Ministry in supporting these envisaged reforms.