PUSHING FOR SUCCESS

Oman 2017 | ECONOMY | PANEL EVENT

Innovation is the name of the game in Oman not just to grow but also to create more added value and capture opportunities.

How does infrastructure, not only physical but also intangible, affect your business?

HILAL MOHAMMED HAMOUD AL BUSAIDI The mining sector did not have the focus and attention of the government or the private sector in the past, but now there is enough determination from the government that the mining sector should play a big role. There will be more investment in exploration. It is important to invest in order to discover what is under the surface. Ore minerals, such as non-metallic minerals, like gypsum and limestone, will also play a big role. To attract such investments the proper infrastructure is required. Looking at the location of these minerals, they are in areas where the logistics transportation of the minerals to the markets—locally, regionally, or internationally—is a bit difficult. With better connections, companies will have the ability to expand their manufacturing and mining activities without the huge investments that are required now. We are also in the process of establishing a company shared between the government and locals called Mining Development Oman. This company will hold a type of consortium for locals and small businesses to be able to expand in their business and be able to sell them out. We also work on training and education programs.

GERT HOEFMAN The manufacturing sector consumes 70,000 kilotons of copper, which currently comes from Russia, Africa, and South America. So we are happy with the initiative to have mining in the country, as it will definitely support our in-country value. When we look at the manufacturing sector in Oman, we recognize that the sector is characterized by commodity producers. One of the characteristics of commodities producers is that they have to recognize that the added value they are able to create is rather small; we are in concrete, aluminum, steel, and wheat, and we look at the index on the Muscat Exchange, which is all commodity based. In order to sustain the businesses in the country we have to innovate and try to create more added value in order to position ourselves not just for the domestic Omani market but also the market abroad. We have to look at how we can structure this innovation and the kind of instruments we can use because innovation is not only about R&D but also on the marketing of products and how we can pack and promote our products better. One of the enablers to that is something we did with Oman Cables, where since the beginning of January we have a majority shareholder coming in from the largest cable manufacturer in the world. Through this strategy, by inviting foreign competence even through shareholding in Omani companies, we can accelerate innovation because it provides quick access to knowledge that we can use in order to be more successful in Oman and increase our export position, since our market is small and manufacturing is a certain scale. We need to export and allowing foreign partners through shareholding or cooperation to bring in this knowledge is a great way to speed up innovation and diversification.

PANKAJ K. KHIMJI We are in a business that is mainly distribution, retail, and logistics. Infrastructure in Oman is actually quite commendable. Now the diversification of moving some logistics operations to Sohar has put up a different challenge, meaning that we have to transport 300km away from Muscat, which is the main urban development area. The issue is not the infrastructure but the soft side of managing that infrastructure. Are our ports the most efficient in terms of clearing cargo and services? No. Are our airports today able to handle the goods and free movement of goods efficiently? No. So we need a major efficiency quotient to come in and manage this infrastructure and make us more productive, profitable, and attractive to the new economy. I will keep repeating this work, as it is the ultimate goal of Tanfeedh. It is the intangibles, the mindset, and the requirement to put down KPIs and benchmarks.

JAMES WILSON The tourism infrastructure in terms of getting people places by roads or airports is at a European standard in this country. The problem is that our tourism infrastructure is 13 years out of date. The best hotel here, which was built 13 years ago, is unoccupied. The hotel is really popular with the international and Arabian market, but nobody has actually copied it in Muscat. There are few beach hotels in Muscat. There are the roads to take us there and to the airports, with a new airport coming and new routes with Oman Air, but the product is significantly out of date. The coastline is 3,200km, and there are five five-star hotels in the country, but perhaps only two of them would compete in the Dubai market. In Dubai there is 86km of beach and 35 five-star hotels. There is not a single Arabian hotel in this country, although when they come here people want Omani hotels where you walk in and feel Arabian. These are the missing things that are required.

Do you see the ongoing Tanfeedh program as effective in pushing a reform agenda forward?

GERT HOEFMAN It is well structured, there are good feedback loops, and the reporting that is done is well organized and recognizable. The reports are readable and understandable, so the process is good and almost feels like a honeymoon period, because, for the first time, everyone is together, talking, and exchanging ideas, which is something I have not seen before in this country. After the six weeks of the program we have to take the next step but the signs that these next steps will be successful because there is a great deal of participation, a broad field, and a commitment from all parties. It will be a successful program, and everyone understands the urgency that we have to do something about the physical breakeven point. There is an absolute necessity to do this, and it is well received by the private sector as well as the government participants.

PANKAJ K. KHIMJI I thought it would never come out in the same way, but in four weeks we have made great progress. By the second week we said let's not press issues, let's determine how we can be more solution orientated or more efficient. By then, they realized it was not about finding faults and pointing fingers but about making us better. We have quick wins, a progressive plan of the change mechanism, and we are addressing something crucial. The biggest one we are looking at is the Easy Invest platform, which the Ministry of Commerce set up in order to establish a company. That platform is great but is completely isolated and connects with nobody. Labor has a fantastic platform; it does not connect with police, and it does not connect with the Ministry of Commerce. Oman lacks that platform, and the e-Oman portal and e-government initiative has been there for at least 10 years, if not more. Nothing has been done, because not one rial has been allocated to it. Now progress has been made. We also talked about our free zones, which are totally disintegrated; every free zone in Oman gets its own KPIs, its own initiatives, different rates, different structures, different holidays, and we said no. We have to regulate this a little better; we need one authority. Our commercial company law is antiquated, if not derelict. Everything we do and ask will create better growth and will eventually create new jobs. Whatever we do is addressing that.

JAMES WILSON Within Omran we have had to be tough and have our own sort of Tanfeedh, as we have just consolidated 28 companies and received six new companies, including Oman Sail and a whole host of other tourism-related companies. The main issue is that tourism demand has been huge but there is nothing concrete on the table. There are many ideas but nothing that is fully economically sustainable. We have got to bring money, build better products that make money, and restructure the real estate industry. One of the problems in this country and region, apart from Dubai, is any country in the world that has a tourist industry is underpinned by the real estate industry. If we look at Spain, Turkey, Portugal, Thailand, and Australia, if they were not selling property to foreigners, they would not have hotels because the hotel business worldwide is risky—it is one of the hardest businesses in the world to borrow money on. Today, we are examining Australia, India, and China. If we do not get the real estate industry right then we will not get the hotel industry right.

Does the current difficult environment contain a significant opportunity?

HILAL MOHAMMMED HAMOUD AL BUSAIDI For how the current situation helps diversification, we have an old saying, which is “Necessity is the mother of invention." We will not be able to be innovative unless we are put in a situation where we must be. Enjoying the easy life as it is can no longer be an option; business as usual is no longer the way forward, nor can the government be the godmother of everything.

GERT HOEFMAN This process and what is now happening to our region and economy is a reset. We have to go through this and do the things that we have to do in order to find the way out. Of course, as the private sector it is nice that reforms are preceding, but I am a stock market company, so I have to deliver my results, listen to my shareholders, and, at the same time, do what needs to be done in house. This is applicable for all the companies in this country, so apart from the drive and good discussions we are having, there are also internal discussions we need to have in all of our companies, where we need to find and define the solutions of the new challenge in order to find our way again.

PANKAJ K. KHIMJI It is better to fight when pushed against a wall. One way to grow is to get more efficient, so my company will definitely try to be leaner, which does not mean laying-off people, but we do not allow as much freedom in terms of spending as we did earlier. We try to make sure that we are able to maintain growth at the same cost as we did last year. This is universal, but what we are learning is also the impediments to growth from the external level, from the government.

JAMES WILSON There are a number of issues, and this is the moment to address them. Tourism regulations in this country need to be completely replaced. I am not talking about tourism law but about regulation. The Dubai tourism website has all the regulations available to view. Change Dubai into Oman, print them, and we are done. Then we can develop a guesthouse or a boutique hotel. Contracts are also a huge issue, and they create conflict. Every project that Omran has done has been delayed, every project is over budget, and every project has an extension of time frames and variations to the contract. This is because the document is wrong. This is our time to look at how we do things.