Nationalisation the key to business success in youth-focused Oman

Nationalisation the key to business success in youth-focused Oman
Neha Bhatia is the editor of Construction Week.
Published: 25 March 2019 - 6:45 a.m.
By: Neha Bhatia

While every market comes with its own share of challenges, Oman appears to have been particularly tricky for regional and local construction contractors over the past five years. As global oil prices declined, Oman stepped up its efforts to increase citizen employment figures and diversify its economy. Numerous contractors and consultancies have adapted to – and succeeded despite – these seemingly rapid changes. But there is still work to be done.

Take the listed Omani contractor Al Hassan Engineering, for example. The engineering, procurement, and construction (EPC) firm closed down its Abu Dhabi operation last year and the company – which earned revenues of $31m (OMR13.9m) in the first quarter of 2011 – posted a loss of $20.7m (OMR8m) in 2018. Last year’s loss was still an improvement over the corresponding 2017 figure of $128.5m (OMR49.5m).

Disputes were a roadblock for the EPC contractor in 2018, which said in a missive to Muscat Securities Market that its major challenge during the year was “to maintain progress on projects, despite severe liquidity constraints”. Moreover, Al Hassan Engineering is also facing 25 legal cases filed by suppliers awaiting overdue payments, with these claims valued at $3.4m (OMR1.3m).

The contractor is working its way through the claims using both defence and negotiation measures, but Al Hassan Engineering’s decline is certainly something of a cautionary tale for other construction companies. Indeed, it is likely that other Omani contractors entered 2019 with similarly distressing balance sheets.

However, there is light at the end of the tunnel. The Omani government is focused on infrastructure building, and recognises the impact that its youth will have on its future economy. Omanisation may challenge construction companies that are unprepared to significantly shake up their workforce, but it cannot be denied that the programme is also creating a great many jobs in the country.

BP Oman and Veolia Middle East’s operations and management agreement for Khazzan Gas Field’s water treatment plant will see 96 jobs created for Omanis within six months of the contract’s activation. Elsewhere, the $7bn (OMR2.69bn) Duqm Refinery will create up to 800 jobs by the time it is operational in 2022. Of these, it is hoped that 80%, or 640, will be retained by Omani nationals.

Oman may not have a glamorous skyscraper, a mega-city, or expansive transportation projects in its kitty. However, the sultanate – much like its GCC neighbours – has long-term commitments in place to serve its citizens and expatriate residents through the creation of a diversified economy that offers both employment opportunities and improved living standards. Contractors that can support these nation-building goals will reap rewards in Oman.

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