Among the largest private sector employers in recent years, the Omani government is moving forward on national development projects aimed at expanding industrialisation, enhancing transport and diversifying the economy away from the hydrocarbons sector. This growth has not been without challenges, however, and the government has moved in recent years to introduce new policies aimed at improving wages and Omanisation and building up domestic industry and HR bases through the recently-established in-country value (ICV) programme. While these measures have been met with some resistance by industry stakeholders, Oman’s contracting giants acknowledge that the long-term benefits of ICV and its related programmes have made the short-term growing pains worthwhile, leading to a few new training initiatives.
ICV
Oman’s ICV programme was launched in 2013 and originally focused on the energy industry, mandating that firms bidding for energy contracts submit a plan outlining efforts to boost local content in their activities, including procurement of goods and materials, support services, construction and ancillary activities.
The Omanisation agenda also forms a key pillar of the ICV programme. Training programmes aimed at improving the skills capacity of Omanis employed in the private sector have been touted by the Ministry of Manpower (MoM) as a critical component of ICV.
The benefits of implementing an expansive ICV programme are considerable. The government estimates that up to $64bn of oil and gas spending could be kept in country by 2020 under a rigorous ICV policy; should this programme extend into the construction, financial, and tourism industries, the sultanate could expect steady improvements to GDP growth, economic diversification and Omanisation.
Omanisation
Omanisation policies predate the ICV programme by decades, with current Omanisation requirements for the construction industry set at 30%. The construction industry is a major private sector employer in Oman, with the MoM reporting in March 2014 that 38.6% of Omani recruits found employment in the construction sector that month. However, expatriates’ rising employment numbers in the sultanate indicate the government still faces difficulties improving levels of Omanisation. In the construction industry, stakeholders argue that it is close to impossible to move forward on major projects without foreign labour.
“Unlike other industries, construction has less of an appeal to the local workforce. It’s not that we don’t try to recruit, there are always positions available, but Omanis prefer banking and retail jobs. Also as a result of the extremely competitive nature of our sector, we have to keep costs low, and so cannot pay the same salaries as the oil industry,” Jithin Kumar, director of KAS Construction, told OBG. This has led the government to introduce legislation aimed at improving the sector’s attractiveness, although recent moves to curb foreign labour and increase the minimum wage have created spin-off problems for the industry.
Overcoming Challenges
In February 2013 the Council of Ministers announced it aimed to limit the number of foreign workers in Oman to 33% of the population. Although no specific timeline for the initiative has been announced, the Shura council moved in the same month to approve a 60% increase in the sultanate’s private sector minimum wage for Omanis, bumping it from $570 to $844 per month, which is expected to make jobs like construction more attractive to Omani workers. However, despite the positive long-term impacts of raising the purchasing power of its labour base, and of attracting more Omanis to the construction sector, the increase in minimum wage has had an impact on company profits, according to industry sources who spoke to OBG.
Indeed, in April 2013 the Ministry of Finance announced it was considering a request by the Oman Society of Contractors (OSC) to reimburse new costs arising from the increased minimum wage. The OSC requested compensation under Clause 70 in the sultanate’s conditions for public contracts, which mandates government compensation for cost escalation as a result of a government decision.
Despite these challenges, Oman moved in November 2013 to enact a ban on hiring foreign workers in the construction industry, announcing in April 2014 it planned to extend the ban for an additional six months, beginning in May. The decision has confused for some stakeholders, given the billions worth of construction projects currently in the pipeline, all of which will require a large labour base.
“We’re at 18% Omanisation in our company, and we feel the challenges of trying to reach government targets,” Abdullah Ali Al Suleimani, senior manager for corporate ICV at Galfar Engineering and Contracting, told OBG. “If you have a workforce of 3000 people, for example, and 10% of that must be Omani, you will need to recruit and retain 300 Omanis. Right now the industry is not capable of delivering these numbers on the technical side, due to lack of experience among the new cadre of Omanis, and the availability of Omanis to match with the number of projects that are going on, or in the pipeline for tender,” he said.
Over-Dependence
The move to reduce expatriate labourers suggests a growing concern that the Omani economy is too dependent on foreign workers—a view shared by governments in Kuwait and Saudi Arabia, both of which have announced plans to reduce the number of expatriate workers in their respective countries. However, the government has acknowledged the difficulties in reducing its expat labour base; when making its April announcement, the MoM also reported that it would allow exceptions for companies working on government projects, smaller enterprises, and firms managed full time by their owners.
Indeed, despite the MoM’s over-arching goal to increase Omanisation, expatriate employees have been growing. In February 2014, Oman’s expatriate worker population stood at 1.53m, compared to 1.35m in February 2013. By contrast, only 184,485 Omanis were working in the private sector as of February 2014. Statistics released by the MoM in September 2014 showed that there are 665,679 foreigners employed in the construction sector, compared to 57,464 Omanis.
Training Programmes
With Omanisation efforts so far failing to bear fruit in a timely manner, the focus has shifted toward providing new training programmes for Omani citizens. In April 2014, the MoM announced it will boost vocational training to reduce the number of citizens opting for jobs in the construction sector as unskilled labourers. “The construction sector, which is developing its equipment and systems, should also similarly train Omani citizens. It will make things easier for them,” the minister of manpower, Abdullah bin Nasser Al Bakri, told the Times of Oman. Mentioning that the construction industry often offers a springboard into other sectors of the economy, Al Bakri said that the ministry is hoping to enrol 5000 Omanis in training programmes annually, including programmes for technicians, engineers and assistant engineers.
Government efforts have seen some early successes. For example, a state-sponsored training programme in partnership with Petroleum Development Oman in 2013 saw the majority of its 323 graduates achieve Level 2 of the National Vocational Qualification and Construction Industry Training Board programme.
Private Sector Training
The outsourcing of training programmes could offer another solution to Oman’s labour shortage. Indeed, Al Bakri also highlighted plans within the ministry to promote outsourcing of services to the private sector for public service, providing significant new opportunities for Omanis to develop their skills and professional competencies. The MoM signed agreements with six vocational training institutions to train over 100 Omani recruits in mechanical repair and financial services. It now has 102 agreements with various educational and training institutions, and plans to sign more in the future, according to Al Bakri. A number of companies have also moved to offer their own in-house programmes, which will go a long way towards recruiting and retaining Omani employees. Galfar Engineering and Contracting offers a new training programme, comprising a nine-month introductory course.
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