Leaders Oman: Interview with Simon Karam, Sarooj
Simon Karam tells James Morgan about Sarooj Construction’s ongoing strategy of diversification, which is already paying dividends both domestically and farther afield.
In years to come, the Middle East’s construction sector may well remember 2015 as the year of the furrowed brow. Although panic is – for now – too strong a word, there exists a good deal of disquiet over the global oil price’s refusal to emerge from its long-standing state of stagnation.
One person refusing to follow the regional fashion, however, is Simon Karam, chairman of Al Taher Group and director of Sarooj Construction Company. His brow remains notably un-furrowed, and his demeanour is as amiable as ever.
One could put this down to his status as a doyen of Omani industry. After all, more than four decades have passed since Karam entered the Sultanate’s construction market; whatever the future holds, he has probably seen it before and lived to tell the tale.
But experience is not the only weapon in Karam’s arsenal. The Sarooj boss has the added advantage of being able to face uncertainty with a healthy insurance policy.
“At Sarooj, our backlog covers the next three years,” he tells me as we sit down at Construction Week: Leaders in Construction Summit Oman 2015. “We’re quite confident – our backlog is extremely important at the moment. Either we have been lucky, or we have played our cards right.”
Karam’s modesty persists when I refer to his position as ‘enviable’. “We would not put it in [those exact terms], but yes: Sarooj is quite comfortable. Actually, we are one of the few contractors in Oman that is recruiting at the moment,” he adds.
Perhaps Sarooj has been fortunate in terms of the way its cards have fallen, but it would be disingenuous to attribute the company’s current position to luck alone. Sound judgement has also played a role in the development of such a healthy backlog. The trick, says Karam, is to remain flexible and diversify whenever possible.
“The success of the Omani economy – and particularly for construction – is directly related to the price of oil,” he explains. “It is unfortunate, therefore, that the country did not do enough to diversify its economy. Many businesses will be affected as a result, and this creates worries in general. Projects will have to be delayed.
“Even so, there are certain areas – public-private partnership (PPP) projects, for example – that must go ahead. Demand for utilities, such as water and electricity, transport, and other sectors like oil and gas, will continue to expand. [Investment] cannot be reduced, otherwise Oman will lose its share of the [global market]. Normally, if you position yourself on projects like these, there won’t be a problem. This is the position in which Sarooj [has positioned] itself.”
That said, project selection alone is insufficient to ward off potential dangers. As Karam goes on to explain, whilst it is important to diversify domestically, it is also wise to seek opportunities in fresh markets.
“We have to consolidate [in Oman] and look abroad,” he explains. “For example, Sarooj has established itself in the UAE and Iraq, and we have quite a few projects in Lebanon. We have also been working to establish our footprint in Iran.”
With regards the latter, Sarooj is not alone. The Iranian market is being closely monitored by GCC construction outfits, many of which are hoping that economic and financial sanctions are lifted sooner rather than later. Before this can happen, Iran must meet the stipulations of the nuclear deal framework, which was drawn up in Lausanne, Switzerland in April of this year. Best estimates place an end to international sanctions at some point in 2016.
Not content to wait and see what moves others make, Karam and his colleagues have been working diligently to get their faces known in the Iran for around five years. Moreover, in collaboration with stakeholders from both the Omani and Iranian markets, Sarooj has already supported a major construction project in the Islamic Republic.
“Iran is quite developed when it comes to existing contractors and PPP-educated organisations; they don’t need such services,” says Karam. “In Iran, it is more about self-financed projects. For example, in collaboration with partners from Oman, we are involved in the construction of a shopping centre in Kerman, with an initial investment of around $100m (IRR3tn).”
The Sarooj Pars Complex has been developed in conjunction with Kerman’s local authorities, which offered the land on a freehold basis on the condition that contractors integrate a number of publicly-minded features. In Karam’s opinion, these aren’t concessions; rather, they are in keeping with his company’s commitment to corporate social responsibility (CSR).
“Many of Iran’s largest cities – as with all old cities – have historic centres,” he points out. “In the middle of Kerman, there is the traditional bazaar. Nobody wants a city to lose its heart, but it’s important to maintain investment, strengthen services, and [introduce] new ideas.
“The local municipality was quite clever. It partnered with [our consortium] and gave us the land – freehold land – so long as we provided 1,000 free car parking spaces [in addition to the mall]. Their vision was to have the new and the old together, supplementing one another with many improvements in roads and access. Citizens of Kerman will be able to come and park their cars and go either to the new mall or the old bazaar. We are injecting new life into this important part of the city.”
Sarooj’s preliminary activities in Iran are also creating opportunities outside of the private arena. During its time in the country, the contractor has built a relationship with Golgohar Mining & Industrial Co, and is intent on pursuing future infrastructure projects, sanctions permitting.
“We became aware of a tender for a 300km, 2m-wide water pipeline climbing from the sea to an elevation of 1,700m,” Karam recalls. “This is the sort of project we are interested in, so we’ve been working with Iranian partners to make inroads in this area. Under the sanctions, you cannot do a great deal as a foreign company except get to know the market, familiarise yourself, and make contacts. But we have been in Iran for five years, so maybe we’re a year or two ahead of our competitors.
“The tender for the second phase of the Golgohar infrastructure project, which will require 400km of water pipes, is likely to be floated in the next three to four months. Sarooj and its Iranian partners will bid for this contract, and we are optimistic that we will succeed.”
Despite the encouraging prospects that can be found in foreign markets, Karam is keen to emphasise that Oman represents the future of Sarooj. As he explains, it is a matter of supporting domestic projects whilst working to export local expertise for the benefit of the Sultanate.
“Sarooj is a family business, and we must define our vision within the context of future generations. We will continue to work in Oman, but we are committed to delivering our services to other areas as well.
“The idea is to give back to the community, because we belong to this land. We are from the Middle East and our children intend to live here for the rest of their lives. Unless you clearly demonstrate your commitment to CSR and add to the value of local communities, your business activities will not be sustainable.”
Karam concludes: “I feel that Oman is in our waters. There has to be a balance between keeping our core business at home, and encouraging the younger generations to [look] outwards.”