Roundtable: CW Leaders in Construction Oman 2016
CW sits down with six of the biggest names in Omani construction to discuss the major challenges facing the Sultanate, and how they should be addressed
These are turbulent times for the Gulf’s construction industry. As the oil price continues to stagnate, GCC member states are having to rethink their developmental priorities in line with reduced national incomes.
Consequently, there exists a certain degree of uncertainty over whether or not existing projects – and indeed, those still being announced – will proceed as planned and in accordance with their original timescales. Construction outfits are understandably wary about what today’s market can and cannot accommodate.
Owing to the high price of extraction, Oman has been hit harder than most by the low cost of crude, and this situation is adversely affecting the country’s construction industry. It is widely accepted that at the very least, the sector is in the midst of a slowdown. At worst, a crisis.
Yet despite such challenges, the Sultanate is also a market replete with opportunities. In a bid to diversify its economy away from oil and gas, the country has embarked on a series of large-scale and long-term developments across segments from infrastructure and logistics to tourism and education.
It is against this backdrop that Construction Week hosted its Leaders in Construction Oman Roundtable. Held on the day of the Construction Week Oman Awards 2016, this event saw six of the biggest names in Omani construction gather in Muscat to discuss challenges currently facing the market and how they should be addressed.
Participants included Robert Holtkamp, chief executive officer of National Aluminium Products Company (NAPCO); Simon Karam, director of Sarooj Construction Company; David Hutton, project director for Oman at Aecom; Marco G Malpiedi, managing director for Oman at Atkins; David Green, senior project manager at KEO International Consultants; and Nasreddin “Nasser” Daud, area manager in Oman for roads and structures at Parsons.
During the course of the discussion, each participant was asked to identify what he saw as the most significant challenges facing construction outfits in Oman. It soon became apparent that all of those present – whether suppliers, contractors, or consultants – were striving to overcome similar obstacles.
“Oman’s construction market has a problem with cash flow; more and more people are asking for longer payment terms,” commented one panel member. “At the same time, the banks have increased their interest rates,” he continued, adding that with companies feeling the strain on both fronts, governmental support could help to maintain stability and promote growth.
“The impact of the low oil price has been sudden,” observed another panellist. “Clients are scaling back their existing plans. We have submitted quite a few proposals over the last six months, some for projects that will ultimately be cancelled. The budget may be there, but the government is being extra careful not to lose it. And the market could become even tighter during 2016. How long this period will last is anybody’s guess,” he lamented.
One message communicated by all roundtable participants was the need for transparency. Oman’s government, argued the panel, must be upfront about the projects that are likely to proceed as planned, and those that are not.
In the words of one participant: “It’s almost as though we’ve entered into a vacuum. There is no clear picture of what’s coming out, or when. Yet the newspapers are still churning out stories about billion-dollar projects. Where is all that coming from? Oman doesn’t have the money [for those projects at present], so it needs to focus on what it can do.”
Aside from project-related uncertainty, a challenge universally identified during the discussion was that of Omanisation. To be clear, all participants were in favour of offering Omani nationals preference when it comes to recruitment. As one panellist pointed out, approximately 65% of the Sultanate’s population are locals; the government cannot afford for a large proportion of its citizens to be out of work.
However, panellists were equally vociferous about the challenges that can arise following the appointment of Omani nationals. In the words of one participant: “People need to be treated fairly. I fully support the notion that if a firm has a position available, Omanis should be given first refusal. But if that person doesn’t perform, why should he or she be protected? It is this protectionism that is hurting Oman’s future, and it has to stop.”
This sentiment was echoed around the table. Oman’s construction sector, it seems, is supporting – and will continue to support – Omanisation, but it needs the power to take action when problems arise. The private sector cannot afford to subsidise employees who fail to deliver, regardless of nationality.
“Under-performing Omani employees should not be protected,” noted a panellist. “The government must allow the private sector to evaluate Omanis on a fair basis. Everybody deserves an opportunity, and the construction industry has demonstrated its willingness to give Omanis a fair chance. But we must also be given the chance to [run our businesses effectively].”
Another issue linked to Omanisation is that of convincing local job seekers to enter the field of construction. Roundtable participants pointed out that not only is it difficult to tempt individuals away from the public sector, but identifying those with relevant qualifications can also pose a challenge. A panellist noted: “It is not only a matter of getting construction companies to employ more than 30% locals; it is also important to ensure that engineers, architects, and other relevant professionals are entering the job market. At the same time, the private sector should be recognised for its efforts to support Omanisation.”
Another theme that emerged during the roundtable discussion was the need for Oman to reduce its expatriate population.
“The majority of expats working in Oman’s construction sector export all of their money,” commented one participant. “Contractors provide all amenities for labourers, so all of their earnings are sent outside of the country. If we could somehow reduce the size of this group – which actually represents a significant cost for Oman in terms of the infrastructure it uses – and replace these individuals with Omanis, it would have a double-positive effect. It would contribute to Omanisation whilst reducing the country’s dependency on people who add little to the economy.
“Oman’s construction industry is far behind the rest of the world,” he continued. “We have to modernise. But every time one company tries to do something in a smarter way, another comes along offering to do it cheaper with manual labour. The government should explore the possibility of having more construction work conducted off site in a controlled environment. In this respect, construction needs to follow a path similar to the oil and gas industry.”
In terms of longer-term opportunities, one panellist called for Oman to use the current “slowdown” as an opportunity to plan for the future. He explained: “Right now, we should be giving work to the consultants, not the contractors. There are projects that will have to take place eventually, so let’s study them now. We should be creating plenty of tenders that involve design and review. Oman should be using this period as breathing space to keep the wheels of construction in motion.”
Finally, the panel called for an improved discourse between the construction community and government decision makers. However, several roundtable participants conceded that this goal will not be easy to achieve.
“The ‘private sector’ is not a single entity,” noted one panel member. “There is no one body to express its interests. And it sometimes feels as though the public sector views the [construction community] as people of bad faith [who prioritise money above all else].”
A fellow panellist added: “It can be difficult to maintain a volunteer organisation – with continuity of membership – that is equipped to represent a profession, owing to the transient nature of the market.”
Of course, nobody involved in the roundtable discussion proffered in a silver bullet to solve all of the construction sector’s woes. But panellists unanimously agreed that better communication and a greater degree of realism would benefit all of Oman’s construction-related stakeholders, whether public or private in nature.
“At the moment, it’s probably more important to tell the industry what can’t happen rather than what can,” one participant emphasised. “I think that the government would get better value from contractors and consultants if this were the case, because everybody would be focused on the right projects. Firms that want to be part of Oman’s future would have no choice but to put their best teams forward.
“However, if the country lines everything up knowing that 60% of its projects will not happen, the construction industry’s focuses and efforts will become diluted,” he concluded.