A roundtable discussion on ‘In Country Value – Challenges and Opportunities’ organised by Nama Group calls for identifying and tapping the potential of ICV in the electricity sector and for more concerted efforts by the government and corporates to support SMEs.
Participants
Eng Hamed Al Magdheri
CEO-RAECO
Eng Ahmed Al Mazroui
CEO, Majis Industrial Services
Badriya Al Ismaili
Training Centre Manager, NICD
Gert Hoefman
CEO, Oman Cables Industries
Hassan Abduwani
CEO, Voltamp
Eng Omar Al Wahaibi
Group CEO, Nama Group
Khalifa Al Abri
Acting CEO, Riyada
Safa Al Riyami
ICV and Strategic Planning, PDO
AmEr Al Sinani
ICV Programme Management Office, Ministry of Oil and Gas
P S Gopalakrishnan
CEO, Nuhas Oman
Hamdy Al Marhuby
ICV Manager, Oman Rail
Moderator: Mayank Singh, Group Editor, OER
Moderator: ICV is a strategy which has been developed for the oil and gas sector. Can it be replicated in other sectors of the economy?
Eng Omar Al Wahaibi: Within the Nama Group, most of the activities in the electricity network construction and operation are handled by local companies. A lot of materials are locally sourced. In the past, the Group has not done anything structured with regard to ICV. So if there is an ICV index and where we are positioned now, it would be pretty high as everything is done through local companies. More recently, we focused on procurement of cable and conductors from within Oman. We now want to start a bit more structured discussions on other components as our networks consist of cables, conductors, transformers and switchgears. And this is where we spent hundreds of millions of rials every year. So some more works will be done in order to understand specifically the size of the opportunity and what we are going to do about it. Are there sufficient manufacturers within Oman? Do we need to encourage people to setup something and so on? This is something that we are going to looking at.
Gert Hoefman: As a company producing in Oman, Oman Cables is embedded so much in the Oman economy and the society. We also purchase materials to produce our cables. A very important component in our procurement is copper as it is the core of the cables that produces electricity. Unfortunately, copper cannot be found in Oman. Of course there is a small mining company but it is not sufficient to meet the requirements. Further, there are lots of components and services that the company is purchasing. And what we already do since the past one or two years is that every month we see how we develop our local procurement. So we try on our side to localise as much as possible the materials that we purchase. And we also see if there are opportunities within Oman to get these products. Apart from that, we have conducted training not only for Omani people working in the company but we also extend it to our customers. Just to give you an example, in the framework agreement with NAMA, there is a very important clause that also defines that we are training the engineers and people of distribution companies. So ICV and development have many aspects.
Hassan Abduwani: Since I joined Voltamp in 2014, I have always ensured that SMEs get preference with regard to product procurement. I even give them 30 per cent more than we give to others. This is my strategy. Secondly, in the training realm, I try to understand their requirement. We have a lot of students coming from the Universities such as SQU, Middle East College. I ascertain their specialisation and then structure training courses that are designed for one or two days. I don’t charge a single penny for that.
Eng Ahmed Al Mazroui: Indeed, when I joined Majis I was surprised to see the attention given to SMEs. Office hospitality at Majis is currently done by SME. And they run it themselves. One of the critical elements at Majis is the sea water intake. And it’s done by a major company. However recently we encouraged them to bring in SMEs to do the job. The company has entrusted the job to SMEs. We buy products from market that is locally available. Additionally, landscaping at Majis is done by SMEs. I am looking forward to the involvement of more local people. There are a number of success stories, which we are proud of. But that’s not enough. More still needs to be done.
Safa Al Riyami: The oil and gas sector issued its ICV blueprint strategy in December 2013, whereby it identified gaps in materials, skills and other aspects that had to be developed. Replicating that in other sectors is a way to embark on an ICV journey. For example, in material aspects, we realised that our expenditure is externalised. We identified specific opportunities. Operators within the sector have picked up the opportunities. PDO is leading in 14 of the 53 opportunities. In 2016, we want to take up more opportunities especially the ones that result in job creation. On the skills side, the blue print strategy identified skills. PDO has taken the initiative to train Omanis. With regard to SMEs and our local community contractors, who come from concession areas where we operate, PDO has always enforced that 10 per cent goes to them. We are now replicating the same for SMEs in our new terms and conditions.
Amer Al Sinani: The oil and gas sector’s blue print strategy was launched during the end of 2013, but we actually started much earlier. PDO has identified some opportunities. We started ahead of the industry. Of course, when we have projects and contracts, we do a strategy workshop for ICV specifically. We see the requirement of each project and try to link projects. We have a very good system and have embedded these things in our processes. The tender board submissions and terms and conditions have a mandatory requirement for ICV.
Eng Hamed Al Magdheri: Initially, we started with a lot of international clients. Gradually, we started encouraging local companies. That encouragement will continue. At present, we have more than 17 excellent grade local companies, who can do projects of 132 kW and 440 kW and can also build power plant. This is really an achievement for the sector itself. We try to raise the capability of the sector by encouraging the contractors to do better. At times, we also train them with the experience that is available in the electricity sector. This has raised the number of dealers in the country. Now we are talking about 197 companies dealing with electricity sector such as suppliers, contractors and consultants. In the electricity sector, maintenance and upgrade is required. We need urgent assistance and we need internal experience.
Gopalakrishnan: Nuhas Oman is a raw material intensive industry. We are using whatever copper is available in Oman. We deal with Oman Mining Company and we use whatever they can supply. Last year, we have used substantial quantity of copper that was available. So this is one way of enhancing ICV. Another activity that we are engaged in is trying to develop special products, which we have done during the past two years. We are also working on products for oil and gas sector, which will reduce import substitution. This is yet another endeavour to encourage ICV. Apart from training of manpower, we are also trying to enhance Omani participation in all our activities.
Moderator: A number of CEOs are claiming that they are doing this and that for SMEs. Do you think that it is enough?
Khalifa Al Abri: Certainly, it is not enough. We need more. I think SME initiatives just started two years ago. And I am glad everybody is talking about SMEs in Oman now. We need more not only from the companies but also from SMEs themselves. We need to enhance their services and upgrade the capabilities.
Sometimes they need guidance and a little bit training. Big companies have a responsibility to do that. And I think ICV is part of this. If the concept is spread out, there is scope for huge opportunities. And I also think that we need cooperation between government and big companies to achieve this goal. We started the process by initiating discussions with PDO and other companies. Big companies should help SMEs by first giving them an opportunity to work with them.
Moderator: Eng Omar, are you doing that? Are you generating more opportunities for local companies and local entrepreneurs?
Eng Omar Al Wahaibi: I don’t think we are doing it in a structured way, although there are a few attempts by individual companies. But it is part of our sustainability policy. That is one of the reasons why we are holding this discussion, and I would like to listen to other people’s experiences. I am curious to know how PDO is doing. Are you doing it in a structured way?
Safa Al Riyami: In PDO, we are working under the umbrella of the Ministry of Oil and Gas on a vendor development programme which also includes incubation programmes for SMEs to help them raise their standard in order to enable them to work in the oil and gas sector. As I have already said 10 per cent of our contracts have to go to the SMEs. We are also working with the authorities to prepare a list of the SMEs that can be utilised for this.
Amer Al Sinani: In addition, the ICV development programme of the oil and gas sector accords top priority to SME development. One of our strategies is to invest in Oman. So when we evaluate a tender, we look at the potential for Omanisation, job training for Omanis, purchasing and procurement from Oman, local suppliers, local research and development and technology innovation.
Eng Omar Al Wahaibi: You do it for all sorts of contracts?
Amer Al Sinani: In the beginning, we cannot do it for all contracts. We start from RO10mn for capex type of projects and RO2mn for opex types of projects. But that is just a guideline. We have a very robust system in place. All vendors, products and services, who wish to do business with oil and gas sector shall be registered at Business Gateway International (BGI). If you want to do business, this registration is mandatory. The contractors have to go through this single platform and are not allowed to register with individual companies such as PDO and OXY for example. This registration can be done within a few minutes.
Safa Al Riyami: Furthermore, it helps us to pick up a lot of SMEs and we direct our main contractors to work with them.
Eng Omar Al Wahaibi: You have put a proper system in place; but the output is also important. How do you make sure all your efforts are paying off well?
Amer Al Sinani: We are also closely monitoring the system to ensure that the companies are abiding by their ICV commitments. Our terms and conditions are very clear. And there are certain penalties and incentives to ensure that they are strictly adhered to.
Gert Hoefman: Promoting SMEs is easier said than done. It is easy to say that we work with SMEs and give them jobs. But if you don’t feel the pulse, and if you are not continuously in touch with them, the risk of failure is very much. They need to be properly guided. We need to support the SMEs in terms of registration and administration; we need to tell them what to do and where to go. We need to educate them more on this areas to make them more efficient and successful.
Eng Hamed Al Magdheri: Yes, we need to guide them properly. For example, in the electricity sector we have ESR and other certifications that give the training required to work in the sector. This will improve the skill of people. But beyond certifications, we need to direct them how to do the job properly and efficiently. Electronic registration could be useful. But I wonder how in an online platform people can get further explanations about the requirements. Are there provisions to do that?
Amer Al Sinani: Within the system, there are several search mechanisms, for different categories such as product, service, suppliers etc. We have three different layers for registration. The layer one is more generic while the second layer is for oil and gas where we have more requirements for registration. But the third layer is more specific, more technical and advanced.
Hasssan Abduwani: Unlike the oil and gas sector, the problem in the electricity sector is that we have two approval bodies- OETC and the distribution body. Electricity has done a lot for the local. But we need to do it in a more structured way. We need to concentrate more on implementing our strategies and plans. The strength of PDO is the governance.
Eng Ahmed Al Mazroui: In the electricity sector, there are five distribution companies, and one transmission company and one generation company. There is a lot of scope at the electricity sector for in-country value. And in-country value can do a lot of things to make Omanisation more effective and in-depth. You might say that your Omanisation is 90 plus per cent but among your contractors Omanisation is as low as 10 per cent. We need to address this question. For example, we need to create more Omani technicians and linemen.
At Majis we reduce the requirements of tender documents, because some tender documents are as long as 100 pages. So we make them around five pages. And we have identified some jobs that we give only to SMEs only and we don’t allow other parties to get them. This strategy is working very well in Majis. There are plenty of opportunities in the electricity sector. If you go for smart metres, there are a few companies that are making metres in Oman. If you go for other metres, there are a lot of SMEs producing them in Oman and it will reduce your losses in millions of rials. This is a win-win situation.
Khalifa Al Abri: I think the electricity sector can easily give up handling metres. We are facing acute shortage of people and technicians. So we had better create small SMEs to take up such important responsibilities. It is very simple to do that.
Badriya Al Ismaili: We have discussed this issue with the Ministry of Man Power. Most of the college graduates with a Bachelor’s degree are not meeting the competency requirement of the sector. We are going to form a committee and we are going to support them to identify what are the needs of the sector in terms of competency. We are developing the specific competency tools required for the sector. In addition, contractors can help a lot in making Omanisation more effective in key areas.
Safa Al Riyami: That is exactly what we are facing in the oil and gas sector. There is a huge gap between the competence of job seekers and the requirements in the sector. At PDO, we developed the national objective team, which work together with the Ministry of Manpower to identify the numbers, skills and the standards that we need to develop and study in the institutes in Oman. It also focuses on training to meet the oil and gas sector’s requirements; and in the end people we train become our contractors’ work force.
Khalifa Al Abri: Instead of Omanisation, better to help them start their own companies. Working for a contractor is not like having one’s own company. If you can help them start their own company and get a contract with a distribution company, they will work harder because they are better positioned as the owners of the company.
Eng Ahmed Al Mazroui: Yes, they (both men and women) will be sweating, and working day and night in order to get more money. There are plenty of money. Eng Omar, I recommend you not to recruit somebody as metre inspector because meter reading is something that can be given to SMEs. Even the Japanese firm that did a study on the sector says metre inspection should be done by a third party.
Khalifa Al Abri: Instead of working for contractors, why don’t you encourage them to start their own companies and giving contract for them? You can think about it.
Eng Omar Al Wahaibi: But don’t forget that everybody cannot own a company. And people who owns a company require people to work with them. And these people are also Omanis.
Gopalakrishnan: May be they need to work in a company to develop their skillset.
Eng Ahmed Al Mazroui: As many as 10 per cent of human being are grown as leaders and 10 per cent are born as followers but 80 per cent can be changed as leaders or as followers.
Eng Omar Al Wahaibi: Regardless of leadership skills, there is entrepreneurship which is quite different. May be everybody can become an entrepreneur, but they have to decide what they want to do.
Moderator: PDO has got a single window system. Do you think that this can be incorporated in the electricity sector?
Eng Omar Al Wahaibi: I think we can. Some of the practices can definitely be adopted and implemented in the electricity sector. But we have to review to see what is good for us in them. But some of them are above our requirements or quite expensive for us.
Eng Hamed Al Magdheri: Not a single window. We have two windows in the electricity sector, as Hassan said, one for transmission and one for distributions.
Moderator: Hamdy Al Marhuby, what has been your experience at Oman rail because you are handling one of the biggest projects in the country?
Hamdy Al Marhuby: Initially we spoke to a lot of companies including key stakeholders in the industry. Everybody has recognised the areas which we need to work on. But there is a lack of coordination between different stakeholders. Safa was talking about the extensive training by the PDO. Why don’t we work together? As we are in the last five years of our 2020 plan, we need to have more cross sectorial coordination, to ensure that we maximise our efforts.
Moderator: This is a consistent feedback we get, about lack of coordination between various sectors. How you address this concern?
Safa Al Riyami: PDO has engaged various companies in the past from different sectors such as electricity, ports, logistics, tourism, supreme council of planning etc. Yes, more can be done and we can all learn from these practices.
Moderator: Ahmed Al Mazrui has come up with a lot of ideas which suggest that there are a lot of opportunities to be tapped. But why are they not taken?
Khalifa Al Abri: SMEs became the main thrust of our policy only during the last couple years. We cannot change the mindset in one or two years. We need to work hard. Both government and corporates need to do a lot of training programmes, discussions and awareness programmes among graduates to guide them. We need to do a lot of such efforts to succeed in our attempts.
Moderator: How easy or difficult is it to achieve Omanisation targets and what are you doing as a company to promote Omanisation?
Gert Hoefman: For our industry there is a mandatory requirement of having an Omanisation of 35 per cent. We are well above this target. I would say, it is both easy and difficult. Easy because a number of Omani graduates like to work with Oman Cables, but we have to train them a lot, which is not easy. We have created a system in the company where we do training on the job. Knowledge transfer is absolutely essential. Traditionally we were not good at transferring knowledge, but we have got better at it. There is a limit to which the training budget can be increased so it is important for people to realise that as a manger it is obligatory on you to transfer knowledge to the person sitting next to you. This is the culture that we have fostered in the company.
Moderator: Gert mentioned two things: one is training and the other is knowledge transfer. Is that happening in your respective companies?
Gopalakrishnan: We train our employees and in addition we also send them outside the country. On job training is very important as that is the way that we make new recruits accept new responsibilities. While it is easier for us to retain staff in white collar jobs, in blue collar jobs retention of employees after a year is becoming difficult.
Moderator: What are the specific skills that you look for in an employee in your industry?
Eng Hamed Al Magdheri: There is a certain requirement, but if you ask the question as to why Omanis prefer to work for the government instead of the private sector, I have to confess that I have not been able to find an answer, and this needs to be addressed. We provide training for newcomers on handling electricity equipment, systems and this is a long process. We have something called ‘Graduate Programme’, where we take them from the theoretical part to executing jobs onsite. They need encouragement and assurance. In the private sector, this still does not exist. In the electricity sector we reversed the process, instead of saying that we will have 30 per cent, we started with 60 per cent Omanisation. While initially we struggled to find Omanis, now we have them all across. This was because we focused on training and encouragement. The sector became attractive for local talent. In 2005, the electricity sector had a training budget of RO90,000, now it stands at RO5mn and this had helped in raising the capability and efficiency of Omanis. These people in turn become brand ambassadors for promoting the sector.
Eng Omar Al Wahaibi: Regarding your (Gopalakrishnan’s) point of Omanis leaving the company. The question is – Why do they join your company? Is it because there are no other jobs or because they like what you do and your vision. There are companies which do not pay very well, but people know that these companies have a training programme and their skills will be enhanced dramatically over a couple of years. Moreover, even the companies do not expect them to stay. If you want to retain people after the initial years then you need to take other initiatives and measures. One way is to take 120 people instead of 100, accept the turnover and to continuously take in new people.
Gopalakrishnan: We have taken in people who have been trained by training institutes as they are better equipped to learn new skills. It is just that sometimes the turnover is high.
Eng Omar Al Wahaibi: You have to accept that and continuously develop new people to fill the pipeline.
Eng Ahmed Al Mazroui: In the 1970s and 1980s service connectors or people connecting the cables were all Omanis. But then there was a shift as Omanis wanted to be engineers or supervisors and the lower level jobs were given to someone else. An individual is evaluated on two parameters, one is competency and the other one is commitment. We spent a lot of money on competency building, but we overlooked the commitment part. So how are we going to get commitment? We can get commitment through SMEs; larger companies need to identify their core business and non-core business. The non-core business should be taken care by SMEs, while the core business can remain with the company. For example, jobs for drivers, JCB’s etc. can be contracted out to SMEs. I believe this is the way forward.
Eng Hamed Al Magdheri: The question is what kind of SMEs should be developed. They should be productive so that the big companies can depend on them, and they should be fulfilling the needs of the economy.
Eng Ahmed Al Mazroui: Absolutely, for example you tender a primary substation, and a grade A contractor wins it. The contractor should then give business to SMEs. Why should a grade A contractor buy an excavator? It’s a mentality where the contractors wants to do everything themselves, while they can bring in drivers and excavators through Riyada.
Moderator: How can companies assign a certain percentage from their investments and operating expenditure towards local companies?
Khalifa Al Abri: We are already seeing it. Firstly, we would encourage companies to sub contract part of their business to SMEs. Secondly, we know that contractors sub contract the most difficult businesses with the least margin to SMEs. This needs to change, as this is not the intention of the government or Riyada. Thirdly, apart from giving business to SMEs companies also need to work with them, coach and mentor them, helping them to do their business in the correct way. This will be helpful to both parties, because overtime the SME will start delivering according to the standards required by the company or contractor, without coaching.
Eng Omar Al Wahaibi: The oil and gas sector has a good model and we should learn from it.
Gert Hoefman: It is not about allocating a certain part of the profit, because that is very difficult. If we have to allocate profits to keep SMEs alive, then it is going to be a dead road. I believe that SMEs should be competitive and they should have an ability to work in an economy and to develop a sustainable business model. And that is what we try and do; giving a business to an SME and subsidising them is not the way to go.
Eng Ahmed Al Mazroui: All companies pay taxes, we can come up with a system wherein that money can go to the Riyada bank account to incubate and develop SMEs.
Khalifa Al Abri: Bahrain has a similar model called Tamkeen, where they do that. One of things that the Nama Group can look at is that in their tender documents, there is a section related to SMEs where interested companies should state as to what kind of services or business they are going to offer SMEs.
Eng Omar Al Wahaibi: There is a lot of money being spent by companies in the oil and gas and the electricity sector and big companies can work with smaller companies and this is the way forward. Today we have one company doing meter reading, if we have instead 10-12 SMEs doing the same then managing them would become very difficult.
Moderator: The ICV strategy was made when oil was trading at over $100 per barrel. Will the fall in oil prices have an impact on the implementation of the strategy and do you have any closing remarks?
Eng Ahmed Al Mazroui: I want to see more SMEs; and just recruiting Omanis or giving them a job is not the way ahead; entrepreneurship is the way forward.
Badriya Al Ismaili: I would like to assure everyone that we would be doing our best in helping Riyada and SMEs both directly and indirectly.
Gert Hoefman: With oil prices coming down, yes, it is more difficult; however our commitment is no different. I am proposing that we learn from the oil and gas sector and see the lessons learnt by them and see if we can come up with a uniform assessment of what is our definition of ICV and how we are going to monitor it. It is important that the measuring instruments that we put in place are uniform across the sector, so that we all know what the reference is and against what we can measure our performance.
Hassan Abduwani: Our experience is that developing skills in Omanis is not difficult. Since I joined the company, we have recruited design engineers, who can design transformers, while other high skilled jobs are also being taken care by Omanis. We support SMEs by trying to buy their products, wherever possible. With oil prices being low it is important that we source locally, instead of sending all our currency outside, so that the money can be rotated within the country.
Eng Omar Al Wahaibi: We have to ensure that the country’s money remains here and hence ICV becomes much more important.
Eng Hamed Al Magdheri: SMEs and ICV are very close to each other, as SMEs are embedded within ICV.
Khalifa Al Abri: ICV is important as it creates a lot of opportunities for Omanis and it will help in the development of SMEs.
Safa Al Riyami: ICV was introduced when oil was trading at $100 per barrel, but PDO’s position is that it will continue to be a focus area and we are still going ahead with our strategy. Some of our activities may get impacted, but it will go ahead slowly but surely.
Amer Al Sinani: Our strategy will not change; we will push for more ICV, as it will help the country and the multiplier effect of ICV goes beyond oil and gas, having an impact on the entire community so everyone benefits from the enhanced business.
Gopalakrishnan: SME development is important and I welcome the idea of outsourcing non-core activities to SMEs.
Moderator: Thank you.
