Shahswar G. Al Balushi
CEO, Oman Society of Contractors
The construction sector has excellent potential in job creation if a collaborative effort is made by all stakeholders to improve the sector’s working environment.
The construction sector’s contribution to the GDP from January to December 2014 was RO 2.054 billion. This could be improved even further if a more conducive working environment can be secured for the sector. As a single sector, it employs 700,000 people, which constitutes about 46 per cent of the total workforce in Oman. It has the highest Omanization potential of any other sector. Not only in the semi-skilled and skilled level jobs but also in professional level jobs. The sector needs around 35,000 engineers, 30,000 health and safety professionals, around 15,000 administrative professionals and approximately 75,000 supervisory level jobs.
At present, expatriates are doing 91 per cent of the above jobs. There are key reasons to this. Construction sector work is short-to-medium term hence job security cannot be guaranteed. Work environment is harsh. Workers are required to often shift and move to where the projects are. Willingness of nationals to work in the sector. Shortages of the required skill sets from national workforce. As example, the annual output of engineers in all specialization is 3,000. All sectors including government fight for them.
There are 100,000 companies registered as contractors. Of which, 6,000 companies are in grade one and above and they employ 53,000 Omanis, 40 per cent of the expatriate workforce (280,000) and implement 90 per cent of all major government development projects, while 94,000 companies are grade two and below and they employ 3,000 Omanis, 60 per cent of the expatriate workforce (420,000), primarily implement small retail projects and many are hidden trade companies. The sector has excellent potential in job creation if a collaborative effort is made by all stakeholders to improve the sector’s working environment.
DRIVE THE DEVELOPMENT PROGRAMME
The Sultanate’s economic development has been at steady pace. This has allowed companies to grow with the county’s needs. However, until now the number of large companies are still limited. To change this we need to look at proper companies’ classifications, improved tendering process, improve companies’ cash flow by paying their dues on time, allow local companies to joint venture in order to implement larger development projects and allow companies’ to rectify their workforce without penalizing them. All of the above can be implemented immediately if there is a will to do so. Oman Society of Contractors is engaging actively with all stakeholders to try to expedite their implementation.
CHALLENGES FACING THE CONSTRUCTION COMPANIES
We have some key challenges at the moment that require immediate solutions. We need to review the Omanization target and bring it to realistic percentage in order to allow for proper and increased Omanization. All clients need to abide by the terms and condition of the contracts and we need to adopt the latest terms and conditions as provided by FIDIC. Clients need to improve payment process to allow for better cash flow for companies. Improved companies’ classification will help drive best business practices within the sector, better regulatory framework and improved tendering process.
Oman Society of Contractors has embarked on several projects with the relevant stakeholder to address these challenges.
We have reached an understanding with the Ministry of Manpower to reduce Omanization target to 12 per cent in 2016 with the aim to reach 15 per cent by 2020. This is awaiting the final approval. If our proposal is properly implemented, as a complete package, across the board without exception will result in creating 50,000 new jobs for Omanis.
We are planning with member companies to establish Manpower Supply Company. This company will recruit, train, and second local workforce to construction companies. This will help improve the attractiveness of the sector to Omani workforce.We have engaged the relevant authority in order to reach sustainable solution regarding late payment and the adoption of latest FIDIC terms and conditions in contracts. We hope that these efforts will bare fruits soon and enhance the sector’s potential for growth
IMPACT OF LOW OIL PRICES
We have seen oil price drop in a very short time since June last year until now from $104 per barrel to $40 and further below. This volatility in oil price will impact government budget and development projects. So in the coming five years, we will see the changing strategy of the government in budgeting and rationalization of expenditures. It will have an impact on construction sector as well. From this perspective, we will have to look at challenging issues like the availability of local and expatriate workforce with appropriate skillsets, training and development of manpower, Omanization, and the cost-effectiveness of projects. Challenges associated with these issues need to be resolved.
Facilitating investments in areas like tourism to build hotels, resorts, recreational facilities or developing infrastructure, fine tuning regulations will bring project opportunities for construction sector and create jobs subsequently. Hence, the regulatory system should be flexible and accommodating enough to support economy. So modification or refinement is needed across the board.