The second session of Oman Debate 2012 titled ‘Freezones and Industrial Areas: Powerhouses of tomorrow- Opportunities and Challenges’ witnessed spirited deliberations on the accountability of the government and corporates, transparency, industrial relations, reformation of labour law etc. Excerpts.
Tim: We will get from the panel a sense of where they are on the question ‘Is Oman Future Ready’. Would you like to pick up, Marcos Belucco, based on what you heard in the first session?
Marco: The construction of the future foundation is a continuous process and the private and the government sector have to work together and I am confident that Oman will be the most important trade hub in the Middle East in the next five years.
Tim: What are the concerns? What could come in the way of that?
Marco: Considering the huge investments by the government to provide logistic systems, we have to invest in the education sector to provide a qualified manpower for the future Oman needs.
Tim: Musab, what do you have to say?
Musab al Mahrouqi: In general, I think we have made significant steps. But the challenge we have today is to wake up every morning and think how I can be better or faster than the day before. And the challenge is not really local but it is of a global nature. The world is becoming faster and hence we have become more demanding and more aggressive every day. Sometimes the pace of development and decision-making do not happen at the pace we want them to be.
Tim: Expectations are too high…
Musab: Expectations are increasing day by day because our exposures are wider and our understanding is bigger and better and people are becoming more educated etc.
Tim: But you heard reservations about the amount of unemployed in the society but you say expectations are still high
Musab: I think, with time we will learn that meeting expectations is not possible. I think if we wake up in the morning and think that I am gonna go and meet the expectations set for me, this is unrealistic. I always tell people in my organisation that 80-20 (The Pareto principle – also known as the 80–20 rule, the law of the vital few, and the principle of factor sparsity) is good enough.
Tim: Okay… Peter Ford
Peter: I fully subscribe to Steve’s views in the previous panel that there is a long way to go but we have around 25 per cent of the base there. And as an American optimist, I think there is a huge opportunity for this country and for those of us working together to take advantage of that 75 per cent, and take advantage of that quickly because we have so many models that are working outside Oman that we can use and modify within this context.
We don’t have to reinvent the wheel on ease of doing business, on training or education or any of these things. There are some very good things within the region itself to learn from. So let’s take that and accelerate it remembering that 80 per cent product now is better than 100 per cent product 10 years from now.
Tim: One of the concerns that were flagged up in the first session was the lack of communication, government to people. Is that something that you have come across?
Peter: I think they were fair comments. The previous session panellists and the people in the audience also reflected that. Communication can always improve. It’s one of those things you can say- we want to improve communication. I don’t think communication can ever be too much, to tell you the truth. It’s a difficult turn at the cross, so let’s improve on that, let’s have more of these debates.
This is an excellent step and some more of what His Excellency was saying, which is getting advice from outside entities – outside the government- as the government doesn’t know it all nor does each individual private sector entity. But if we start sitting together in roundtables, we can get a view of everything and we can say, by the way, let’s look outside and see what’s working already and try and modify that to our needs.
Tim: Do you understand the grievances that were expressed in the beginning of this year (2012) and last year (2011)? Somebody was suggesting that the people were pushed towards that because the government wasn’t listening sufficiently to their demands?
Peter: I can’t speak about that because that was a bit before my time but I can easily see that people who haven’t been listened to would have concerns and would come out in protest. And I think that discussion on freedom of speech and freedom of expression was an interesting one.
And it is interesting to see it develop because there are so many slippery slopes where we have to find out what is constructive and non-constructive. And these are valid questions and at the same time, the vision is the thing that has to prevail. Do you want a free economy and freedom of expression? If so then you have to take a punt on some of them.
Tim: And one relies on the other, doesn’t it?
Tim: A free economy relies on free expression…
Peter: Clearly, clearly…
Tim: You can’t separate the two…
Peter: No, I don’t think you can
Tim: Okay, Henk Pauw?
Henk: I pressed the button 2 to show that Oman is not future ready. It also depends upon what do you mean, it’s a very open question. What do you mean by “ready”. And there are Omanis out there who have very high expectations of what they want to be. And it was said in the previous panel. It takes time to get there because this is a developing country and it has done great things in the last few years and if it keeps that up, it will be one of the power houses in the Gulf.
Tim: You raised a question, while talking yesterday (in the briefing session) that Omanis want a lot. Are they willing to work?
Henk: One of the issues is the culture of entitlement in the sense that people want a lot of things from the government and from employers etc. But what are they doing themselves? They have a responsibility to themselves as well to educate themselves, to learn and to go out after the opportunities.
Tim: To learn or adapt? Are there cultural mores or hurdles?
Henk: I don’t think so. Somewhere in the last few years, there is something lost in the educational system and also on how to achieve; and there was a very high need for talent, so everybody got a job anyway. Now there are much more people who need a job and it is not self-evident that you get one. You have to work for that. In Oman, there is always family who will help you. There is no poverty trap. So you don’t have examples of what happens when you don’t employ yourself.
Tim: What’s different about the mindset in Oman as compared to other places you worked in?
Henk: Yea, this is my sixth country. I think one of the difficulties is in manufacturing- there is no mindset for manufacturing…
Tim: (stress on words) No mindset for manufacturing…
Henk: There is no cultural heritage for manufacturing…
Tim: So lack of knowledge, lack of perspective…
Henk: I don’t say knowledge, it’s more experience. It’s knowing that is needed.
Tim: To what extent do you think this is holding the country back?
Henk: I don’t think it is specific for Oman. It is just part of the growing that when you start investing in these kinds of project, you have to teach. We have our own training centres to help people to understand…
Tim: Has it been frustrating dealing with different mindsets?
Henk: No, it’s just part of being here in Oman. You have to do that.
Tim: Nicholas Barakat, you seem to be concerned that there are not enough partnerships between educational institutions and the industry.
Nicholas: This morning we talked about the importance of education. In our view, in order to prepare the employee of the future, an individual has to be able to integrate herself easily into the workforce. And in many countries, what they have is a partnership between universities and the technical schools in order to prepare people. That is not prevalent in Oman.
Tim: Someone needs to push that…
Nicholas: Yea, however, these links can be formed very easily. For example, in Octal, in the beginning we hired 40 engineers, none of which had been exposed to the industrial environment. None of them have been into a factory formerly, but very quickly that transition happened, especially, in the analytical and qualitative positions such as instrumentation.
In respect to the future ready question, I think the key element here is how one competes in the world market. And I think that is the real question. Does Oman and individual Omani companies have the capabilities and resources to compete in an open global market? Over the last five years we have seen that.
Tim: So the government should do more to promote exports…
Nicholas: Yes that’s the key part. For example, in the Salalah Port, the key element now after the infrastructure is built, is attracting the big shipping lines that can get us to the key markets of the world. Yes, that is moving in the right direction.
We ship to New York in 14 days, Chicago in 18 days, San Diego in nine days. Therefore, yes Oman is future ready, in the sense that it has already a lot of the elements of success. I don’t think we should forget that. All we have to do is to build on that.
Now, does it have all the trade agreements? For example, look at the success of Korea in the past three years. The success of Korea to negotiate the Free Trade Agreement with Europe is phenomenal. But Oman does not have an FTA with EU although it is one of the few countries to have an FTA with the US which in itself is a success.
But what is more important is a vote of confidence by the US government that investing in Oman is safe, and rights to property and rights to intellectual property etc. It means that you are already part of an exclusive group. So for me Oman is future ready. The trappings are there, we have to build on that.
Tim: And be a little more aggressive internationally
Nicholas: Yes, a good example is we export 99 per cent of what we make. So you have to be competitive, it’s a combination of efficiency, costs and access to capital.
Tim: Peter Ford, do you share the view that the government has to be more aggressive internationally?
Peter: I think that the step that the government has taken recently in allowing the ministry of foreign affairs to actively market Oman is an excellent one. There is something around the Free Trade Agreement which I think is an interesting concept. The US FTA may be considered as a failure and a success at the same time because one could wonder why there are not more American businesses inside Oman starting up companies and taking advantage of this. I have heard anecdotal evidence although decision has been made at the higher levels. Companies are being asked to provide proof of their photocopies of passports to make sure it’s American.
Tim: This is what they will ask here. So the red tape is enormous.
Peter: It is getting lower but it is at an unacceptable level.
Tim: So ease of doing business is the key thing that they should be working on.
Peter: It should be.
Tim: (pointing to Musab) Would you accept that? Ease of doing business
Musab: The sector I am familiar with is the industrial sector. Perhaps we can focus on that. I can say about the philosophy behind the construction of the Port of Sohar and how the industries were set up. Perhaps there are some challenges in that model right now but looking at other experiences around the region, we can see some benefits. There is the absence of an umbrella that helps facilitates the ease of doing business in a confined industrial area in Sohar. And industries still have challenges.
Tim: What about the red tape that Peter Ford was talking about?
Musab: I think that is what I am referring to. If there was one umbrella and one entity responsible for facilitating doing business in these industrial areas, we would probably avoid all these issues.
Tim: A one-stop shop?
Musab: Yae, a one-stop-shop. It has to be visible; it has to be active, engaged with industries. You can’t sit in Muscat and then imagine things in Sohar would do well just by themselves.
Vote on the first question of the session: Are large companies serving the interest of Oman?
NO: 60: YES: 40.
Tim: Would you share that view Henk Pauw?
Henk: Probably some more needs be done there. We are already doing quite a lot for the Omani economy, probably not explaining very well what it is all. So maybe we should do a little more on that front.
Tim: Nicholas Barakat. Do you agree with the vote results?
Nicholas: Yea, pretty much. I mean the purpose of businesses is to create a better world and I think the large organisations which come with instructions on which they can not only create employment but create foreign exchange are beneficial especially if they have done it within international norms. So, the fact that Oman is able to attract capital and develop industries is a good spot. This being said, these industries only make sense if they can compete. They do good when they are successful.
Tim: Peter Ford, the government made good investments in the Sohar Port, the Salalah Port with the aim of creating downstream jobs. $14bn invested in Sohar and only 7000 jobs created. Are they giving value for money or not?
Peter: Well, I am terribly familiar with Sohar and the statistics behind that, I am more familiar of course with the Salalah area. And Salalah is an interesting place because it is private money or a significant part of it is private money publicly traded on the stock market and so we have shareholders to whom we have to add value to. And some of those shareholders are actually private citizens and some of them are pension funds and banks etc. To build on Nicholas’ comment, the big businesses are here to add value, value to communities, government and shareholders and value to staff. And we have talked a lot about all those.
When I looked at that vote and saw the high percentage of No, I guess the question is what is it that the people expect these projects to deliver? And is it a mismatch in expectations? Is it that we thought that we are going to invest huge amounts of money that would generate 10,000 jobs at a plant? And maybe the issue of communication, communicating investment, not just the amount but also the expectation of returns is what could solve some of the mismatches that we see.
Tim: Manal, from the first panel, you are still in the audience I see. $14bn invested in Sohar and only 7000 jobs created. Has it been a catastrophic waste of money from the government’s point of view?
Manal: We’ll have to realise that this area, the Sohar Industrial Port area, is capital intensive. I mean we always knew that the projects and industries in Sohar are not going to generate that many jobs. But what we did expect is that the projects in Sohar are to create downstream and create a multiplier effect.
Actually for every direct job, there is a possibility of creating four indirect (1:4 ratio) jobs in the private sector around the community of Sohar. And this is where we should concentrate: how can these big industrities which are represented here today be engaged in creating the second wave of development in Sohar. Go through their value chain, break down their procurement, and look at the possibility of setting up small entrepreneurs based on their operations.
Tim: So is this working? Are large companies serving the interest of the country?
Manal: I was one of those who voted No because there is still possibility of doing more. And I think this has come to the attention of the business community in Sohar. Most of them have programmes like in-country value and have discussions with their suppliers and contractors to see how they can add value to the economy.
Tim: Musab Al Mahrouqi, is it fair when people accuse companies of taking advantage of cheap gas, infrastructure, access to world class ports and not providing enough jobs for Omanis?
Musab: The question is what is enough…
Tim: The question is, is the accusation fair? What do you think?
Marcos: I think the industries happened in Oman for a reason. I think we wanted to monetise the resources we have in the country. I think we followed a general industrial development that was not only happening in Oman but all over the region. The whole region was industrialising the hydrocarbon sector in different ways to monetise the available oil and gas. And Oman was no different. I think we had very successful projects some of which were facilitated by the government while in some others government is a shareholder as well as a beneficiary.
Tim: So you are telling me that it is a mixed picture. You don’t wanna come down one way or the other.
Musab: I think we are too young as an industry to make a judgement whether it has worked well or not.
Tim: But you need to make judgements to see whether you are on the right track or not after putting in so much investment
Musab: I am for putting in more investments in the hydrocarbon sector if that is what you want to hear. If you think of what Oman can do in the future, we think about what we have, and what we have is limited resources focused on oil and gas, a natural resource and hence if we want to develop, industrialise and create economic development, we have got to think what we have. Of course location is one and building ports is the other
Tim: Are you talking about diversification?
Musab: The word diversification is a very difficult one. Diversification from what to what? This is a different debate altogether. So… who is diversified today? That is the question also, have we saved ourselves from the turmoils and difficulties of the economy?
Tim: And you would say no?
Musab: I would say no (emphatic).
Tim: Marcos Belucco
Marcos: I think we have a good example of diversification for the future of Oman. A huge investment is going to generate a lot of opportunities. The government is building ports, airports, railways and a lot of opportunities would be created for the Omanis.
Tim: Come back to the suggestion that large companies are only serving their own interests rather than the interests of the country.
Marcos: Yes, the price of the gas is attractive but in order to receive this gas, you have to contribute to the society. You have two ways to generate opportunities in our companies. The first is to recruit the locals, train and qualify them to work in our companies.
The second way to provide opportunities is to develop the local suppliers to work with the companies and to have clear evidence that we are adding value to the community.
Tim: But you are not here for social service, you are here to make money aren’t you?
Marcos: Yes, you have to balance this. You have to find a balance between your company, your social responsibilities and job creation. You have to find a balance between all these factors because social responsibility is part of our business.
Tim: Ok question from the front row.
Tawfeeq Al Lawati: My vote was NO. I don’t think these mega projects (I should not generalise them, but the ones I am talking about are those invested by the government) are not for the benefit of the local economy.
Tim: They are not giving you what you want…
Tawfeeq: Initially, the plan was to diversify the income and the expectation was to achieve 35 per cent income from industrial sector out of the 60 per cent non-oil revenues. That is value additions to local natural resources – creating job opportunities and basically returns on the investment. Today – and we have reviewed the budget for 2013 – most of these projects are not contributing revenues for the budget. In fact some of them are loss-making and taking good advantage of the cheap gas.
Tim: So they are working for themselves, not for the country.
Tawfeeq: They are working. Unfortunately, some companies have 50 per cent partnership and they are getting advantage of the cheap gas price and they are minting huge amounts of profits.
Tim: OK. Let one of the CEOs on the panel answer that. Henk Paew?
Henk: I can only talk for my own company. I think we do bring lot of value for the country. We have a very successful business model and we have exceeded our project values and Oman Oil is a 40 per cent share holder and so the government is getting back the revenues I think. In our case, at least that is not a true statement.
Tim: Nicholas Barakat, do you accept the charge from the Majlis A’Shura?
Nicholas: No, no. Actually it’s a funny angle. Last year, some of you may be knowing there was an anti-dumping approach from the EU and with partnership of the Ministry of Commerce and Industry, we fought the case and basically what came out of that was we were subsidising on gas, water and electricity and I think, it was a very effective vote for the EU to back off.
So Oman is attractive beyond the access to its raw materials; it is accessible by its geographic position.You bring raw materials from anywhere in the Middle East to the site, convert it and re-export it…
Tawfeeq: Tim, I will give you two examples if you allow me. First of all, even Oman Oil Company which is the umbrella company for Sohar Aluminium is still not making profit to recover the price of gas subsidy which is paid by the government if they sell it at the current international prices.
Another company, the Oman India Fertiliser Company (OMIFCO) is buying gas at 77 cents. And as per McKenzie report, if Oman has to import gas today, for the same unit it has to pay $14. And the urea product is sold to the Omani market at $500 and exported at $140. You get a payback of investment in one year and Oman is owning only 50 per cent of the project.
Tim: Peter Ford, can you answer that?
Peter: I think those are very fair comments from the Majlis and I would then ask the question what the Omani government as a partner is doing in all these businesses. Why does the government continue to invest rather than let the private sector invest and create an environment to let the private sector to flourish and deliver what the markets need rather than what the government thinks everybody needs?
Tim: He is asking the same question…
Peter: I think it’s a very valid point. We could probably all sit here around the table and point to about five or six other projects we had some serious doubts about – whether or not the private sector entity could have been located in that destination – but the government has decided to do that. I think His Excellency’s earlier comments about consultation, planning, and advising what the opportunities are, those are the key messages for me to prove that Oman is future ready.
Tim: But I presume that Tawfeeq would rather have them here than not having them at all even though they are getting more out of the country.
Tawfeeq: Well I think I agree with Musab that all hydrocarbon projects are not viable. If there are viable projects, we should diversify but the decisions should be revised. Take Oman LNG Company for example, which has a foreign investment of only RO30mn and the government has just a 50 per cent stake in that. What is RO30mn? Do we need RO30mn in foreign investment?
The payback during the last 10 years has been RO3bn for RO30mn investment. Why? Because we are giving cheap gas. This money belongs to the people of Oman. It is indirect benefit for a foreign company. What we have requested the Shura Council was to review these contracts and unfortunately till now we have not got an answer from the government.
Musab: It’s not to counter the Majlis A’Shura argument but I will try. Perhaps, I will give my experience, short experience, in this business. I think there is a lot of knowledge centred on this business. Perhaps a lot of people are not appreciative of the knowledge involved. We become more appreciative of the knowledge and the technology of a mobile phone but not so much of a technology in a refinery or in a plastic factory, for example.
Tawfeeq: You pay them for the know-how
Musab: The ability to convert crude oil into the material here (points out to a plastic mineral water bottle on the stool in front of him) is not a simple ability. There are lots of processes and technologies available in general. And hence I think I can tell you from my experience that the presence of knowledge providers to help us in this early stage of development in this sector has benefitted a lot.
And I can draw comparisions between the companies that have access to that knowledge and companies that don’t. And more time is required to deal with these issues, which are technical and non-technical issues. And hence we should not ignore the impact that knowledge has on our business and you can say it is knowledge based business. As Manal said, it is technology that you buy by investing so much money. But you don’t buy the technology and everything works fine afterward.
Tim: Let him (Tawfeeq) have a brief comment
Tawfeeq: I would like you (Musab) to give me some explanation about the Aromatics project. A $700mn project becomes $2bn project. And what is the profitability of the project, a direct question?
Musab: I think we had that conversation in the Majlis A’Shura last year. I don’t know if you want to….
Tawfeeq: No, no, tell it to the public.
Tim: You may have had that conversation but it seems it is not resolved
Musab: I think to answer that question, we need to have some more facts and hence I would request that you come to my office or I come to your office and I will explain to you about the performance of each of our plants including the Aromatics plant. I am happy to do that, any time you like.
Tawfeeq: Is this today viable, is it making profit?
Musab: It is making profit
Tawfeeq: Net profit, on record? Because last year it was making operational profit but not net profit.
Musab: Your Excellency, perhaps the questions that you are asking are good questions and…
Tim: The answers would also be nice too (audience laughs and claps)
Musab: In order for me to answer properly, I would need to explain to you a little bit more facts about the project and about Orpic in general.
Tawfeeq: I got the answer, thank you.
Musab: Thank you.
Tim: OK, you did but I don’t think the others got it (audience laughter). But you’ve got your answer.
Musab: I can say to His Excellency, the performance of Orpic, which is 100 per cent owned by the government of Oman, is duly shared with the government and hence you have access to this information but we would also be happy to share the performance indicators with you.
Tawfeeq: On record, we don’t have. We have requested and it has not been provided.
Tim: OK, communications gap. Is there anybody in the audience?
Audience: I think this is a clear example of how most of the government spending is done to benefit those crony corporates that don’t look at productivity. It means that most of them are for private benefits. This is a clear example. You have to remember that this is public money, this is people’s money. Tomorrow, when we run out of oil, people will ask what happened to this money.
Tim: You are making a sweeping accusation about the corporates; do you have anything to back that up?
Audience: Well, most of them are benefitting from their special interests with the government.
Tim: Companies are entitled to benefits…
Audience: But not from government spending. Remember, people haven’t given the authority to spend this money and they are not really showing profits. And when we deal with losses, there is no questions raised. But now, thankfully, we are asking, where is the money going.
Tim: Henk Pauw, do you want to say something? I am not suggesting that you are one of the crony corporates? (audience laughs).
Henk: I think it’s a valid question to ask but we also have to ask when these projects were decided. At that point in time, the urea prices, which were alluded to earlier, were totally different. The business plan and the LNG prices were totally different.
So you needed a partner to help you. Now LNG prices are sky-high, probably $15-$17. But with the advent of shale gas which is coming, the LNG prices might plummet in the next five years.
As regards my plant, they started contemplating in 1995 to build a smelter and in 2005, they signed the agreement. We are now two years in full operation. It takes a long time and during that time, things will change. So it’s not so easy to say how that went, because hindsight is such a beautiful thing. You always can justify.
Audience: Maybe that’s why we need the private sector to invest in these things. Because when they lose, it’s they and not the people who lose money, unlike when the government spends. This is the clear example why socialism fails. So when the private sector invests, they are the ones who gain the profit and they are the ones who bear the consequences or risk.
Henk: Fair enough. In our case, 40 per cent is Oman Oil but the rest are publicly listed companies. So mostly we are private sector.
Audience: My name is Hussain. I work for Petroleum Development Oman (PDO). So I am well aware of the oil industry. It’s quite a pleasure to sit here and to debate issues. I thought this would not have been possible two years ago. So, I am glad that my country is headed in the right direction.
I think that the main thing that a lot of Omanis are asking for is accountability, accountability from the government, from the big corporations, and accountability even in a workplace. If the questions on accountability as regards where the public money goes can be answered, everything would be solved and people will be more relaxed and they could go home knowing that everything is being done in the right way.
Tim: First, let’s deal with the accountability. Peter Ford, what standards of accountability do you find?
Peter: I think, accountability is such an excellent thing that we also turn it all the way down into the work place and schools. Everybody is accountable for their actions. I mean, we can’t have protests looking at lowering the passing grades in colleges. This is not accountability. We can’t have long- drawn- out malfeasance or negligence on the job. This is not accountability. So accountability is a two-way road. People have to feel comfortable that their government is accountable to their wishes and at the same time people have to be accountable for their own actions.
Tim: So you are saying there is a long way to go
Peter: I think that one is the key and it goes to some of the things that Nicholas was referring to.
Nicholas: Peter, one of the things that were not debated today is the bankability of the corporations. You can’t start a business without a bankable concept and in the inception of all these projects, the guarantee of the government is very important. You can’t pull together a $2bn project without the bank lines. So sometimes the government is forced to get in to kick start some projects which Manal presented to us.
It’s like saying, what you are doing today; I am working on my second million. But do you have your first million? I don’t. The second one is easier to make. I think that is really very important for Oman to go out there and clip a piece of the international markets, it needs strong supply chain partners which only very strong international groups or the government of these countries can produce. So as much as you would like to go it alone, sometimes you have to clip along with companies such as Aromatics.
And now the other part is the pricing fluctuation of these commodities is such that you can’t weather two storms. Two cycles and you are out. You will have junk assets here on your shores.
Musab: Just to pick up on Nicholas’ example and just to share some of the market challenges that business like ours face, I can tell you that in May-June this year (2012) the refining marging was almost zero dollars. Therefore you are better off selling crude oil than refined products. This month (December 2012), the refining margins is about $8, and this is within a span of four to five months and you as a company actually require to manage through that cycle. And the cycle becomes very volatile too. And it’s not a cycle that sometimes takes years or so but it takes just a few months and hence we need to build capacity, ability and efficiencies to be able to deal with those cycles and become a profitable business.
Tim: Marco Belucco
Marcos: I think it is very important to think about the running of a business on a long term. You have to generate profits in order to generate dividends to your stakeholders who are your shareholders, your employees and the community. That’s why, thinking in the long term you are going to pay dividend for your stakeholders.
Hussain from audience: Sorry, my point mainly was focused on public funds. I mean accountability to the public funds. Where the money is going? The point is as the honourable gentleman from the Majlis A’Shura mentioned they do not have an idea about where the budget money is going to. If it has reached to such a stage where the people who are representing people do not know where the public funds is going, does that require us Omanis to go back on the streets again to demand laws for disclosure to the Majlis.
Tim: What do you think? Does it require Omanis to go back on the streets? Are you going to see more protests as a result of such things?
Hussain from audience: I mean according to a programme that I watched, in relation to Bahrain, the gates of freedom have been opened up and they are not going to be closed again…
Tim: What about Oman, because Oman is different from Bahrain?
Hussain: Yea! At the end of the day people have seen that they can have changes when they go out on the streets in protests, when something comes to a standstill …
Tim: They also have seen that they can go to jail as well… So that means there will be less protests…
Hussain: That’s where the tussle is going to happen between the people and the government. But at the end of the day…
Tim: But you are forecasting a continuing tussle, aren’t you?
Hussain: No. But if the government can’t deliver, then yes. If changes don’t happen, then I do see people back on the streets and protest for changes in government, changes in policies, and of course the big one, accountability.
Tim: Do you think that is right Musab? Do you share that forecast?
Musab: We have to be careful about transparency. I think transparency is good. The important thing is what I do with the information. I think, as I said in my earlier comments, the expectations are too high. People think that I am gonna have a say in everything because I have got freedom of expression and my opinion will count…
Tim: That is having a say…
Musab: That is very high expectation. And my…
Tim: To be able to have a say is very high expectation?
Musab: There should be organised way for people to have their opinions…
Tim: You just cannot have people going out on the streets to express their opinions…
Musab: We have, I think, created different channels. Important is, after people have expressed their opinion, so what afterwards? You know, we can allow people to express, create forums. Then the expectation will be like, oh, I went and expressed my opinion, and a year later it was not done. This was expressed earlier: We came here (to Oman Debate), expressed our opinion, voted, and a year later I came back but nothing happened. Why do I need to go again?
Tim: Peter Ford
Peter: That is a representative government and so if you don’t like the way your government is behaving, you get rid of the representative government. And then the new session will be able to make the changes that the previous session couldn’t make. Now whether or not the government of Oman changes drastically its structure is up to the government of Oman. But accountability, as I said earlier, is a two-way street. So protesting is fine, but destroying things is not fine. And accountability has to dictate that. There is only a certain amount of tolerance that there can be room for…
Tim: But I wonder if, as a CEO, you detect the level of impatience that the questioner was referring to in your workforce
Peter: I do see it inside and outside. Salalah is one of the examples of how it should be done during April 2011. There were a whole lot of unhappy people, there were whole lot of people protesting, but there was not a piece of equipment destroyed, not one strike in Salalah and there was an engagement factor.
There was also an earlier generalisation that every Omani is educated and we know what we want; but that might be taking a step too far because certainly, many people may know what they want and not everyone is educated. Some of the demands that came across are not necessarily realistic, for example, forgiving all private debt. Again this is about accountability and behaviour. We have to make sure that we are delivering the right messages to people.
Tim: I just want to go back to a question which we had before. If the government had better human resource policies, how much difference could it have made to the industrial unrest we have seen earlier this year?
Peter: It’s a tough one because there are two things. One is, in my perspective, the Omani labour law is ambiguous at best in certain areas…
Tim: Do you find it hard to work with?
Peter: Yes, I find it difficult to work with. It’s very difficult to terminate people for cause; and actually, in my view, if you make it more transparent and allow us to get rid of non-performers, we would then be able to hire more Omanis who are willing to work. But I cannot do that and I am taking a risk with being saddled with a non-performer for a significant periods of time.
Tim: Manal, do you want take that criticism, difficult labour laws?
Manal: We have to recognise that there are certain reforms introduced last year and I think those were seen as improvements, maybe not by industries but again, I would say, they have been seen as improvements by ILO and World Bank. You are bringing a new level of comfort to the business working environment.
Peter: To whom? Comfort to whom?
Manal: I think it is bringing comfort to the labours, the workers…
Peter: Oh yes, clearly they are very comfortable…
Manal: Maybe this is something you may not agree with but it is improving their perception of the working environment. To get two days holidays is not something bad, actually it has its impact on the leisure sector, on the food sector and the retail sector…
Peter: that’s not the stuff I am talking about, I am talking about industrial relations and performance management. I have no problem with two days off in a row. We have 24×7 operations and we pay huge overtimes. What I am talking about is dealing with non-performers easily and enforcing the actual rules of the land today for industrial relations which say that you are supposed to negotiate, give advance notice if negotiations fail and then you go on strike. But that didn’t happen at all, even a year after the events of March 2011. And there were not penalties for violating the rules of the law. So what is the government going to do around that?
Manal: I totally subscribe to this. Some of the companies in which I am a board member have suffered from this unorganised employee relationships. I do agree with you that we need to create that culture of dialogue and understand that this has to be governed by policies.
Tim: This is more than dialogue. Are you going to respect the laws or enforce the laws of the land?
Manal: Agreed. But some of these are very sensitive sectors like electricity. HE Mahrouqi can maybe share some of his experiences. Some of them have to do with food, with imports. There are certain rules to declare your demands. You have certain demands, certain requests, they can be made…
Tim: But Peter Ford is asking whether you will enforce the laws of the land?
Manal: I do not represent the Ministry of Manpower but I think they should (allow companies to enforce the Omani labour law). Today we have 165 labour unions created so far. I think again talking about learning experiences and learning curve, we should come to invest in these unions and showcase through these unions that we can create a healthy dialogue between business owners and labours.
Peter Ford: But the government stepped in between the labourers and the business owners and totally eradicated that dialogue, that discussion.
Manal: I personally think that that is not the right approach. We should strengthen the role of the labour unions and allow them to act as mediators between labourers and business owner. This is my personal perspective.
Tim: OK. We talked in the first panel about an action plan. What anybody can commit to on the basis of what we discussed.
Manal: Agreed. Add this point to the action plan please.
Tim: What else would you like to put on this action plan?
Henk Paew: There are changes being made touthe labour laws and we as employers are not being involved in what is good or bad. What I would like to see is a dialogue wherein we are consulted, at least, in what works and what doesn’t. Firing somebody for cause is horrific. I worked in the US where it’s a little bit easy, even in Europe it’s not that difficult. And you also find the Ministry of Manpower, most of the time negotiating in favour of the employee and telling the company to take him (the employee) back. This is a position that the government should never be in. So what I would like to see is a dialogue between the different parties in setting up some kind of tripartite consultation.
Nicholas: I know that this will have to be a GCC initiative but having an FTA with the European markets would expand significant opportunities for markets. I think it is a vital necessity to have that second leg of trade.
Musab: Well, the action plan for us has been decided before this meeting and that is to strengthen the partnership with the society. Sohar Aluminium, Vale and Orpic are working together in the forum of Jusoor to try and build stronger partnerships with the society and create sustainable relationship.
Tim: Will there be measurable results to these dialogues?
Musab: Well, we are trying to focus on areas such as SMEs and how to help them to succeed in that region.
Marcos: I think you have to consider social responsibility, generate jobs, have environmentally friendly operation and add value to the community. And with Jusoor we are looking to have one entity to provide social responsibility projects for the community. This entity was created in the beginning of this year (2012) and its time now to make an assessment to check how it has progressed.
Peter Ford: I have two things: From the earliest age at home and in school, the words productivity, value and competitiveness should be talked about. This has got to become part of the culture. And the second thing is we should sit down and start talking about the things that the government should stop doing, not the things they should start doing- to allow the private sector to generate greater value to the local Omani economy.
Tim: Manal, again, you will be part of that dialogue happily wearing both your government and commercial hats, yea?
Manal: I will be happy to do that.