The budget addresses the concerns in the country with key emphasis on infrastructure development and creation of jobs to further stimulate the economy. On the expenditure side, financial allocations for Government ministries and development programmes have been raised by 30 per cent to complete infrastructure projects underway like ports, airports, roads, water, sewage network and projects at Al Duqm Special Economic Zone.
The expenditure also includes the allocation for training 16,000 new jobs. Last year the government created 36,000 jobs for Omanis by spending RO300mn. This year, 56,000 jobs would be created, of which 20,000 will be in the government sector.
“The budget is very positive and well-balanced. And the additional job opportunities among youth will boost spending and thereby aid the growth in credit through an increased demand for finance this year,” says Ajit Engineer, CEO, Muscat Finance.
“The budget focuses on attracting local and foreign investment in the private sector, supporting growth of the small and medium enterprise (SME) sector, and setting up new industrial zones. The increased spending on development projects will give a major boost to demand for equipment and working capital financing. These projects would also benefit the subcontractors & SMEs,” adds Engineer.
C B Ganesh, deputy CEO, ahlibank brings in a global context to the State budget. “You need not be an economist to say that government’s austerity measures and spending cuts lead to unemployment and lower GDP growth, if not stagnation,” avers Ganesh. When the private sector is hesitant to spend and has gone into a shell, governments across the world needs to spend to stimulate the economy. I think this is where the Euro zone is faltering. In this context, the Sultanate’s deficit budget 2013 is a bold move in the right direction.”
“The projected government spending will definitely stimulate the economy and create more employment opportunities. Infrastructure development needs to precede any economic prosperity (as exemplified by China and learned by India the hard way) and hence, Oman’s budget focus on roads, airports and sea ports is laudable,” adds Ganesh.
The various infrastructure projects announced will lead to further unification of the GCC markets which could result in increased flow of foreign direct investment (FDI) into the country. Considering the demographic profile of Oman, in my view, education should get precedence over health in budget allocations, Ganesh points out.
Private sector’s role
Sometimes it is a clichéd statement but really speaking the direction of the government laid out by the vision of His Majesty is so fantastic, says Dr Shirish Gupte, CEO, ICT Kitara Capital. “The government’s strategy is that we will spend on the infrastructure. As a result of this, when the government spends, it’s the private sector which is going to get the benefits. So it is then important that the private sector also plays its role in the overall development of the nation. I think that time has to come for people to expect reasonable profits. Its time everybody woke up to the fact that there is no cheap labour any longer. Start concentrating on productivity and efficiency rather than on salaries. Start improving the skill sets of people as even the government is concentrating its efforts on education and training,” Gupte adds.
Training will lead to more jobs, more wealth, more stability and development of the country, he says.The other interesting part is that a well developed infrastructure will be the key to attract foreign direct investment into the country, says Gupte.
Economy in motion
While new projects announced will create higher demand for commercial and project loans, the new employment created will result in retail lending opportunities. Increased government borrowings through government development bonds (GDBs) could help in creating a much needed benchmark yield curve for Omani riyals.
Project approvals and execution is expected to further accelerate, helping the business sector and in particular the small business contractors. As the private sector is a direct beneficiary of the economic activity generated by government spending, the 29 per cent increase in expenditure should create good business opportunities, Kabir adds.
From a macro-economic point of view, Budget 2013 continues to build upon the Sultanate’s growth story with an enhanced outlay on infrastructure projects, renewed focus on social spending and efforts to promote small and medium enterprises. This coupled with an expected $100 plus per barrel oil price, is a firm affirmation that Oman’s finances and economic policy are headed in the right direction.