Local content development in the industrial sector

The use of local content in different sectors of the economy has expanded beyond the oil and gas industry, and is now used as a tool to transform industrial growth into a broader and sustainable economy. At the industrial level, local content goes beyond procurement of goods and services within the country. Local content is a mechanism to develop a country’s capacity and capability to build local supply chains and create quality jobs, support the Small and Medium enterprises (SMEs), enhance innovation and retain more value within the country’s economy.

Local content development in the industry sector is directly associated with the goals of Oman Vision 2040, particularly on economic diversification, private sector and competitiveness, as well as the development of national capabilities. While Oman is gradually developing its manufacturing and industrial sector, the challenge is not to attract more investments to establish more factories, but to ensure that those investments create and add more value to the economy.

INDUSTRIAL INVESTMENT TO LOCAL VALUE

Each large scale industrial project can create many smaller scale projects and businesses. A manufacturing plant requires many inputs, services and supplies. Raw materials, equipment, logistics, and maintenance are some of the inputs that represent opportunities. However, not all of these opportunities will be captured. The key challenge is to create an environment where local industries, based on their competitive level, can satisfy a company’s requirements.

This strategy would help Oman slowly reduce dependence on imports while creating new investment opportunities for Omani businesses.

STRENGTHENING SMES

The participation of SMEs in industrial supply chains is also important, but SMEs should be included based on their capability and competitiveness. Large industrial companies can help SMEs through supplier-development programs, and other interventions like quality certification, long term contracts, and procurement opportunities.

The effectiveness of a local content program should therefore be assessed based on the extent to which local suppliers can export. Local content programs should therefore evaluate the extent to which suppliers improve their productivity and technical capabilities, as well as create sustainable jobs and adopt international standards.

DEVELOPING LOCAL TALENT

The development of local talent is important. A range of new occupations are created by industrialization, including engineers, technicians, operators, and researchers as well as supply-chain and data management specialists, and industrial managers. To ensure that jobs are sustainable, the education system, the vocational training system, and industry should be aligned.

New industrial investments should target what will be needed in the future, and identify the skills the industry will require, and work with training and higher education institutions to fill the skills gaps. Local content strategies should therefore address the same issues as Omanisation.

INCORPORATING INNOVATION

New ways of thinking and integrating innovation into local content are important to remain competitive. Industrial automation, digital supply chains and other trending technologies should be part of future local content strategies.

Local content programs should foster collaboration between industry, universities, SMEs and startups, research, and development institutions. The focus should be on gradually moving from buying locally to designing, developing, and manufacturing locally.

IMPACT, NOT SPENDING

Ultimately, the measurement of local content in the industrial sector should be the impact it has on the economy. Some of the indicators should be local procurement, local jobs, SME and supplier development, investment and import replacement, improvement of productivity, technology and innovative edge, as well as exports.

This is a radical departure from asking, “How much did we spend locally?” to asking, “What economic value has this industrial investment created for the Sultanate of Oman?”

When local content is part and parcel of a strategic industrial policy to attract investments, develop and diversify the supply chain and create economic value, it touches on multiple areas including industry, entrepreneurship and employment.

For Oman, the opportunity is to build an industrial ecosystem in which international investment and national capability reinforce one another—creating competitive Omani industries that can not only serve the domestic market, but increasingly compete in regional and global markets.