IN the 70’s of the last century, the Sultanate needed to establish government-owned companies due to the lack of foreign investments inflows and the weakness and reluctance of the private sector to invest in new projects.
This led the government to move towards establishing some national companies in vital sectors such as tourism, industry, fisheries and others.
The question currently being asked, therefore, is: “Do we now need government companies in light of the established presence of the private sector?”
The truth is although the private sector has proven itself capable of setting up new businesses, it has sometimes hesitated to venture into certain areas of strategic significance to national and social development because of the high risks involved.
Nevertheless, it must be emphasised that the private sector is better placed to set up new companies in today’s environment. The government, for its part, must be focused on legislation and regulation.
Managing companies requires great responsibility, and the members of their boards of directors must step up to face the difficulties and challenges. With the presence of companies, whether governmental or public, this means working to increase the methods of control, auditing and governance methods. Lamentably, some companies resort to corruption and manipulation of public funds in order to strengthen their positions and work in their own self-interests.
At the beginning of the 70’s the government began developing, among other things, a chain of hotels after finding the private sector hesitant to invest in this sector.
It has also established companies specialising in flour milling, mining, fish processing, and so on. An airline and maritime transportation service were also established to serve the citizens of the country. However, due to the absence of sound auditing and accounting practices in some of these companies, they accumulated losses which piled up over the years and became a burden on the state’s finances.
This happened due to the lack of transparency, governance and integrity since key officials in these companies believed that oil prices would remain at $110 or $120 per barrel, and the government would continue to support and finance the businesses even if they were losing money.
Some of them also acted as if these companies belonged to them without any religious, moral or national scruples, as some put their personal interests above the interests of these companies. The same was also the case in some public shareholding companies, which went bankrupt during the past years.
The establishment of the Omani Investment Authority (OIA) by Royal Decree last June is a key step in transforming these loss-making entities into productive and profitable businesses.
The Authority has been tasked with restructuring government companies, professionalising their administrative and operational structures, making them lean in their expenditure models, and ensuring they deliver on their corporate objectives in the interest of the national economy and the Omani people. Understandably, this mandate will take a while to achieve the desired goals.
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