SALEH AL SHAIBANY - saleh_shaibani@yahoo.com - Oman must step its privatisation efforts to attract much needed foreign investments into the country to diversify away from the oil income. Privatisation in Oman is not new. In 1994, the Sultanate was the first country in the GCC to generate electricity and desalination plants under the privatisation scheme with the Al Manah Power Project. It had the enviable privilege of being the first electricity generating company to be 100 per cent owned by the private sector.
The success continued throughout the 1990s with Barka, Suhar and Salalah generating electricity under the ownership of foreign investors. However, since then, the privatisation has been largely put on hold after the impressive initial success in other areas of the economy.
Thus, so far, the privatisation has been slow. Oman Flour Mills is still majority owned by the government 30 years after its establishment. The national carrier, Oman Air, has suffered the biggest setback in the government’s privatisation process. Formerly known as Oman Aviation Services (OAS), the company started its privatisation process in 1981 by listing its shares in the MSM. However, in 2007 the government bought back all the private shares to reverse the privatisation process and nationalise the company.
In 2006, the announcement that Oman National Transport Company (ONTC) would be privatised was received positively by private investors but again the plan of the sell-off of this vital service was put on ice. Similar fate fell on Oman Airports Management Company (OAMC). The company was established to be wholly owned by the private sector to run the airport services. A decade later, the company is still entrenched deep in the control of the state. The ongoing expansions of Muscat International Airport and Salalah Airport would have been served well had the private sector taken over the management. With the completion of regional airports at Suhar, Duqm, Ras Al Hadd, the government would need to relinquish control of the management task of this progressive expansion in the aviation field.
The creation of government agencies such as the Public Authority for Radio and Television and Public Authority for Civil Aviation is well meant and it will improve efficiency but in the long run, these entities will prove a financial burden to the state. With the purse of the state’s coffers showing signs of splitting from the hems, the government would need to take a closer look of its privatisation initiation to give the private sector a bigger role. The growing financial demands of various public services would critically derail the fiscal balance. The government’s 2020 vision includes selling off most of the public controlled agencies. Yet, very little has been done towards that target as far as privatisation of state-owned companies is concerned, apart from the commendable efforts in the power sector.
But in the defence of the government, the private sector has shown very little interest in acquiring shares of state-run companies. Perhaps what is needed is the overall restructuring of the privatisation plans. The government agencies should conduct comprehensive marketing schemes to attract foreign investors. Otherwise the state will continue to support ailing and unprofitable establishments. This will put considerable strain on its spending by subsidising poor management. If unchecked, the public authorities and other state-owned enterprises would collect colossal losses and prove to be too inefficient to run.
In conclusion, privatisation must be looked at as part of market reforms and a broad strategy to further liberalise the economy. Oman is already leading the region with the privatisation of the power sector. It should be easy to move on to other sectors, using this success as a stepping stone. If executed the right way, the success of privatisation would lead to the expansion of the economy, job generation and fiscal savings for the government.
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