MUSCAT, SEPT 8 – With infrastructure spending by regional governments constrained by the ongoing economic downturn, the private sector must forgo their fixation on “maximisation” of corporate profits and support investment that aids the “optimisation of value to the ecosystem of the economy”, according to Oman’s Minister of Oil and Gas. Dr Mohammed bin Hamad al Rumhy (pictured) said the private sector is expected to do more to support economic development amid the current slump, by eschewing the single-minded quest for profit maximisation.
“They have a responsibility to a certain extent to do more optimisation instead of maximisation,” said Dr Al Rumhy. “The private sector looks at profit as the sole criteria. That is not optimisation, but a maximisation of returns. However, to sustain the ecosystem of our economy, they have to consider how we can optimise value — and value sometimes doesn’t come in dollars and cents. I think we need to have a discussion on this!” Dr Al Rumhy made the comments during a panel discussion held as part of the opening session of the World Heavy Oil Congress and Exhibition hosted for the first time by the Sultanate last week.
“From the government’s point of view, the private sector has a responsibility as well, especially in our region,” the minister noted. “Personally, I feel the private sector can do more too; but they think the government should do more.” In this regard, Dr Al Rumhy exhorted the private sector “to rethink about optimisation of the ecosystem of the economy over maximisation for shareholders”. He noted in particular the potential for private firms to invest in infrastructure projects. “Governments and government-related entities are driving most major projects in the Gulf region, but we want more private sector involvement in these projects. We often invite the private sector to take a small equity in a project, but they tend to shy away, perhaps because project development takes a long time, and their cash is stuck for a number of years. Instead, they tend to concentrate on providing services rather than being part of the project.”
Asked about the Oil & Gas industry’s employment generating potential, Dr Al Rumhy explained that given the nature of the sector, it tends to have a positive knock-on effect on other sectors rather than being a job generator itself. For every one direct job created in the industry, six indirect jobs are spawned in related sectors, particularly the services industry, he said, citing figures revealed by a fellow panellist at the event.
“Our industry does not hire a lot of people, but it contributes to job creation through growth in other sectors,” the minister said. “Jobs remain a main challenge for our nation, and our sector is playing an active role in supporting this by helping other sectors in terms of training, and so on. But job creation is a challenge.”
The trend is not dissimilar in other oil producing nations, Dr Al Rumhy pointed out. “When I spoke to BP (International) they told me that with new technology, they don’t need at least 16-20 per cent of the people they have. We can now do more using modern technology, Big Data, information management and so on; Artificial Intelligence is expected to play a bigger role in decision making, and will reduce human involvement in our business. These are challenges that nations like Oman are facing.”