The private sector has long been at loggerheads with the public sector for so long now that many aspects of the economy has stagnated. Companies which for many years depend on contracts awarded by the government are now blaming the it for the slowdown of projects.
What the private sector do not try to understand is that the government regulates the economy and spur development but the rest it is up to the companies to shore up their own businesses.
Since 2015, the government has lost more than 40 per cent of its revenues when the oil prices plummeted from $115 per barrel in June 2014 to about $75 now.
The revenues decline obviously would have an impact on how the government would award contracts. But the private-public partnership cannot be overestimated.
This partnership, as far as the private sector is concerned, cannot be entirely pushed to the extreme to the government’s side.
The companies now must brace themselves for a new regulatory environment where the government plays a lesser role in the economic development.
Obviously, businesses looking to expand into new ventures must be innovative in creating opportunities instead waiting for contract awards from the government. Currently, there is a downturn in demand for their services over the short-term look. While at the same time, they need to prepare to meet a long-term increase in demand for their services in the future.
At a recent business workshop, speakers urge the private sector to stop “the blame game” and take pro-active measures instead.
The peak of the government’s contract awards was in 2014 with over RO 2.6 billion rials worth of projects awarded. Then came a rapid decline of 25 per cent per year since then due to oil prices fall.
This year, the government has trimmed down or cancelled some contracts to concentrate on more important issues like education and health sectors. Next year, it would not be any better.
The dry up of contracts is not just confined in Oman but most parts of the world. But the long-term look for the private sector should not look gloomy at all.
If only they shift their businesses away from government’s reliance. With local banks still willing to extend corporate and industries loans, the private sector can this advantage and expand their operations in new areas.
One area they would need to look at is investing outside Oman. Currently, just less than 3 per cent of Omani companies are doing business abroad. There are more robust economies in Asian countries such as China, Singapore, India and Malaysia.
This diversification of their business operation would stop them from relying on their local operations. Private companies need to playdown the risk factors, too.
Most of the Omani companies see higher risks when it comes to overseas investments. They stick to the local experience which they view as lower risk ventures. Local companies do not even venture to the regional countries, which, due to closer geographical proximation, the costs and risks are much lower.
The pressures are beginning to show to most companies in Oman which have been depending on government’s bailout in the form of contract awards.
Lower profitability in the last three years have been a major factor in the survival of some of the local companies. Many business analysts fear the worse. The next 5-year outlook does not look good for private companies unless they redesign their businesses in a different model. The service sector is one area the private companies might need to revisit. Retail is another area that does not depend on government’s contract.
The official statistics show that the service sector has room to grow while the retail has not reached its full potential.
The potentials in these two sectors and the future can be rewarding if only the private companies stop relying on constructions, engineering, oil and gas sectors as their core operations.