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Al Makhmari: non oil exports are important

Al Makhmari: non oil exports are important



Non-oil exports draw investment

Retaining and growing Oman’s manufacturing base is a matter of vital national importance and key to enhanced national efforts to boost the sultanate’s non-oil exports, Taleb Al Makhmari from Ithraa tells Pummy Kaul

November 2018

Oman’s non-oil export revenues hit $5.07 billion in the first half of this year (June 2018), according to a senior official at Ithraa, Oman’s inward investment and export development agency.

Taleb Al Makhmari, Ithraa’s director general of marketing and media, said Omani firms export to over 135 countries and in 2017, it exported $8.2 billion worth of non-oil commodities, up from $6.21 billion in 2016.

“Our non-oil exports matter because they represent the very sectors that drive wealth, attract investment, talent and technology transfer, boost productivity and innovation, and generate employment. The production of exported goods and services creates jobs, both directly and indirectly in the supply chain,” Makhmari said in an exclusive interview with Gulf Industry.

According to him, up to 2017, foreign direct investment (FDI) stood at $24.19 billion compared to $20.95 billion for the corresponding period in 2016, a rise of $3.23 billion, growth rate of 15 per cent.  

The UK was the largest investor with an investment of $11.8 billion as of the end of 2017 against $8.8 billion for the same period 2016, followed by the UAE, $2.641 billion compared to $2 billion.

Oman’s manufacturing sector is seeing high investments

Oman’s manufacturing sector is seeing high investments

Foreign investment in Oman reached OR9.7 billion ($25.22) in the second quarter of 2018, which is OR1.4 billion more than the same period in 2017, as per the National Center for Statistics and Information (NCSI) data.

The UK is still the largest investor in Oman, reaching OR4.7 billion at the end of the April-June period, compared to OR3.7 billion over the same period in 2017. After the UK, the UAE and Kuwait were the next largest sources of FDI, bringing in OR1 billion and OR425.9 million respectively.

Oil and gas in Oman accounted for the country’s bulk of FDI, reaching OR55 billion in Q2, while FDI in manufacturing hit OR1.07 billion.

 

Excerpts from the interview:

Can you tell us about Ithraa’s work in helping boost Oman’s non-oil exports and attracting investment?

Ithraa has worked with inward investors and Omani non-oil exporters since 1997 helping them identify opportunities domestically and internationally. We have helped to create and safeguard thousands of jobs across the sultanate, spanning manufacturing, tourism, agriculture, financial services to IT. However, without the continued support of our government partners and our wider private sector stakeholders, Ithraa would not be the award-winning organisation it is today. Likewise, we have always been fortunate to attract an outstanding team of professionals, all of whom have served Ithraa and Oman well over the years.

Today, Omani firms export to over 135 countries and in 2017, exported $8.2 billion worth of non-oil commodities, up from $6.21 billion in 2016. And as of June 2018, Oman’s non-oil exports were recorded at $5.07 billion. Exporting is good for Omani business, good for Omani workers and good for Omani jobs. Put simply, when Oman exports, Oman prospers.

Targeting middle class consumers in Asia and Africa as well as in Europe and North America is crucial to putting Oman’s economy on a solid footing. Helping businesses penetrate these markets is what we excel at.

Exporting is of course fundamentally a decision driven by local businesses. But, firms attempting to close an export sale can face hurdles, including lack of market information, challenges obtaining export financing and strong competition from foreign companies. This is where Ithraa’s staff and services play such an important role. We help Omani businesses assess export opportunities, from developing a plan, identifying buyers and markets, advising on regulations to managing logistics. Our goal is to provide everything an ambitious company needs to succeed in today’s global economy.

Oman’s non oil exports are booming

Oman’s non oil exports are booming

Up to 2017, FDI stood at $24.19 billion compared to $20.95 billion for the corresponding period in 2016, a rise of $3.23 billion, a growth rate of 15 per cent.  

The UK was the largest investor with an investment of $11.8 billion as of the end of 2017 against $8.8 billion for the same period 2016, followed by the UAE, $2.641 billion compared to $2 billion.

Investors are clearly being drawn to the sultanate by various factors, particularly as the government continues to drive its successful and ambitious diversification strategy forward, providing more opportunities for potential investors in sectors ranging from manufacturing, logistics, utilities, renewable energy, fisheries, technology, mining to tourism.

To support our drive to attract increased levels of investment and promote Oman’s non-oil exports, we have recently organised missions to Qatar, Italy, Algeria, India, Sudan, France, Switzerland, Germany, and the UK. These were very successful and have helped strengthen our business ties with these important international markets. 

We also played a lead role in the success of the Omani Products Exhibitions recently held in Riyadh, Dubai, Doha, Algiers and Tehran. This initiative was designed to help expose local companies to the many commercial opportunities available in these countries. With mega events such as the World Cup and the World Expo coming to the region, it is important we help local businesses explore and penetrate these markets.

With regards to more mature markets, we have been helping Omani companies participate at major international trade shows in the Gulf, the US, Asia, Africa and Europe. We have also been encouraging Omani exporters to take advantage of the Oman-US Free Trade Agreement which has seen our non-oil exports to the US reach over $350 million in 2017.

Helping Omani firms, of all sizes, penetrate mature as well as emerging markets is extremely important to us. In fact, we have had considerable success in this regard and the number of Omani firms exporting to international markets continues to rise. 

Our non-oil exports matter because they represent the very sectors that drive wealth, attract investment, talent and technology transfer, boost productivity and innovation, and generate employment. The production of exported goods and services creates jobs, both directly and indirectly in the supply chain. In fact, recent Canadian research suggests that, when compared with non-exporters, exporting companies tend to be more productive and competitive; faster growing with higher revenues; more innovative; and less vulnerable to risk. This is a message we relay to local businesses thinking of entering the export market.

 

How do you see the manufacturing sector in Oman changing over the next few years? What are the trends we should be looking out for?

Oman is a country that makes things. From car batteries, AC units, fibre optic cables, confectionery, footwear, marble kitchen tops, pasta, soap powder, ceramic tiles to tomato paste, the products manufactured in the sultanate are diverse. Representing 10.2 per cent of the GDP in 2017 and employing over 244,463 people, Oman-made goods are exported to over 135 countries. Indeed, manufacturing is a key contributor to Oman’s growing and ambitious economy. 

And breathing new life into the sector is the growth of niche micro-manufacturers – these small companies typically employ fewer than 10 workers; examples include hand-made chocolate, organic cosmetics and personal care products to women’s fashion to precision engineering, where innovation in design create products that capture the consumers’ attention. Though small in size, many of these micro-manufacturers are becoming an economic force to be reckoned with. Indeed, a revolution in manufacturing is coming. The power of automation and the dropping of the costs of tools will alter the landscape of how things get made in Oman.

In fact, the micro-manufacturing sector is part of a much larger global creative economy that, if it were a country, would already be equal to the fourth-largest economy in the world, with the fourth-largest workforce. Indeed, a 2015 Unesco–EY report shows the creative economy employed nearly 30 million people worldwide and generated $2.25 trillion in revenue – 3 per cent of the world’s GDP. Micro-manufacturing creates jobs, increases local incomes and preserves cultural traditions that in many places are at risk of being lost.

We live in a world defined by personalisation and unique product offerings. Thanks to the rise of technology that allows the customisation of everything from music playlists, to food, clothes to cosmetics, there is no longer such a thing as “one size fits all”. Smaller cultures that function within the wider culture are becoming more common, as is the acceptance of a variety within tastes and lifestyles. The marketplace is changing rapidly to accommodate this new culture of diversity. And it›s doing this through niche micro-manufacturers.

To capitalise on the opportunities presented by micro-manufacturing, the government has introduced a number of successful programmes to facilitate workspace for companies as well as provide finance and start-up mentoring through the Public Establishment for Industrial Estates, the National Business Centre at Knowledge Oasis Muscat, the Research Council, the Industrial Innovation Centre, the Public Authority for SME Development (Riyada), Al Raffd Fund as well as the newly-launched Oman Technology Fund.

Aided by these organisations young Omani entrepreneurs are setting up manufacturing businesses, attracting funds to their projects and figuring out how to build their products and services locally. They do not need large factories. Instead, they require compact, micro-manufacturing facilities tailored to small, flexible production runs. For many talented Omani designers, inventors and makers, micro-manufacturing will be the key to their commercial success.

Retaining and growing Oman’s manufacturing base is a matter of vital national importance and key to new and enhanced national efforts to boost the sultanate’s non-oil exports. At the same time, it has been working to solidify a new “placed-based” vision for Oman’s economic growth and prosperity, integrating the work of several government organisations to promote sustainability and economic competitiveness. Indeed, government clearly recognises that business and job growth come from having a skilled, multilingual, internationally-focused workforce, a modern infrastructure to transport Oman-made goods, a commitment to ongoing improvement such as through energy efficiency and waste reduction and a stable supply of appropriate manufacturing workspace. Moreover, critical to all these factors are public-private partnerships that work with Oman’s manufacturers to create a competitive business environment, one that attracts talent and investment.

 

Can you highlight any sectors that will be important for Omani companies?

There are a number of sectors that are growing at the moment, from logistics, manufacturing, tourism, fisheries to mining. We are constantly encouraging companies from different sectors to go international with their products. Currently, our major export markets include China, India, the UAE, Japan, South Korea, Saudi Arabia, USA and Qatar but we are also encouraging current and potential exporters to consider markets in Africa, Ethiopia for example. We see a lot of potential in Africa for Omani manufacturers. 

India is market we have spent a lot of time working on. It is a market that varies widely across different regions and states but it is one that is taken seriously by Omani companies that are seeking to expand and go international. Interestingly, the business opportunities have now stretched beyond the traditional business centres to the emerging cities such as Chennai, Nagpur, Ahmedabad, Chandigarh, Pune and Jaipur, to name but a few.

 

Where does Industry 4.0 factor into Oman’s manufacturing scene?

Today, Oman’s manufacturing sector is being driven by social media, mobile technology, analytics and cloud computing (SMAC). Indeed, many believe our manufacturing sector could be on the cusp of a major breakthrough with the move towards Industry 4.0 (4IR) - a revolution that has the potential to transform the way Oman-made goods are ordered, designed, manufactured and delivered. According to a 2015 Accenture report, by improving productivity, reducing operating costs and enhancing worker safety, 4IR could add $14.2 trillion to the global economy over the next 15 years.

At the heart of this revolution will be smart factories, using technology to change global supply chains and production lines, bringing a much higher level of automation and digitization to their operations. Local manufacturers will use AI, self-optimising and self-configuring machinery to complete complex tasks, delivering superior cost efficiencies and better quality goods.

Local manufacturers realise that the most obvious benefit of 4IR is the opportunity to increase production yields and reduce waste. Anything that affects yield, such as downtime or equipment failure is a blow to any company’s bottom-line.

There is undoubtedly a need to raise awareness of the potential, as well as the risks, of 4IR across the economic spectrum. While larger Omani companies in oil and gas and manufacturing are embracing new technologies emerging from 4IR and re-adapting business models, micro-businesses and SMEs are not always familiar with these. Technical staff in new and established enterprises, as well as managers and policymakers, need to be trained in order to understand the implications and opportunities of 4IR. This is a space we are working on.

 

Economic diversification is a hot topic in Oman. Could you share your thoughts on this?

Today, the reach of Omani products is truly a global phenomenon. This is healthy and exciting. It speaks volumes about the quality of the products made in Oman.

If I am to talk diversification and attracting high-impact investment, I would have to mention Vale – a Brazilian multinational metals and mining company, which made an initial investment of $1.25 billion in their Oman operations. They have generated thousands of direct jobs and generously supported the growth of locally-based SMEs which will lead to further job creation and national capacity building. They have also invested heavily in training their employees, many of whom are now qualified mining industry engineers, technicians and operators.

It is also important to look at what is happening around us. By 2025, it is estimated that 600 cities will generate nearly 65 per cent of the world’s economic growth. But, the most revealing fact is that by 2025, cities in emerging economies will account for about half of overall growth. Moreover, one billion people will enter the global consuming class by 2025. They will have incomes high enough to be classified as significant consumers of goods and services, and 600 million of them will live in emerging markets on Oman’s doorstep.

These trends point to great opportunities for not just Omani firms but also the ports, airports, industrial estates and free zones the government is investing in. We are strategically placed and have the business base, track record, infrastructure, experience, talent, leadership and connectivity to help any business take their activities global.

 

What‘s the thinking behind how Oman’s brand is being presented to the world? 

In today’s competitive world, countries are often viewed more like a product. A product that provides labour, land, premises, services and infrastructure to businesses while offering housing, shopping, leisure and other amenities, and a social milieu to residents and tourists.

In this regard, Ithraa is working with partners in the public and private sector to help differentiate Oman from other places and hence facilitate the promotion of the sultanate’s place product offer.

With the impact of globalisation and the rise of the Attraction Economy, it is increasingly important that Oman gets it international image right.




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