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An ally for the private sector and foreign investors

Interview - March 16, 2012
H.E. Khalil Bin Abdullah Bin Mohammed Al Khonji, Chairman of the Oman Chamber of Commerce and Industry (OCCI), discusses the U.S.-Oman FTA, Oman’s growing non-energy sectors and its healthy relations with the U.S.

In March 2011, the OCCI signed a Memorandum of Understanding with the National U.S. Arab Chamber of Commerce to establish the Oman-U.S. Joint Business Council. What progress has been made over the past year?

We currently have almost 30 business councils around the world and the newest one is the Oman-U.S. Business Council. We seek to increase the number of joint business councils in a bid to enhance economic ties, increase the trade and investment exchange, advise businessmen and investors of the investment potentials, raise awareness of the business laws and regulations, exchange information by means of promoting investor-friendly environment and cementing economic ties.

This year, we had the election in the chamber, so we have been waiting for the new board of directors to be appointed, which has delayed our activities a bit. A Co-Chair from the U.S. has been appointed and I am going to meet him soon. In less than a month’s time we will also announce who is the Chairperson from the Omani side.

We established the Oman-U.S. Business Council to facilitate the Free Trade Agreement (FTA) that was signed some years ago between the two countries. It will be a tool to promote both sides, especially the U.S. side to Oman. With the help of the business council, we are planning a road show with the Minister of Commerce, so that American investors can understand more about Oman and how peaceful it is.

We need to increase the awareness of Oman’s location in the U.S. I was a student in the U.S. and I know how unaware the public is about Oman. We will emphasize the location and Oman’s strategic position. Although Oman has a small population, our neighbors are highly populated. That is a big market for American companies, and it is a good opportunity because we have a longstanding relationship with the U.S., unlike some of our neighbors, with all due respect. We have already celebrated 150 years of relations between Oman and the USA, and I think it is about time to materialize that and take advantage of the FTA.

How do you rate the current trade and investment cooperation between the sultanate and the U.S.? How can these relations be enhanced?

Despite the negative impact of the global financial crisis on the investment flows from different parts of the world including U.S., the volume of trade exchange remained high (about $2.134 billion as of the end of 2011). We are looking forward to see many U.S. companies taking part at the tenders floated by the Omani government for the implementation of the various development projects, especially the U.S. companies which have excellent experience in infrastructure projects.

After the activation of the FTA between the two countries, the American investors have shown keenness to activate the bilateral investment relations. As of today, the U.S. companies have investment in oil, auto, foodstuff, textile and infrastructure sectors.
If promoted properly, the FTA may enhance the trade exchange and increase the volume of reciprocal trade, which in turn will settle the trade balance between the two countries, which is still in favor of the U.S. This will also create new avenues for cooperation especially in fields such as IT, transfer of technology, electronic, manufacturing, IT programs and training of national manpower in the different administrative and technical fields.

We welcome U.S. investors to maximize their investments in our industrial complexes, warehouses, storage facilities and other related services. Oman is known for its strategic location, which qualifies it to become the gateway to Africa and GCC countries. The U.S. investors may also contribute to setting up research, development, information and statistics centers in the sultanate. That will hopefully be the new role of the business council in the future.

You were first appointed Chairman of the OCCI in July 2007. You come from a renowned family in the field of commerce and industry. Since the beginning, you applied your deep knowledge and understanding of the sector by implementing a very clear and methodical approach in modernizing OCCI. Following your recent re-appointment, what is your action plan for the second term?

I realized that number 7 was lucky for me. I was appointed on July 1st in 2007, via decree no. 57. I have 7 children and my post box is 73, and I was reappointed on December 27th.

I am optimistic. I have big ambitions for the future, along with the new board. We have a new young elected businessman who has joined us, so most of our board now is of the new generation with a new mindset. I hope that we will satisfy the domestic members of the Chamber. We currently have almost 190,000 members and 10 branches. We are here in the head office and the authorities are demanding more authority, so this is a new challenge. We have to keep the OCCI as one unity that represents the Chamber to the world. So far, we are one Chamber; there is no federation, there are only branches. The challenge is in giving more authority to the branches without changing the real structure of the Chamber.

Private sector demands are high, and I think in the future we will play a greater role to bring investors in. We are busy every day receiving delegations from around the world. We promote Oman here or when we go outside to our business councils. I hope that the next four years will be good for OCCI, along with the burden of the FGCC, which has just started for the next two years.

How would you evaluate the performance of the Omani economy and its potential?

After the recession witnessed by the world economies in 1999 and the slump of oil prices to less than $10 per barrel, the Omani economy has made leaps and bounds. The sultanate has been one of the least affected countries by the global financial crunch that ripped a number of economies worldwide.

Oman’s economic performance during the last four years has been impressive. The forecasts estimate the growth of the Omani economy in 2011 to be around 25% compared to 2010, which was 23%. It should be noted that this rate is a record – especially the oil price was around $100. The GDP did not manage to achieve this growth rate when the oil price was around $150 in 2008.

Benchmarking the performance against the Vision 2020, we will find that the performance of the different sectors has been in line with this Vision. The oil and gas sector is still making great added value, which in turn gave the other production sectors the momentum for growth. As per the Omani Vision 2020, the contribution of the oil sector to the GDP will be reduced to 9% by 2020 and the contribution of the oil-related industries will also diminish.

The sultanate is making steady strides in setting up a non-oil based industrial sector. This is very clear from the mega industrial projects and green fields in other sectors. Many factories for steel & iron, aluminum, sanitary materials, construction material, copper, non-metallic, polyethylene and others were set up. These factories led to increasing the contribution of the industrial sector in the GDP to more than10% of the GDP compared to 5% in 1995. The contribution of the industrial sector to the GDP is expected to be about 15% by the end of 2020.

The OCCI is instrumental in promoting the dialogue between the government and the business community in Oman, with the aim to develop a sustainable economy. How did the role of the private sector evolve over the past years, and what trend do you foresee in the future?

The Chamber was created in 1973 to ensure that the partnership between government and the private sector is a real partnership. That means that when the Government creates a law that affects the private sector, they will consult OCCI. For the past four decades the relationship was up and down. We have to be realistic as well. The Government has its own reasons to take our advice or not. People’s mindsets have changed over the past year in both the private and public sectors. Demands are increasing and the mode of democracy has also increased. The private sector has many demands and we are trying to defend these demands with the Government.

Presenting the private sector’s case regarding the new Labor Law, for example, is a real challenge going forward. There are new techniques and new ways. But at the end of the day, we are partners and we are not against each other. Oman has developed over the past 40 years and most of the infrastructure has reached everywhere. I think Oman will progress further, and I hope that the Government will evaluate the Vision 2020 plan, so that we can work on a clear picture with a new strategy for the future.

How is OCCI helping develop a business-friendly environment in the sultanate?

OCCI is very much interested in ensuring a conducive business environment that attracts local, regional and foreign investors. To this end, OCCI provides services for its members to help them carry out the proposed feasible investment projects. It also provides them with researches, studies and reliable economic data. We hold meetings between businesspeople and officials in the different organizations to enhance the communication among them. These meetings always provide investors with an overview on the available investment opportunities, the incentives provided by the government, the decisions and the executive orders used by some organizations.

OCCI also seeks to develop its relations with the different government organizations to ensure an investor-friendly environment in the sultanate. Oman has many investment opportunities in different sectors. The Omani government realizes that it cannot do everything alone and that the foreign investors should be involved in the development process. In a bid to attract foreign investors, the sultanate took a number of initiatives to create a favorable legal framework, provide business incentives and establish free zones. It should be noted that the government seeks to maximize investment in the non-energy sectors, especially in fields such as services, tourism, health, education and other potential sectors.

In light of the privatization endeavors, what are the investment opportunities available in the Sultanate?

The sultanate has many lucrative investment opportunities in the different sectors. To help investors benefit from these opportunities, the government has also set up free zones in different parts of the country and provided the required infrastructure. This helped attract many Greenfield projects in Sohar Free Zone. The Salalah Free Zone has been established to benefit from the container terminals in the Salalah Port. We also established the Special Economic Zone in al Duqm. Work is underway to make the zone ready to receive billions of dollars’ worth of investments from world investors.

Moreover, the sultanate has huge potential for tourism investment; thanks to the rich history, culture, the beautiful sceneries and the biological diversity. The Sultanate also has a coast that extends for more than 2,000 miles.

Oman has been one of the leading countries in the region in terms of privatization as it started this move in 1988. Many governmental projects were either fully or partially privatized. This move provided private sector investors with huge investment opportunities that made them active players in the development process in the Sultanate. The Sultanate government has many investment arms in tourism and industry sectors. This provides many opportunities for many privatization projects in the future.

You represent the sultanate in your numerous trade missions and trips around the world. What are the major stereotypes associated to the image of Oman that you have to address when promoting the country?

The location. Some of the foreigners mix us with other countries, and they think that Arabia is all one country. Oman has a history of multicultural and multiethnic groups. They live together and because of our unique location, we have a long history with the whole world. We have always been peaceful with others and we accept them and vice versa. We have an international mindset.

Oman is a free and liberal society. We believe in free trade and government not interfering with business. The OCCI will protect all of these values with others. Nobody knows about Oman, but now it is there. Airlines play a significant role in getting the world closer and helping everyone understand where Oman is.

The Middle East is a very vast region and we have been friendly to everybody. We have no enemies, so Oman is the best place to invest in. We have good human resources and we have realized that there is a lack of education, vocational training and on-the-job training. We will work together with the Government to make sure that we are on the right path.