If the Omani authorities wanted to send out the message that their anti-corruption drive would leave no stone unturned, the recent spate of sentences handed down to senior government and business officials suggests they are communicating it well.

Some of the biggest names in corporate Oman have found themselves at the wrong end of legal proceedings targeting high-level corruption. In January, Mohamed Ali, managing director of one of the sultanate’s largest contractors, Galfar Engineering & Contracting, was forced to resign after being found guilty of paying bribes to government-run Petroleum Development Oman (PDO).

Ali was sentenced to a total of 15 years in jail, on five counts of bribery.

Targeting bribes

Two other senior officials were jailed, also linked to the payment of bribes to PDO. On 12 January, the Court of First Instance in Muscat sentenced Juma al-Hinai, a Finance Ministry official, who also headed the PDO tenders committee, to three years in prison and fined him RO600,000 ($1.6m). Another Galfar manager, Abdullmajeed Nushad, was sentenced to two years in jail.

The Omani authorities have made attempts to reach out to us, and are keen to see how they can improve their ranking

Arwa Hassan, Transparency International

These convictions were followed in February by the sentencing in the Court of First Instance of Ahmad al-Wahaibi, CEO of the state-owned Oman Oil Company, to 23 years in jail. This was related to a charge of accepting $8m in bribes from a senior official at South Korean group LGI, as well as charges of abuse of office and money laundering. The court found that Al-Wahaibi had received the cash after LGI won a RO1bn petrochemicals project at Sohar port. A former ministerial aide at the now dissolved economy ministry, Adel al-Raisi, was sentenced to 10 years for helping to arrange the bribe, as well as money laundering. 

February was a busy month for the Omani courts. It was reported that National Gas Company CEO Goutam Sen was detained on charges of bribing a government official, with others on trial including Qasim al-Shizawi, director-general of ports in the Transport & Communications Ministry, accused of receiving a bribe to facilitate infrastructure projects.

In all, nearly 30 executives, government officials and private executives face charges of offering or accepting bribes in exchange for contracts – proof that there is a sustained effort by the authorities to clean up the process of contract awards.

These efforts build on Sultan Qaboos bin Said al- Said’s previous attempts to combat corruption, which have seen him dismiss ministers and senior officials for alleged malfeasance. In October 2005, more than 30 state employees, including the undersecretary of the Housing, Electricity & Water Ministry, were convicted on counts of bribery and forgery.

But it is clear that the latest anti-corruption drive, which has snared some of the biggest names in the country’s projects sector, has gained impetus from the authorities’ response to the civil unrest in 2011, when the streets of Sohar, Muscat and Salalah resounded to vocal criticism of the extent of corruption in business life and the perceived conflict of interests between business and political elites.

Although protesters scrupulously avoided identifying Sultan Qaboos as being responsible for any of the failings, their demands for stronger measures to combat corruption have clearly registered in his palace. Royal Decree 112 of 2011 promulgated an anti-corruption law.  

One of the most significant moves was the remodelling of the State Audit Institution, which in 2012 was renamed the State Financial and Administrative Audit Institution (SFAAI). It was handed enhanced powers to detect financial and administrative irregularities, as well as instances of the misuse of influence in awarding government contracts. The audit body began targeting white-collar crime and referred cases in 2012.

Widened participation

Oman is as keenly aware as any GCC state of the need to strengthen the social contract between subject and ruler, and the past year has seen the government focus more on these issues.

The reforms are not confined to tackling high-level corruption. In March 2011, Sultan Qaboos widened political participation, with the appointment of members of the Consultative Council as ministers. The Council of Oman was also granted legislative and regulatory powers.

In October of that year, another decree announced the establishment of municipal councils that would be elected for a renewable four-year term, and the first municipal elections took place in December 2012.

The authorities also announced the creation of 50,000 new public-sector jobs, along with a rise in low-end salaries. In July 2013, the minimum monthly wage for nationals working in the private sector was increased by 62 per cent to RO325 ($850).  

These various efforts have had a positive short-term effect in lifting economic growth. “The recent strong growth was mainly a result of unrest in 2011, following which civil servants’ wages were hiked, spending on security was increased, and welfare and unemployment benefits for Omanis were introduced,” says David Hedley, deputy director for the Middle East at the US-based Institute of International Finance.

Further constitutional reforms have seen the office of the public prosecutor granted independence from government control and the introduction of beefed-up consumer rights via a new Public Authority for Consumer Protection, which is charged with monitoring market prices and censuring unlawful increases by private companies.

Some key issues have to be ironed out to make Oman’s business environment more hospitable

Jamie Gibson, Trowers & Hamlins

Having largely completed the job creation and welfare provision component of the policy response to the civil unrest, the Omani government is now focusing on boosting transparency and ramping up its anti-corruption drive. The across-the-board commitment to addressing the issue has been gaining traction this year. On 9 January, Oman ratified the UN Convention against Corruption, providing a framework for local institutions to draft their own by-laws and executive regulations, an indication of more activity to come.

Last month, the central bank issued a circular attempting to bolster corporate governance standards in the banking sector, instructing banks and licensed financial institutions to avoid conflicts of interest when appointing board members and senior management.

The circular, issued on 10 March, noted that while banks may already have certain conflict of interest provisions in their constitutional documents, the central bank as regulator may become “concerned with other scopes of conflicts too”.

Transparency ranking

More needs to be done to improve governance standards. Despite the reforms since 2011, Oman ranks unfavourably against other countries in the region in terms of overall transparency.

According to Transparency International’s Corruption Perceptions Index (CPI) for 2013, Oman is ranked 61st out of 177 countries globally. In regional terms, it is just above Kuwait at 69, and Saudi Arabia, ranked 63, but below Bahrain at 57. It is well behind the leading Gulf states in the index, with Qatar at 28 and the UAE at 26.

“The Omani authorities have made attempts to reach out to us at Transparency International, and they are keen to see how they can improve their ranking,” says Arwa Hassan, senior programme coordinator at Transparency International’s Middle East and North Africa department. “The government is now sitting up and listening. They want to improve their position and that is a positive thing.”

The government is not just motivated by the response to the 2011 protests. One reason for improving transparency is that a growing number of international companies base their investment decisions on countries’ positions in the CPI index.

The anti-corruption effort is part of a wider reform programme designed to make the Omani economy more competitive and investor-friendly. However, foreign investors want to see more progress in improving the process of licensing investment applications.

Although the capital investment law automatically permits 70 per cent foreign participation for companies operating in most sectors, and 100 per cent in certain sectors, there has been criticism of the bureaucratic hurdles placed in the path of firms looking to obtain investment licences.

While bodies such as the sultanate’s foreign investment promotion agency – the Public Authority for Investment Promotion and Export Development (Paiped) – have actively sought to increase foreign direct investment (FDI) flows, there are concerns that the Commerce & Industry Ministry and some other government entities are not making things easy for them.

“Their actions are not lining up with government policy and, if anything, since the start of 2013, there seem to be more obstacles for foreign investors setting up in Oman,” says Jamie Gibson, a senior associate at the Oman office of UK law firm Trowers & Hamlins. “Some key issues have to be ironed out to make the business environment more hospitable. Certainly, some of the commerce ministry’s new requirements do not seem to have much grounding in the black letter law.”

Another cause for consternation, which also relates to the sultanate’s post-2011 reforms to boost employment, is the crackdown on foreign labour. The government’s stated aim is to reduce the percentage of foreign employment in the private sector from 39 per cent to 33 per cent, bringing the total number of expatriate workers down from 692,867 to 586,272.

Labour clampdown

“Oman has always been more aggressive than other Gulf states, but that dynamic has intensified in recent months,” says one senior Middle East economist. “The economic impact of such policies can be significant, so it remains to be seen how they will manage the process.”

Boosting employment of nationals is the major policy aim of the Manpower Ministry, which gave notice that no further approvals for  the employment of foreigners in certain sectors would be granted between November 2013 and April 2014.

Companies employing expatriate manpower and found violating the Labour Law and ministerial decrees would face fines and be banned from hiring foreigners for a year, while the workers would be deported. 

Again, criticism centres on the disparity between theory and practice. “The idea of having a young population getting jobs ahead of expatriates is fundamentally sound,” says Gibson. “But the application of the policy by the Manpower Ministry is often not as transparent and consistent across sectors as employers would like.”

For example, the ministry often insists on employers hiring Omanis without recognising the specialist skills and experience that may be required for those positions, which may not be available within the national labour pool.

It is clear, however, that the Omani government is serious about addressing the concerns of the protesters that poured onto the streets in 2011. At the same time as conducting the anti-terrorism drive, the government is making progress on developing the country’s infrastructure and investing in healthcare.