The heads of major Omani state-owned companies recommended sustainable and step-by-step privatisation of key assets, at MEED’s Outlook Oman on 24 October.

The government needs to balance development priorities, improving the performance of these companies and generating revenues, as it moves ahead with its privatisation strategy.

“Governments privatise for a host of reasons; efficiency, bringing in professional management, improving services, job creation, developing capital markets, and fostering a culture of innovation,” says Talal Al-Mamari, CEO of Oman Telecommunication (Omantel). “Obviously in these difficult times we have to look at innovative ways to generate revenue, and one means is the sale of assets, but we also need to look other objectives, and not be too hasty in privatising certain companies which are considered the crown jewels.”

Omantel is 51 per cent government-owned, and is traded on the Muscat Securities Market. 

“It is very important to look at the objectives of more revenue for the government versus meaningful development of the sector,” says Al-Mamari. ”Telecoms is undergoing major transformation, in Oman and globally… competition from new forms of technology such as social media is impacting the sector. The government has digital transformation and e-commerce objectives, and companies such as Omantel can useful to acheive these goals.”

Some companies are privatising subsidiaries first to bring in innovation and efficiency to improve performance. This also contributes to overall balance sheets, while avoiding the short term thinking sometimes favoured by investment funds.

However, the privatisation of Oman’s flagship carrier Oman Air is a long-term objective.

“We have carved out parts of the airline and created joint ventures with privately-owned companies,” says Paul Gregorowitsch, CEO of Omanair. “We have done cargo handling and ground services already, and next is engineering and maintenance, and catering. Doing it like this step by step avoids capital venture stepping in, and then for example selling off landing slots to get return on investment. Like everything in Oman we should do privatisation in a controlled, sustainable way, from smaller units, to the larger float later.”

Oman Air is still able to support national development goals while improving its balance sheet to reduce subsidies.

“The private sector has a different dynamic; you have to perform, and get your cashflow in order, but also as the national airline we need to support development of the tourism sector for example,” says Gregorowitsch. “If look at balance sheets national airlines are highly interesting to investors, but the government should maintain control to contribute to the national economy.”

Oman Post is also taking a bottom-up approach to privatisation.

“Oman Post is wholly government-owned but for future funding requirements we are looking at other potential sources such as private ownership of the company or revenue stream privatisation,” says CEO Abdulmalik Al Balushi. “We have signed an MoU [memorandum of understanding] for a joint venture for last mile delivery, which Oman Post doesn’t offer right now, and 50 per cent of the cash is from the private sector. We are also looking at supply chain, and first mile and middle mile can be outsourced, so that Oman Post can look at key strategic areas like hub & spoke only. Delivery and branch management can be provided by the private sector.”