Petrol's going up, and musical chairs in the Construction industry

I've been a lazy blogger lately, I've not been blogging a lot and there's so many things I've wanted to write about and then.... Christmas happened and watching my 3 year old get so excited about it was far more important to me than spending time writing. So, yeah. Lazy blogger.

However, some major developments are afoot, and one rather amusing confusing disturbing case of musical chairs in the Construction industry that I thought I'd point out.

So, first up. News is leaking out today about Oman's 2016 budget, and there are some rather meaty bits to it this time around.

Fact's are still not totally clear, but here's what I can understand from it that may (probably definitely will) affect you:

1. Fuel subsidy on "petroleum products" is to be "revised" from "mid-January 2016". This short article on the Oman News Agency raises more questions than it answers, but the safe assumption to make will be: a) Expect the price at the pump to rise when filling your cars b) Expect your electricity bill to rise (it's generated from LPG) and c) Expect your water bill to rise (most of it is generated from LPG fired desalination plants).

2. Corporate taxation is to be increased to (apparently) 15%. This is up from the current 12%, but what isn't clear is the eligibility for who should actually be paying this tax, I understand that the intention is to start taxing everyone, regardless of their annual turnover.

3. All companies that the Government has a 40% or more stake in are putting a bonus freeze indefinitely. I wonder if this affects PDO too?

Well I guess we'll see increases in the cost of living across the board, as supermarkets are for sure going to start charging more for it's goods' given that it'll cost them more to bring their products to their stores, etc etc. Times like this make me happy I drive a 2litre VW ;)

Musical Chairs

Now, on to the rather bizarre turn of events that have been reported in recent weeks:

Firstly, this article from 6th December 2015 noted the following:

55,000 Omani workers in the Construction sector face an uncertain future, a Mr Shahswar Al Balushi (CEO of the Oman Society of Contractors) is quoted as saying in this article. Mr Shahswar goes on to say in the article, "Out of the 200,000 Omanis working in the private sector, 26 per cent are in the Construction sector. If the current conditions prevail, they will be losing their jobs". The "current conditions" he was referring to was the current difficulties Construction companies have in getting labour clearances to bring in expat labour forces so that they can keep up with their current work demands from existing Contracts.

If you cast your mind back a few months to the Ministry of Manpower raid on the Airport where 1,000 "illegal" workers were scooped up and presumably deported. That was the very public tip of the iceberg. Construction sites across the city have been regularly raided by Ministry of Manpower operatives on their hunt for illegal workers.

The construction industry here in Oman has long been one of delicate balance, and over the years a don't ask, don't tell approach has been adopted by many Contractors, who regularly used "illegal" labourers on their projects in order to get the manpower required in order to complete their projects. I'm not saying it's right or wrong, I'm just observing that there have been people working on Construction site's here in Oman since probably the 70's who shouldn't have necessarily been there. It's just the way it has been. Now, the Ministry of Manpower are looking to clean that all up (fair enough) and are currently on a drive to scoop up as many as they can find and sending them back to their home countries. Which means that Contractors are facing labour shortages and so progress on projects are slowing down. This is where Mr Shahswar was coming from (I presume) when he was chirping about the fact that Contractors are not getting labour clearances and thus being crippled from a labour point of view.

Now, things get a little more interesting as I've heard a few reports from people in the Construction industry now that the more recent raids by Ministry of Manpower inspectors on Construction sites are more a sort of cursory inspection, and they haven't been searching sites from top to bottom like they were earlier in the year, happy with just a few captures. Perhaps an unofficial softening on this recent hunt? I also note with a little concern that it has been regularly observed by people that these ministry of manpower inspectors apparently do not wear proper PPE or follow site safety rules, hopefully none of them meet with an accident on a Site.

Right, so on the 6th of December we have the CEO of the OSC (Oman Society of Contractors) saying that 55,000 Omani jobs in the Construction sector are at risk, primarily because of the shortage of labour.

So you may be as confused by this article published on 28th December 2015 as I was which states that 33,000 NEW managerial jobs for Omanis are to be created in the Construction industry. You what? Oh, and it gets better, because guess who's quoted in the article as saying: "If implemented properly, 33,000 new managerial jobs will be created for Omanis in small companies in the sector, which either have a low Omanisiation rate or are not following Omanisation policies". Did you guess?

Of course, it's none other than Mr Shahswar Al Balushi, the CEO of the OSC!

So, in the space of 22 days, we've secured 55,000 Omani jobs, and also found another 33,000 in the process. But no new regulations on the release of labour clearances for Construction companies has happened. So, what, exactly did happen?

Well, Mr Al Balushi noted that these new 33,000 managerial (yes, management jobs) will be created at smaller companies "which are not connected to Government projects and are not linked with oil price fluctuations". Which is a bit hard to swallow, given that the oil price affects everyone and everything in an economy that is driven by hydrocarbon sales.

I can see the logic - Increase Omanisation first, and then the labour clearances will flow. The obvious problem with achieving this is finding enough competently trained Omanis to fill these managerial roles so that they don't merely become an increased overhead for a Contractor, but that they actually add value to the company. Given that there are already 55,000 Omanis in the Construction sector, it's a little bit of a head scratcher to see where exactly these additional 33,000 Managers are going to come from. But like I said, I can see the logic, I just can't understand where these managers are coming from. Sure, there's not that much expertise involved in building a house, but there is more expertise than you might think in building a bridge, or a road, or an airport, or an exhibition centre, or a Luxury hotel, and so on.

And so what I suspect will happen is that Contractors that want to do business here in Oman will stay small in size (because expansion will require too many highly priced managers which simply can't have much experience) and their costs will increase, and thus the costs for their services will increase too.

Extrapolate that out to the largest Contractors in the Sultanate and it really does confuse me as to how they are supposed to survive right now. By right now I mean, they already have contracts in place, and no labour to fulfil those contracts and the apparent only way to get that labour is to take on many more Omanis to get their Omanisation quotas up so they can hire more labour in order to do the work. Except that will most likely financially break them. And the Ministry of Manpower clearly are sticking to their guns because they're not giving any labour clearances. It should be pointed out that simply increasing Omanisation within a private company needs to be on the back of valid locally available talent. One cannot simply just employ 100 Omani secretaries (for example) for the purpose of increasing Omanisation just to get more labour clearances because that is not economically healthy, and sort of defeats the point of trying to develop industry outside of Hydrocarbons that is buoyant. People have to make money to be successful, the more successful the more business won, the more jobs created. Not the other way round.

Which is probably why two large Contractors that I'm aware of have made the decision to pull out of Oman in the last 6 months, I imagine more may be following them soon.

2016 will certainly be interesting.

le fin.