Surface transport on path to privatisation

By V L Srinivasan

Muscat, Jan 26: After higher education, electricity, water, ports and airports, it is the turn of surface transport to be privatised in the sultanate. The government has commissioned a detailed study and a final decision will be taken after the report is submitted to the government.

In an interview to Muscat Daily, H E Ahmed bin Abdulnabi Macki, Minister of National Economy and Deputy Chairman of Financial Affairs and Energy Resources Council, spoke about the plans for privatisation, allaying fears that the interests of employees working in the units will be compromised with.

Privatisation commenced with the sale of government shares in 1988. It was then extended to key sectors like telecommunication, power, ports and education a decade ago. What has been the progress achieved so far?

The Government of Oman is a pioneer in its privatisation initiative in the region and has achieved remarkable progress. A start was made in 1998 by reducing the government's holding in Oman Flour Mills Company. Since then a number of privatisation projects have been completed.

The government's share in Oman Cement Company, which was 63.5 per cent, was reduced to 51 per cent as a first step. The balance of the government share is to be divested later.

Similarly, in Al Maha Petroleum Products Co the government has sold its entire share holding, amounting to 65 per cent, through the Muscat Securities Market.

In the power sector, thanks to its position as the first Arab state to allow private investors to develop independent power plants (IPPs) 15 years ago, Oman currently has one of the most dynamic energy sectors in the region.

The government introduced a legal requirement that all new power generation will be established through IPPs in 2004. As a result, private entrepreneurs already own and operate a substantial part of the generation capacity in the country's power sector.

In Omantel, public issues and lilisting on the MSM of 30 per cent of shares was completed in 2005. The sale of another 25 per cent to a strategic partner was
considered in December 2008 but was kept in abeyance due to unfavourable market conditions.

The government has already restructured some of its activities in corporate entities as a first step for privatisation, like Oman Post, Waste Water Services, Solid Waste Management and Hazardous Waste Management amongst others.

Operation of restructured entities are de-linked from government ministries and handed over to professional management teams, which will pave the way for future privatisation. Sectors like surface transport are undergoing detailed study for restructuring.

It was planned to hand over construction of new greenfield airports and Oman National Transport Company (ONTC) to the private sector. Why has the government decided not to go ahead with the proposal?

With regard to airports, the government has taken the strategic initiative to build them in order to overhaul the nation’s air travel facilities and to meet the growing need from passengers in both business and tourism sectors.

Business volumes in the initial years will not be high enough to attract private investment. However, private sector participation to operate and manage these airports will be considered in the future.

Similarly, efforts are on to restructure ONTC’s operations, which are also linked to the outcome of surface transport sector reforms being studied in detail.

Will the government ask the private sector to construct the 275km rail network (part of the GCC rail project) in the Batinah region?

This project is under study at the moment and the matter of financing has not been identified yet. The government’s financial support to the private sector is on the decline according to the monthly bulletin issued by the Ministry of National Economy.

Does this means the government wants to play the role of a facilitator while encouraging the private sector to invest in critical areas?

The government's support of the private sector has not declined. However, there has been a reduction in government contribution to participation in various international, regional and local organisations. These organisations are not directly linked to the government support to the private sector.

While the government wants to privatise some sectors, what measures have been taken to protect the interest of employees working in them, considering the private management may feel that there is surplus of staff in some industries?

Safeguarding the interests of employees has been one of the key considerations in deciding restructuring and privatisation strategies. Privatisation of a project is approved only after protecting the interests of employees. Moreover, the Privatisation Law has specific provisions to protect the interest of employees like maintaining same level of salary, job security for five years, and continued payment of pension contributions, amongst other things.