SMEs and Job Creation in Oman

Oman has seen astonishing growth since the Renaissance in 1970. In terms of economic growth, Oman’s GDP has grown to over $80 billion annually thanks in large part to oil and gas revenues (approximately 70% of GDP). While the steady flow of income has given the government the means to invest in public services and infrastructure, other developmental indicators, such employment, have not been advancing at the same rate. Big business came with the promise of revenues and jobs, but by its very nature ‘big business’ is limited in its ability to fulfil the second half of that promise. Large industries are more efficient, and focus on technology for the large part of their activities, and thus tend to require less human resources, leaving them restricted and incapable of meeting the growing needs for jobs. Moreover, the jobs that are created require sophisticated skills, as opposed employment opportunities for high-school and college graduates entering the workforce.

The issue of youth unemployment in particular became one of contention during the Arab Spring movements. In 2011 a wave of protests broke out in the country’s two largest cities, the capital Muscat, and industrial hub Sohar. Calling primarily for jobs, better wages, lower living costs, and a crack down on corruption, the protests lasted over a period of two months. In order to maintain legitimacy, the government has made the government place job creation firmly on the agenda for coming years (Logan, 2012).

The question is, if big business has been unable to provide, and the public sector can only create so many jobs, what is the future for the Omani job market?

In high income countries, SMEs represent a driving force for economic growth, bringing in approximately 50% of GDP, and providing 80% of total employment. In Oman these figures are significantly lower, ranging from 13-14% of GDP just 15-20% of total workforce (Muscat Daily, 2013).
The government recently recognised the need to channel funds into the SME sector, which though weak represents 90% of all private sector employment as the majority are ‘micro-enterprises’ (less than 5 employees). Currently, the growth of these micro-enterprises is limited as a result of lack of access to credit, due to high interest rates, and unrealistic collateral requirements. In 2013, the government  created a new fund specifically for SMEs, and the Central Bank of Oman (CBO) mandated all banks to allocate 5% of credit to SMEs by the end of 2014 (Muscat Daily, 2013).

In addition to capital, SMEs also require support through business and management skills training, skills which have proven to be make or break for many SMEs. In addition to a funding role, big businesses has the potential to accelerate the development of SMEs through knowledge and skills transfer, for the mutual benefit of all. As the CEO of Oman Oil, one of the countries largest oil companies, rightly identified “job creators will be our subcontractors and the large number of SMEs who will be their subcontractors”. Furthermore  it reduces government pressure on large industries to create jobs that are unnecessary. Finally, a vibrant and healthy community, and business environment  is necessary to ensure the successful growth all businesses, regardless of size.

Today, Oman’s economy heavily relies on revenues from fossil fuels, and as the world moves towards a low carbon economy (albeit slowly), diversification of economy is necessary to safeguard the country’s future, and contend with its growing population. Oman has an estimated population of 3.1 million people (2011 census), which is predicted to reach 5 million by 2050. With youth unemployment a controversial issue, the needs of the population extend further than money, and meaningful employment, and stable income is necessary for the country to advance on other developmental indicators. SMEs represent a potential for economic growth, and job creation that must be pursued, and that can only be accomplished through collaboration.

 

Sources:

Joseph Logan (2012) Oman protests suggest jobs, reforms fall short. Retrieved 21/04/2014 from:
http://www.reuters.com/article/2012/07/04/oman-crackdown-idUSL5E8HLB2620120704

Muscat Daily Online (Dec 2013) SMEs, the engines of economic growth
http://www.muscatdaily.com/Archive/Business/SMEs-the-engines-of-economic-growth-2rl4

Parambi, Raphael (Feb 2014) SME development in Oman: Working with the mighty. Retrieved 22/04/2014 from:
http://main.omanobserver.om/?p=55164


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