What role does Galfar currently play in the overall development of Oman’s infrastructure?
ALI: Galfar is the largest construction company in the country. We work in all sectors of development, whether it is in the construction of roads, ports, airports, oil and gas facilities, water and sewage networks, or harbours. We do everything. Thus, we play a major role in Oman’s construction and development.
What new projects is Galfar involved in and what progress has been made to date? How would you describe your current ratio between government related and private sector projects?
ALI: We are focusing on all the projects coming in as we are working across all fields. As mentioned, we have some projects in the oil and gas field. We have been recently reappointed as a service contractor for north Oman. We are also involved in many road construction projects, such as those in the Batinah Expressway and in the further development phases of Batinah. We are also operating in the ports and harbour projects. Ultimately, we are focusing in the mega road construction and infrastructure projects. The majority of our projects are related to the government. We have limited presence in the private sector. Most of the governmental projects are carried out by companies whose majority shareholder is the government itself, such as the PDO projects, or Haya Water, or the PAEW (Public Authority for Electricity and Water). These are the clients, thus our presence is mainly related to the government’s projects across all fields.
How competitive is Oman’s construction industry? What is your market share and how do you see this evolving over the next 2-5 years?
ALI: The construction industry is very competitive in Oman. In the past there has been a steady workload for those contractors that were based here, and this trend is going to continue. Maybe there will be a surge in the construction industry in Oman because the government has a lot of great plans to add to both infrastructure and the oil and gas fields. Our overall market share, if you look at road construction, is maybe 30%; for the oil and gas fields, it is approximately 25%; in the water segment, it is 30%. Overall, in the construction industry, our contribution is 20% of the construction projects of the country. Definitely, Oman’s expenditure budget, which has been released for road construction, ports construction, and rail construction, is going to continue and grow for the development of these areas.
What are Galfar’s competitive advantages vis-à-vis other construction players in Oman?
ALI: Our capacity, our competency, and our readiness to move to any location and overcome all terrestrial challenges, are among our main competitive advantages. When any of our clients are stuck up with some contractors, whenever they approach us, we are there for them. We are a readily available team. We have been contributing to the national development of Oman for more than 40 years now.
Galfar’s financial year 2012 net profit rose 68% year-on-year to OMR 8.93m ($23.2m). Where have you been most successful? How do you plan to maintain this strong growth in revenue?
ALI: The 2012 net profit, as you mentioned, was better than 2011. But from 2013 onwards, we are expecting a greater growth and the return on investment will be much greater than what we obtained in the last 2 years. We provide a package, which is not exclusive to one field. We, as a contractor, provide a package from earthworks to the commissioning of all the projects; that is, earthwork, infrastructure, construction of water & sewage networks, mechanical work, electro-mechanical work, etc. We are currently building 2 airports, 3 seaports, the longest highway, and we are building the most challenging road network from Hasik to Shuwaymiyah, which nobody has ever attempted before. So, if you look at any of our projects, you will see that these are the most challenging ones as we can rely on our competitive advantage, that is, our capacity and our expertise.
The construction industry in Oman relies heavily on foreign labour. However, Omanization requires construction companies to fill a third of their positions with Omanis. What effect has Omanization had on the construction sector? How has the decision to raise the minimum wage of Omani workers by 47% impacted the overall industry?
ALI: Omanization is a necessary initiative for this country to provide employment, most importantly to the local citizens. In this way, not only can the economy survive, but it can also thrive. In Oman, most of the population is made up of young people, who are available and ready to work. The only thing is that we have to train them. In Oman’s construction industry, we aim at employing at least 20% Omani employees in all fields of interest for Omanis to work in. For example, in the oil and gas construction segment, there is a higher percentage of Omanization, whereas in the building sector the percentage is lower. Overall, whenever Omanis are trained, they will definitely take the job and their place in the industry. I am sure that being a need of the time, this trend will continue. Now, there are many opportunities in the private sector. There is a lot of focus on training to make Omanis employable and useful to the industry. Once this happens, the local economy will grow along with the local entrepreneurs and the small and medium sectors. This will be the main driver and engine for Oman’s economic growth. Galfar Training Institute is our group organization which was established for the training of young Omani citizens to take up various assignments suiting their interest and aptitude.
The construction industry is very competitive in Oman. In the past there has been a steady workload for those contractors that were based here, and this trend is going to continue.
Cement prices in Oman are expected to rise in 2013 due to dumping from the oversupplied UAE market and increased domestic demand. How will the rise in costs for cement and other base materials impact the overall construction industry in Oman?
ALI: It is a cost. For every contract we have in place, we work on a “best cost” basis and honour the return on our equity. So that is the way it works. If it is a cost, it is a cost for everybody, whether it is for contractor A or contractor B. A cost is a cost for everybody and it depends upon the profit you want to make. What happens if the oil price goes from $3 to $20? What I am trying to say is that, it is quite natural for the prices of basic material to increase. 10 years ago, the salary of the people was lower than what it is nowadays. So, these are all related costs. I would say that it all reflects on the economy of the country.
What are Galfar’s expansion plans outside of Oman?
ALI: Galfar is a robust company, with strong foundations, strong capabilities, and a much higher capacity than any of the other competitors, in addition to having great people behind it. Human resources are the strength of any organization. The strength of our company is our people, its shareholders, and the strong board of directors. What else do you want? This is the best combination for any company to have; that is, the capacity, the people, the commitment, the management efficiency, and an excellent board. Galfar was established in Oman, it is growing in Oman and now we are growing in the GCC and India. We are also looking at other countries, because with our capacity and capabilities, our potential in the market will be much greater and this gives us an opportunity for growth and expansion. We are in the UAE, in Qatar, and Kuwait. We are also planning to penetrate other markets, such as Iraq, Libya, whenever the situation allows, and India, where we already have 5 projects in place. India will be a good market for us. With the knowledge we gained constructing the best infrastructure here in Oman, our work will be of great benefit and use in India and for Indians.