What role does Sarooj Construction Company (SCC) play in the overall development of Oman’s infrastructure?
KARAM: Sarooj is one of the major players taking an active role in the construction of Oman’s infrastructure. The group has been doing so since 1976. We are part of Al-Taher Group and we represent the main construction arm of the group. We build roads, dumps, oil and gas facilities, and marine infrastructure, such as fishing harbours, ports, etc. This is a global overview on our participation in this market. We are neither the largest nor the smallest company in Oman. We are probably among the top 5 even in terms of turnover and involvement in the construction of Oman’s infrastructure.
What new projects is SCC currently focusing on?
KARAM: There are two areas on which we focus. Let me first tell you which areas we are no longer focusing on. There is a huge program of building in Oman. We are road builders. However, such a market is overpopulated. We concentrate in specialist work and specialized areas, where high standards of health and safety measures are required, particularly in the oil and gas industry and in marine works. These are the two areas on which we are focusing. We are participating in the construction of a large gas plant in Northern Oman, as well as a large environmental project in the oil field. On marine works, we always look at fishing harbours for the population. These are the two major areas on which Sarooj is currently focusing.
What progress has been made to date in your areas of focus?
KARAM: Considering the challenges, Sarooj’s progress has been quite satisfactory. This is because the projects in which we are involved in generally require a lot of good, precise planning. The clients with whom we work on these projects demand high standards. We are talking about major upstream operators and international companies, who, from planning to procurement, play a huge role in delivering the project. We do not see any supply and logistic problems. Sometimes we have a shortage of labour, which can only be met if you achieve a certain percentage of Omanization. Nevertheless, we still consider this to be a successful factor and parameter. So, provided the company takes care of its Omanization program, and demonstrates its commitment to a number of Omanis, than there is no problem in obtaining expatriate labour to carry out the project.
How has the increase of foreign companies in the marketplace impacted the overall bidding process for government tenders and project development agreements? How do you see this progressing in the long term?
KARAM: The construction industry, particularly the local contractors, faced some problems when Dubai and the neighbouring countries were booming. Such a phenomenon caused very high inflation. Although Oman follows the general contract conditions recognized worldwide, that is the FIDIC (International Federation of Consulting Engineers) conditions, we do not have a mechanism to measure or compensate for inflation. Therefore, in 2005, the local contractors, and the industry as a whole, suffered a lot, to the point that there were not enough tenders and work coming out. To rectify the situation, the government made it very easy and appealing for any foreign companies to come and establish in Oman. The Omani government has been over generous in that respect and this has attracted many contractors at a time when there was no more work in the area. Some of these companies are quite good and it is positive to have some healthy competition, I am thinking in particular of Korean companies. However, many other companies entering the Omani construction sector already showed problems in their size and in the nature of their work, as they are delaying their work and losing money. This type of competition has an impact on us, because these same companies won tenders as they offered lower prices. This will eventually be balanced out. The Oman Society of Contractors has already informed the Government of this situation and certain measures have been taken. Finally, we are not worried when there is fair competition. On the contrary, we should be more competitive. However, when other companies have different objectives or other reasons for coming and competing in Oman, then we withdraw to a safer heaven.
The construction industry in Oman relies heavily on foreign labour. However, Omanization requires construction companies to fill a third of their positions with Omanis. How has Omanization impacted the industry? What actions are being taken to help construction companies meet these requirements and to ensure that the skill set of local workers is on par with what is being demanded from industry players?
KARAM: It is absolutely fair that the government looks after its national workforce and it is the duty of the companies to work together with the government to achieve that, particularly so in Oman, where we have approximately 60,000 graduates that enter the job market every year. When we came in to this country in 1970, there were not enough educated people to form a government and His Majesty had to appeal to Omanis working abroad to come back. This is how the first government was formed. So, between 1970 and 2000, any educated Omani would find a job within the government institutions. They found a job either in the military or in the civil service. By the year 2000, there were no more jobs within the government, thus the government had to expand in the private sector. However, there was not enough time for Omanis to opt for working in the private sector. People’s dream was to work for the government. Even 10 years after 2000, young Omanis are more attracted to work for the public sector because they find a better working environment, definitely more security, and probably, let’s say, less accountability. This is the constraint of Omanization. We believe that the education system requires a lot of improvements. We have proof that certain schools here provide fantastic education, as they produce the leaders of the country. On the other hand, however, when education is not of the standard expected, it can create a problem for the private sector. The government has made a lot of efforts to train Omanis. We think that the quality of the training, and not the quantity, is sufficient to make the life of the private sector easier. This does not mean that the private sector does not hold the duty to train people on its own capacity. Ultimately, it is a cultural matter. That is, how do we control the productivity of an Omani, or his attendance to work, or his discipline at work? Having been living here for many years, I reckon that this is only a transition period. I think that very soon young Omanis will start feeling that unless they work, they will not be able to conduct a decent living. Thus, they will be driven by the need of a better life. This trend will not take long to happen. I reckon that within the next decade, the private sector will attract more Omanis and have a much easier task in achieving the required level of skilled employees. This is definitely a big challenge for everybody in the construction sector. The safety and security of the country relies on this change, as well as on a social balance. One has got to say that it is a matter of attitude from the private sector as well. You see, I can sit behind the desk and say “bring me the trained, qualified, top Omanis and I will employ them tomorrow”. However, this is not the right attitude today. Maybe it will be in 10 years time. Today we have to say “What can this young man do?” There is definitely a need for a change in the private sector towards Omanis. You take it for a fact that they are not trained to the degree that you want. They are not qualified, but you live with it. You have to adapt, you have to make a change, and finally, you have to participate in that effort. This is what we do at Sarooj Construction Company.
The Oman market is by any standard a small market...Although we are doing well, if not extremely well as a country, it remains a small market. Making the mistake of growing larger than the market would put us in trouble. Thus, our plan is to diversify and go horizontally in Oman, and then develop outside.
SCC has a diverse project portfolio that spans across many segments throughout the construction industry. Which key areas in the construction sector is SCC most active in? How would you describe your current ratio between government related and private sector projects?
KARAM: 60% of our work is related to government projects of the infrastructural type. We do not concentrate much in the construction of buildings, as that market is not a large one. If you see the construction landscape around here, there are mainly villas and small buildings but no skyscrapers. We do work in the private sector, such as oil and gas projects for PDO (Petroleum Development Oman), or petrochemical companies who want to develop their premises. We think it is essential for somebody who is from the Middle East, and wants to remain in the Middle East, to always concentrate on oil and gas, because this is the industry that in the long term, and in the foreseeable future, will generate a lot of work. It is a pleasure to work in this environment because elements such as quality and safety are paramount to the successful delivery of a project. Soon we will celebrate 10 million man hours without a single incident at Sarooj, which is an encouraging achievement, as well as being something of which we are proud.
What are your future plans for growth and expansion? Which segments throughout the construction industry is SCC most keen to move into?
KARAM: The Oman market is by any standard a small market. We may have had a boom in the last few years. It is irrelevant for other countries that we seem to be doing well. Although we are doing well, if not extremely well as a country, it remains a small market. Making the mistake of growing larger than the market would put us in trouble. Thus, our plan is to diversify and go horizontally in Oman, and then develop outside. We now have work going on in the region, in countries such as Iran and the Emirates. Sarooj has surrounded itself by a group of companies who provide different services. We have a company providing geo-technical services, another company in the marine sector providing divers, maintenance, or operational services, etc. We developed horizontally in Oman and are looking to expand outside of Oman at the same time. But we will always remain a small family business group. We are very lucky because the second generation has joined us. That is, most of our children, Omani children or expatriate children, are back, working and bringing a lot of new ideas in the business. So, I cannot draw the future plan entirely. I leave this for them, to be mad, to think out of the box, to go wild, and do things that I would have never thought we would do. It is in this spirit that we opened an office in Dubai, in order to be close to the world. We also have a think tank of young MIT graduates, who are thinking about new ways to improve the company. At the same time, we have 3 to 4 core activities, the backbone of the group, which will remain the same. These are the oil extraction, the upstream and downstream construction, and the manufacturing. With the drive of in country value, we have set up our first factory to manufacture products for the oil and gas industry in Oman. We also have plans to develop a series of small manufacturing facilities that will serve this industry. So this will be our future plan.