Job training and incentives to support development of Oman's workforce

The issue of Omanisation – which refers to the initiative to increase the percentage of nationals in Oman’s workforce – has a considerable pedigree. The concept was first introduced in 1988 as a means to reduce the nation’s reliance on expatriates in key areas of economic activity, such as the oil and gas sector. Over time, most private sector companies were compelled to publish their own Omanisation plans. In 1998 a green card system was introduced, which enables companies to demonstrate that they have succeeded in meeting Omanisation targets and are complying with the eligibility criteria for labour relations. Achieving green card status brings palpable rewards: as well as the public relations opportunities that arise from being published in the local press, companies that attain the green card are able to receive preferential treatment in their dealings with ministries.

Since 1998 there has been a gradual acceleration of the Omanisation schedule. Sector targets have risen and the scope of the programme has widened. For example, even those oil and gas firms that succeeded in meeting a sector-wide Omanisation target of 86% at the beginning of this decade were soon faced with a new drive to build in-country value (ICV), which required the local contractors hired by them to also meet robust Omanisation criteria. Many of the contractors used by oil and gas companies, particularly in the fields of construction and maintenance, have traditionally utilised low-cost labour from India and Pakistan, and the ICV rules therefore came as a challenging regulatory burden. The new demand also carried financial implications: in 2012 the sultanate’s ICV board announced that compliance with ICV regulations would be a key parameter in tender evaluations in the future.

Cooperative Approach

While the long-term ambition to ensure that Omani citizens have an opportunity to enter the workforce and build the skills necessary for them to play their part in a growing economy is generally appreciated, over the years employers have voiced their dissatisfaction over the implementation of the Omanisation initiative. A common concern is that larger companies are frequently compelled to recall Omani nationals working outside the country in order to reach their targets, an unintended consequence of the initiative which threatens to hinder the very transfer of knowledge that the policy strives to achieve.

In the past decade the government has shown itself to be more amenable to private sector concerns. In 2010 the Ministry of Manpower (MoM) initiated a restructuring of the 12 influential sectoral committees charged with overseeing the Omanisation programme, allowing private sector officials to sit alongside representatives of the General Federation of Labour Unions as well as government personnel. The new panels set targets for the training and recruitment of nationals, assessed the need for extra capability in new disciplines and skill sets based on market demand, and worked directly with private firms to meet a set of broad, sector-based Omanisation objectives.

This cooperative approach, following a doctrine of gradualism, has been carried through to the government’s current economic strategy. Tanfeedh, an initiative which links the government’s strategies for the nation’s most promising economic sectors, speaks of “gradual Omanisation policies according to the nature of each sector” and facilitating the “coordination between supply and demand” in the labour market. In practice, however, the government’s response to the Omanisation challenge has been more direct.

Ramping Up

In January 2018 a ministerial decree placed a six-month ban on the recruitment of non-Omani manpower in 87 professions in sectors such as IT, accounting and finance, marketing and sales, media, medical services and engineering. The MoM announced that this ban would be extended for a further six months starting in July 2018.

Subsequent decisions by the MoM added yet more professions to the list, and extended the duration of the ban on others. The results of this policy became apparent in June 2018, when government data revealed that the expatriate population had decreased by 43,000, or 2%, year-on-year. The government has also taken a more robust stance against companies which have failed to make progress with their Omanisation policies, terminating deals with 199 companies in February 2018 because they did not employ enough local citizens.

Solutions

Oman joins a trend seen across the GCC, as governments seek to lower the level of their social spending by encouraging more citizens to join the workforce. The development has sparked a lively economic debate, with some economists seeing the trend as net positive for the macro economy, as a more engaged domestic workforce will keep capital within the country and provide the basis for sustainable economic growth. Others, however, are more concerned by the effect of falling consumer spending on the economy as expatriates leave the country. While the public debate continues, for the government the employment question has become a pressing one in need of a short-term solution. In January 2018 the government committed to creating 25,000 jobs for Omanis over the following six months as the first phase of a wider job creation drive aimed at boosting the size of the domestic workforce. In May 2018 the MoM reported this target had been reached.

Given the scale of demand for job opportunities, the Omanisation initiative is likely to remain at the forefront of the sultanate’s employment strategy over the coming years. Some areas where Omanisation rates are particularly low have been targeted for special attention in the short term. The construction sector, for example has an Omanisation rate of around 10%, largely due to the undesirability of many construction sector roles and the fact that a large number of employment opportunities are based on temporary contracts for specific projects. Nevertheless, the government proposes to increase the number of Omanis employed in the sector to 20% of the total by 2020. To achieve this goal it intends to implement a process of sector reform that will see the reduction of unregulated employment and undeclared businesses, and the provision of training opportunities for Omani nationals interested in entering the sector.

Flexible Workforce

In establishing targets such as these, the government has been compelled to balance the task of meeting the demands of the population for employment opportunities with the concerns of the private sector. “Omanisation is a great initiative and supported by many expatriates. However, the framework should be reformed to offer incentives to companies,” David Crickmore, CEO of Amouage, told OBG.

The difficulty of finding suitably qualified candidates for newly vacant positions is a common challenge. Some solutions are outlined in the Tanfeedh programme: boosting the capacity of the Oman Academic Accreditation Authority to apply its accreditation system to all sectors of academic, technical and vocational education, including professional qualifications; enhancing the employability of vocational and technical graduates by improving governance and communication with industry; and launching the National Leadership Development Programme to empower Omanis to take middle and upper management positions in the private sector.

The positive effects of these initiatives, however, may take years to be realised. In the shorter term, the government’s efforts to make the workforce more flexible stand a greater chance of alleviating the private sector’s challenge. In 2017 the MoM published new regulations for part-time employment in Oman. The regulatory framework is one of the key initiatives to emerge from the labour labs of Tanfeedh, a national initiative which is part of the sultanate’s ninth five-year development plan. As a result of the move, Omani nationals have for the first time been given a clear set of criteria that will govern their entry and participation in the part-time labour market. The MoM hopes this will open up employment opportunities for traditionally under-represented demographic segments such as women and retired people, which in some cases are the possessors of much-needed expertise. In addition, the framework enables school students as young as 16 to gain work experience that will make the transition to full-time employment later in life an easier one.

It also grants employees a number of important protections. According to the new regulations, Omanis can be in part-time employment for no less than four hours daily and no more than 25 hours a week. A work contract is required to specify the work hours, work days, hourly wage and the type of work the employee will be expected to perform. Employee benefits and remuneration will also be clearly outlined: it will be mandatory for the employer to provide the employee with insurance cover against work injuries from one of the sultanate’s approved insurance companies, and a minimum wage of OR3 ($7.79) per hour has been established for all part-time workers. Although some of the regulations may be more difficult for smaller businesses to implement, a framework which makes it easier for companies to hire Omani citizens is likely to have an overall positive effect for the sultanate.