Ithraa News Q3 - 2016 by Ithraa Oman

SEPTE MB ER T WENT YSIXT E EN I SSUE TH REE

The Public Authority for Investment Promotion & Export Development

Trade Talks in Asia & Europe Why Export? Supporting Enterprise Growth

Ithraa News

SEPTEMBER TWENTYSIXTEEN ISSUE THREE

Formed in 1996, Ithraa is Oman’s award-winning inward investment and export development agency.

Ithraa News Doing Business in Oman A series of 12 Sector Films Doing Business in Oman is a series of 12 films showcasing people, businesses and sectors that are helping shape the Sultanate and drive the economy. From manufacturing, education, agriculture, tourism, logistics to the creative industries, this collection highlights Oman’s outstanding offer as a place to live, invest and do business.

Scan the QR code with your smartphone to watch the films http://bit.ly/1QRWgr8

We are an ambitious organization committed to promoting the business benefits of Oman to a global audience. Our experience, expertise and global reach helps companies of all sizes realize their potential.

Contents 4

Ithraa Events

Helping Omani SMEs Thrive

Inside Stories 2016

Business Incubating Omani Style

Why Export?

And Finally...

Welcome to another edition of Ithraa News. It’s been a very busy third quarter for our export and investment teams who led highly successful Omani trade missions to London, Paris and Singapore. In addition to news on our international activities, we have a marvelous one-on-one interview with Raphael Parambi, CEO, Oman’s SME Development Fund and an in-depth article from Malak Al Shaibani, Director General at the National Business Centre (NBC), the government-run business incubator based on Knowledge Oasis Muscat. Raphael talks to us about setting-up the Fund, introducing entrepreneurship to Oman’s youth, the challenges small businesses face as well as whether there’s enough capital and good ideas in the market. Malak suggests entrepreneurship isn’t something special that a few people are born with, it’s a way of thinking that can be developed – exactly what she’s looking to nurture at NBC. And despite the current global economic challenges and vulnerabilities, Malak believes entrepreneurship can act as the engine for Oman’s continued economic growth as well as provide a successful route to long-term employment, especially if entrepreneurs receive the right support and advice in the business start-up phase. We’ve also included an infographic on why you should consider exporting. Exports, in our view, matter because they represent the very sectors that drive wealth, attract investment and talent, boost productivity and innovation and generate employment in Oman. But most small companies think exporting is just for the large and established firms. We don’t agree. In fact, we think it’s just as beneficial for small businesses to engage in international trade as it is for large companies. And we’ve given you 15 reasons to think about why you should be trading beyond Oman’s borders. If you’re interested in hyperlocal tourism, what’s made in Oman, urban logistics or the Circular Economy then you might want to read about and attend our annual Inside Stories event, four evening discussions organized for mid-September at Bank Muscat’s Head Office in Airport Heights.

Credits Editorial: Taleb Al Makhmari Sajda Al Ghaithy Nadia Al Lamki Dave Pender Design: Lamahat Print: Al Anan Printing Photographs courtesy of Ithraa.

Editor-in-Chief Senior Editor Editor Advisor www.studiolamahat.com www.alananprinting.com

And finally, if there’s some good news you would like to share with Oman’s business community, then we want to hear from you. We will will soon be putting together the Q4 edition of Ithraa News, so if you’ve enjoyed some success in 2016 - whether that’s exporting to new markets, introducing a new product, experiencing growth, winning new clients, receiving an award or generally just going from strength-to-strength and would like to shout about it, then now is your chance. Please send your news and photos to news@ithraa.om We hope you enjoy the read. Team Ithraa

Ithraa News

SEPTEMBER TWENTYSIXTEEN ISSUE THREE

Ithraa Events

Invest in Oman Forum in Paris

Oman Looking to Attract UK Investors

Oman Talks Trade in Paris Three days of intense Omani – Franco trade and investment talks were recently held at the French – Arab Chamber of Commerce (CCFA) in Paris. Building on existing trade and investment ties the top-flight delegation led by Ithraa, met French industry leaders from tourism, logistics and transport, agriculture and fisheries, waste water management, engineering and asset management.

Omani trade delegation at the Society of Maritime Industries

Capitalizing on its strategic location, infrastructure, regional ties and talent, Oman is looking to lure UK waste management and logistics companies to set up offices in the sultanate, helping them reach out to the fast growing economies of the Gulf, Iran and East Africa. To this end, and reaffirming Oman’s excellent trade relationship with the UK, Ithraa, Oman’s inward investment and export development agency, led a top-flight business delegation to London, 25 – 27 July 2016 to meet with senior UK government officials and key business leaders. Oman’s political and economic stability gives UK investors great confidence. The strength and warmth of the bilateral relationship and the long trading history also add to the attraction. The sultanate’s infrastructure and development as a global logistics hub through ports, air, rail and road construction and expansion coupled with a choice of world-class free trade zones, industrial estates and tech parks offer a good mix for UK waste management and logistics companies. Mrs. Alya Al Hosni, Ithraa’s Director of Industrial Investment said: “The UK trade visit gave us an ideal opportunity to showcase the wide-ranging logistics and waste management opportunities on offer in Oman, as well as build on the success of the longstanding Oman – UK trade relationship. It also provided us the opportunity to meet the next generation of UK companies looking to do business in the Gulf and Asia. We genuinely believe there is no better place in the GCC to establish a business than in Oman. This is the message the team put across during our visit.”

Eng. Abdulraham Al Hatmi, Oman Global Logistics Group & Simon Mullett, Hutchisson Ports

Oman has been successful in attracting multinational investors in industries such as plastics, aluminum and steel, methanol and fertilizers and is now diversifying into non-oil industries that include logistics, tourism, fisheries, food processing, minerals, manufacturing and waste management. To date, the UK is Oman’s largest source of foreign direct investment with over US$7 billion of investment, and one of the sultanate’s top trading partners with exports of UK goods to Oman doubling between 2007 and 2014. “UK companies should look at Oman as a strategic location using it as a hub for trade with the GCC, Iran and East Africa, benefiting from the sultanate’s political and economic stability, infrastructure, multilingual workforce and friendly and flexible laws which welcome foreign investment,” remarked Ithraa’s Director of Industrial Investment. UK Trade & Investment based at the British Embassy Muscat helped over 750 UK companies to do business in Oman in 2015, providing in-country expertise and business guides, sign posting to relevant local partners, facilitating meetings, arranging visit programs and providing networking opportunities. “Trade promotion services form a central part of what Ithraa does and we are particularly proud of our track-record of helping UK companies set-up and export from the sultanate. We also offer a range of inward investment services, advice and market intelligence that give UK clients interested in setting up in Oman the edge they need to compete in the Gulf’s highly lucrative market. And we understand that foreign investment is a key driver of jobs and growth for the Omani economy and that is why the UK visit is so important to us,” explained Mrs. Al Hosni.

The senior delegation included some of Oman’s largest and most influential business organizations, including: SEZAD; Oman Chamber of Commerce & Industry; Salalah Free Zone; Salalah Port; Sohar Free Zone; Sohar Port; Oman Air; Al Mouj Muscat; Oman Aquaculture Development Company; Oman Foods Investment Holding Company; Omran; and the newly-created Oman Global Logistics Group. Organized in partnership with Oman’s Embassy in France and the CCFA the Invest in Oman seminar included presentations from Azzan Al Busaidi, Ithraa’s Director General of Planning & Studies; Saleh Al Hassan, Director, SEZAD; and Imad Al Khaduri, General Manager Business Development, Oman Global Logistic Group. Presentations were also delivered by French counterparts including Vincent Reina, Director Development, Suez Environment; and Frederic Parde, Director, International Projects, SNCF. The Invest in Oman seminar was attended by HE Humaid bin Ali Al Maani, the sultanate’s Ambassador to France who welcomed VIP guests including Herve de Chareatte, President, CCFA; Dr. Saleh Al Tayar, Secretary General, CCFA and Julien Buissart, Chef du Bureau, Middle East, Ministry of Economy & Finance. Over 50 leading French companies took advantage of the event to learn more about Oman’s substantial investment opportunities. Reflecting on the Paris seminar, Mr. Al Busaidi said: “We held a series of high-level meetings with French business colleagues. These were extremely successful and generated significant interest in Oman’s investment offer. We look forward to developing the important commercial relationships we have made in Paris.” Today, 54 French companies are in operation in the sultanate, investing US$209 million in construction, finance, manufacturing, oil and gas, transport and utilities. While Oman’s non-oil exports to France registered US$3.3 million in 2015.

We held a series of high-level meetings with French business colleagues. These were extremely successful and generated significant interest in Oman’s investment offer. We look forward to developing the important commercial relationships we have made in Paris. Azzan Al Busaidi Director General of Planning & Studies

Ithraa News SEPTEMBER TWENTYSIXTEEN ISSUE THREE

SMEF is a Partnership for Development (PFD) - part of Oman’s Offset Program project set up by four European PFD obligors with the support of the Offset Committee and Oman’s Ministry of Commerce & Industry. The National Company for Projects and Management (NCPM) is the channeling agency for and the administrator of Offset grants as well as the fund manager for SMEF. SMEF is effectively the implementing agency for the program and the public face of the NCPM-SMEF combination.

Helping Omani SMEs Thrive Ithraa News sat down with Raphael Parambi, CEO of the recently-established SME Development Fund to get his take on why there’s a need for this new investment organization and how his team is providing Oman’s growing start-up scene with confidence, experience, know-how and capital. Raphael Parambi Oman’s SME Development Fund’s CEO

So a few months back you helped start the SME Development Fund & National Company for Projects & Management (NCPM). How do you describe SMEF-NCPM to people and why does it exist? It has been two years since the SME Development Fund (SMEF) was established in response to the government’s strategy on economic diversification, growth and job creation. SMEF is a Partnership for Development (PFD) - part of Oman’s Offset Program project set up by four European PFD obligors with the support of the Offset Committee and Oman’s Ministry of Commerce & Industry. The National Company for Projects and Management (NCPM) is the channeling agency for and the administrator of Offset grants as well as the fund manager for SMEF. SMEF is effectively the implementing agency for the program and the public face of the NCPM-SMEF combination. We are provided with grants by the PFD obligors to finance SMEs, develop Omani entrepreneurs, support local SMEs and create opportunities for them. The four point plan (4PP) for achieving the above comprises:

1 Entrepreneurship Development Training in entrepreneurship is provided to college and university students and experienced entrepreneurs. The objective is to enhance their interest in and understanding of entrepreneurship and widen Oman’s SME base. The program seeks to instill interest in entrepreneurship and teach potential entrepreneurs and students how to generate ideas in a structured manner; formally evaluate and improve these; assess financial feasibility; prepare and pitch business plans, and, finally, to set-up ventures with our grants and support.

2 Nurturing To help nurture and grow local SMEs, business mentoring is offered as well as support with accounting and low cost software. Reputed accounting firms are contracted to support the SMEs on an outsourced basis.

3 Funding For eligible SMEs, speedy and flexible financing is offered at subsidized interest and without taking external collateral.

4 Legitimizing creating a conducive environment through interventions with the Tender Board, large companies, Free Trade Zones and Industrial Estates, local SMEs are given favourable consideration when pitching for a contract. (see: www.smefoman.com)

Despite increasing access to funding, and considerable growth in programs to guide and support new Omani entrepreneurs, the rate of failing start-ups within three years still stands at around 40%. Why do you think this is the case and what can be done to address it? While most of our data on start-up failure in Oman is anecdotal, indications from elsewhere are that this could be as high as 60% (NESTA, the UK’s National Endowment for Science Technology and Arts). Challenges faced by SMEs are many, some of the important ones are: •

Poorly designed or no business plan – Due to lack of experience many SMEs start a business with ‘aspirations’ rather than actual “SMART” business plans. Even when they do have a plan many do not know how to execute the business plan or how to handle contingencies.

•

Poorly planned capital structure – Many SMEs fail to estimate the working capital gap and the CAPEX requirement which leads to strain in the day-to-day operations, leaving them unable to achieve the desired results.

•

Regulations – regulatory obstacles, difficulties in obtaining manpower approvals, and delayed payments are some of the major external challenges faced by SMEs. SMEs in general and start-ups in particular, by definition, do not have the capacity to navigate these obstacles.

•

Lack of understanding of accounting and cash flows – growing businesses are often cash negative even if they are profitable. Many new entrepreneurs burn through their start-up capital, overspending or over investing, before their cash flow is positive. Another dimension of this problem is that SMEs often mix business and personal funds, in the absence of sound accounting and financial guidance.

•

Limited market access – this is one of the fundamental barriers to any country’s attempt to boost SMEs. The approach to SME development needs to go beyond providing funding and early stage mentorship. We need to find ways to help SMEs gain access to various markets, form part of the broader supply chain and receive timely payment.

Our funding is purely by way of debt finance and our minimum ticket size is US$130,000 and our preferred maximum financing is US$780,000; though we can extend up to US$7.8 million per customer.

Distribution of Funding Portfolio Construction & Infrastructure Logistics Oil & Gas Others

14%

Tourism

37% 19%

22%

20%

The plan described above has been designed to help start-ups overcome some of these challenges.

Can you talk a little about the people and start-ups SMEF-NCPM is helping and how should we expect to see SMEF grow over the next few years? In the start-up space, I would like to distinguish between micro enterprises and small and medium enterprises. Micro enterprises constitute the vast majority of the MSME (Micro, Medium and Small Enterprises) landscape in Oman. These are supported by Al Rafad Fund as well as the banks, either through personal loans or through their specialized programs. The somewhat larger companies, the ‘small’ and ‘medium’ category, are the real drivers of employment, in country value (ICV), and economic growth and these are the companies that typically struggle to obtain growth finance The ‘missing middle’ http://www.smefoman.com/news.html is the segment on which SMEF concentrates. Our focus is on the major economic sectors comprising construction and infrastructure, oil and gas, tourism and catering, and logistics. However, given that the SME sector in its entirety is in its infancy, we support any SME that is at least 51% owned by an Omani and adding economic value – not just rent seeking. We insist that the Omani investor should be engaged in the business but do not believe s/he needs to be unemployed to run a business.

An important part of our 4PP comprises entrepreneurship development, among senior executives and in colleges. In the first 18 months, we have seen our Entrepreneurial Campus initiative spread to 15 colleges, covering 13,000 students. Within two years, we expect the program to be present in every college and university in Oman, covering our entire student body, provided the expected funding is received. We have also piloted a program to teach entrepreneurship to government employees at the Ministry of Defence (MoD) and have so far trained 112 officers and staff and our expectation is that 20 concrete proposals of a cumulative value of US$10 million will emanate from this program by the end of 2016. Another vital element of the 4PP is our tie-up with KPMG who will support the program which comprises the provision of free software, low cost accounting support, monitoring and mentoring to 75 SMEs. Over the next two years we expect to partner with two more major accounting firms to provide this service to an ever growing population of SME customers. In terms of funding, we are likely to see a 100% growth this year, and while this rate of growth is not advisable in the longer term, we would expect growth in high double digits in the next few years.

Ithraa News

SEPTEMBER TWENTYSIXTEEN ISSUE THREE

What do you think of the current start-up landscape in Oman? Are there enough capital and good ideas in the market?

For the start-ups you fund, what are you looking for them to accomplish in their first 90-120 days to be a success and have impact?

In our extensive interactions with potential entrepreneurs, with the university system and with the various other entrepreneurship initiatives, we find a large number of excellent ideas. However, for Oman to achieve the kind of SME and ICV growth that it needs, far more are required and even more importantly, the innovators need to be equipped with the right tools for converting innovations into actual business. Our own survey of 18 colleges as well as reports from the Ministry of Civil Service and the Ministry of Higher Education (MoHE) indicated a low level of entrepreneurship interest and understanding amongst college joiners.

SMEF is more a growth financier than a start-up financier with a major focus being on improving the SME operations through our nurturing, to prepare entrepreneurs for growth both in business and employment as firms grow from small to medium to large. However, of our 130 transactions (80 unique customers) as of March 2016, 30 have been to start-ups/first time borrowers. This number will grow further as our training initiatives bear fruit. In the start-up space, we do not expect any commercial success in the 90-120 day window. The metrics for measuring success would vary depending on the nature of the start-up. In the case of an innovative product (we have some in IT, entertainment and services) we would be happy just to see initial market acceptance – we insist on proof of concept prior to funding. Where it is a new entry into an existing product category (we have examples in logistics, construction and infrastructure, oil and gas) we would expect to see initial contracts being booked. In manufacturing, hospitality, etc., where there is a long implementation period, we would be happy to see the project proceeding as per the pre-agreed milestones. Start-ups often are unaware of best practices in planning and executing projects and our value add is in helping the entrepreneur think critically and improve his/her own project planning and monitoring process.

Our Entrepreneurial Campus initiative and “Start your own Company” training for government employees has been designed in response to this requirement and we find a significant initial impact as per formal feedback from MoD trainees and informal feedback from college faculty. This coupled with the initiatives of The Public Authority for Small & Medium Enterprises Development (PASMED), MoHE and various other stakeholders, will, we hope, have a modest impact. Regulatory changes, speeding up approvals, easing manpower regulation in the initial years are vital for a good start-up ecosystem as is the availability of meaningful angel investment, venture capital and start-up grants.

What skills/talents does a start-up need to become successful? A sound feasibility study by itself is no basis for success of an entrepreneur – these are easy to come up with and equally easy for competition to replicate. Innovative, well thought out ideas are vital starting points but are not of themselves adequate either. When we assess a proposal, we look for a good idea which has been thought through to execution (ideally as reflected in at least the rudiments of a plan) but even more important, we look for a fit between the person, his/her interest and the proposed business. The specific skills required differ from stage-to-stage. Initially, entrepreneurs need passion, energy and perseverance; set backs are definitely to be expected and overcome. Focus on execution and on cash flows are vital at the start-up stage and the entrepreneur needs the rudiments of marketing and finance, as, initially, he/she has to handle all aspects of operations. At the growth stage, the skills requirements change. Ability to attract the right team, man management, the skills to scale up, understanding of markets/customers outside his/her initial comfort area (often just within Oman) become vital. In some cases, the entrepreneur will need to hand over to a professional and this is inevitably the highest hurdle.

What have you learnt from NCPM’s honeymoon period? Where were you right, where were you wrong? Setting up NCPM/SMEF feels like a ‘honeymoon’ of fire. I guess we experienced most of the challenges any start-up faces in today’s business environment. We had surveyed the market fairly extensively and my colleagues and I had worked in the SME funding space, in different countries, and I would like to believe that the 4PP has been well thought out. Nevertheless, we got some items wrong and underestimated. Procedural delays and complexity appear to be far more than when I was here earlier. We faced this when incorporating and growing SMEF and now we see SMEs face the same challenges. An interesting learning has been that start-ups need to be resilient and nimble. We came into being post Saih Al Shamekhat Symposium and the enthusiasm to develop and strengthen Oman’s SME sector. By the time we got our feet wet, the market had changed completely and many of our assumptions needed 180° re-thinking. As we grow, we are going through the challenges of maintaining quality with limited human resources and now, with NCPM becoming a 100% government company, we have a new set of challenges. Another surprise under estimation was our offer to the ICV sector, which was designed at considerable cost and after much thought, in view of our major investors’ desire that this initiative of the government be supported. The ICV support envisages an integrated program comprising SME development, training in hard and soft skills, monitoring, and guidance and mentoring for SMEs contributing ICV. Despite the offer being free to the industry and having presented to various stakeholders, the program is yet to be accepted in its entirety.

Setting up NCPM/SMEF feels like a ‘honeymoon’ of fire. I guess we experienced most of the challenges any start-up faces in today’s business environment.

Worth Reading SME Development in Oman: Case of the Missing Middle

Raphael Parambi Oman’s SME Development Fund’s CEO

http://omanobserver.om/sme-development-inoman-case-of-the-missing-middle

It is perhaps early to identify things that we got right. However, some of the pleasant surprises include the ready acceptance by the system of the 4PP. The market probably felt the need for an integrated approach to entrepreneurship and SME development. The structuring of our nurturing initiative to reduce SME failure through use of software, top quality accounting support, structured monitoring and light touch guidance have probably got some aspects right. Defaults and delinquency are lower than anticipated and way lower than industry experience. The activity based approach to entrepreneurship training, encompassing ‘ideation’, idea validation, business plan formulation and financing implementation, appears to have struck an initial cord. Our tough-love style of lending also seems to be working. We do not write as many deals as we could, however, we have found a far higher than normal proportion of successful start-up and growth stories.

What’s been the best thing to happen to the Omani start-up landscape this year? Most of the improvements in the SME landscape have been through a series of incremental steps over the past couple of years. There has been some increase in flexibility by the Ministry of Manpower towards SMEs particularly those who can demonstrate Omani ownership and management. There is also a willingness on the part of large contractors and government to give preferences to SMEs, but this aspect still has some way to go. The biggest improvement probably is the increase in interest in entrepreneurship among Oman’s youth. A small part of the latter has been a result of our efforts in colleges and with the MoD. However, even more importantly media, especially social media, seems to have taken up the cause and I hope this will continue. The introduction of a definition of MSME has been a major step too, as has been the decision of the Central Bank, prescribing that SME lending should comprise 5% of banks’ advances.

What’s the best piece of financial advice you’ve ever been given? This question reminds me of the words of my first chairman, who was one of the doyens of Indian banking. I had just moved from management consulting to the financial sector, and in an evangelical mode, he took it upon himself to advise me that any financial transaction is to be looked at with two lenses: “why you should do it” and, separately, “why you should not”. The team at Muscat Finance Company and SMEF look at business proposals through these lenses. The “why we should” could be the economics and social merits of the project, the passion and competence of the promotor and its viability. The “why not” could be the various risk factors. The next step our chairman used to advice is to see how the “why nots” can be mitigated and the “whys” enhanced. This approach, I adopt in important life decisions as well, when weighing up the pros and cons and trying to maximize the pros and eliminate or mitigating the cons, before finally taking a decision.

Ithraa News

SEPTEMBER TWENTYSIXTEEN ISSUE THREE

Inside Stories is a series of four informal evening discussions, organized by Ithraa and held at Bank Muscat’s Head Office in Airport Heights, Seeb. The series brings together some of the sultanate’s most inspirational and innovative business people, scientists, journalists, teachers, civil servants, architects, environmentalists and artists to share their stories. And together, we discuss the opportunities and trends that are redefining what it means to be in, and start, a business today. Sessions are always stimulating and informative. Inside Stories is open to all.

Inside Stories 2016 Evening One: 7:30pm Monday 19 September

Hyperlocal Tourism

Evening Two: 7:30pm Wednesday 21 September

Made In Oman

Evening Three: 7:30pm Monday 26 September

Urban Logistics

Evening Four: 7:30pm Wednesday 28 September

The Circular Economy

Tourism is Big Business

Made In Oman

Road Freight

Wasteful Cities

In 1950, there were only 25 million international tourist arrivals worldwide. In 2012, the tourism sector achieved the milestone of one billion international arrivals, surpassing 1.8 billion in 2015. Today, the travel and tourism industry outperforms manufacturing, retail, financial services and communications. In fact, one in 11 jobs on the planet is supported by travel and tourism. It’s big business.

Worldwide, manufacturing has been helping drive economic growth and raise living standards for nearly three centuries. Sixteen years into the 21st century, manufacturing continues to power the global economy.

Today, 64% of all travel happens within urban environments and the total amount of urban kilometers travelled is expected to triple by 2050. Freight transport is responsible for 20% of road traffic, 30% of road occupation and 30% of CO2 emissions in cities.

Nearly all waste is generated by city-dwellers and as the world’s population grows and hurtles towards an urban future, the amount of municipal solid waste (MSW), one of the most important by-products of an urban lifestyle, is growing even faster than the rate of urbanization.

Inefficient Service

Garbage

Urban logistics is essential to the functioning of Oman’s city economies, ensuring the supply of goods in stores and for local firms it forms a vital link with suppliers and customers. However, it’s extremely inefficient. As it currently stands, almost all urban freight is delivered by motorised vehicles often transporting very light goods. For example, the average payload transported in European cities weighs less than 100kg and has a volume of less than 1m3. Of the 1,900 vans and trucks entering the city of Breda in the Netherlands each day, less than 10% of the cargo being delivered requires a van or truck and 40% of deliveries involve just one box.

Ten years ago there were 2.9 billion urban residents generating about 0.64kg of MSW per person per day – that’s 0.68 billion tonnes per year. By 2025 this will likely increase to 4.3 billion urban residents generating about 1.42kg per person per day of MSW that’s 2.2 billion tonnes per year.

In Oman, manufacturing, as we know it today, started in 1975; and today employs 61,000+ people and exports to 140 countries. In 2015, Oman’s non-oil exports reached US$8 billion, up from US$680 million in 2002.

Travellers’ Expectations Once a tourist arrives in Oman their expectations are high, they’re investing time and money in a unique and authentic experience. Whether it’s climbing mountains, crossing deserts, sailing, relaxing on a beach or shopping, tourists want the best time possible. And Oman’s small businesses, particularly those in the creative industries, play a vital role in helping tourists realize their expectations, as well as supporting the hotels they stay in and the airlines they travel on.

Career Opportunities Access to talent is already an important factor in location decisions of manufacturers – more than the cost of salaries. Oman has a rich pool of human capital and managing it effectively will help enhance our competitive advantage. In turn, manufacturing can provide valuable employment opportunities and career paths for Oman’s youth.

Skilled Workforce Authentic Experience Today’s travellers are looking for real and meaningful experiences in non-traditional destinations. Travellers have evolved. They’ve become social travellers and want to do something offbeat and connect with people, culture, history and cuisine, to get a real sense of the place. The demand for local experiences and hyper-local activities is on the rise. Travellers want hyper-local or micro tours of Oman’s forts, mosques, restaurants and markets. Surely, this offers interesting opportunities for Oman’s creative industries?

Creative Industries Are Omani hotels connecting their lodgings with references to local communities? Playing local music, placing locally grown flowers at reception, using locally made toiletries in bathrooms, serving produce grown on local farms, showcasing local artistic talent on their walls. And are our shops selling high-end locally made souvenirs?

With the increasing speed and complexity of manufacturing industries, the need for more high-skilled workers is growing and shortages of workers with training in technical and analytical specialties are appearing. Oman’s manufacturers, schools and higher education need to deepen dialogue to ensure that skills of their graduates meet the needs of industry.

Home Grown Talent Oman graduates 17,000+ higher education students annually. We must ensure that Omani manufacturers access this valuable talent pool for the growing number of jobs in management, sales, marketing, accounting, R&D and production posts and that graduates are aware of the many career opportunities in manufacturing. Indeed, how can we prepare young Omanis for jobs in manufacturing? And how can we improve take-up of jobs in the manufacturing sector?

On the domestic front, Oman’s population is projected to reach 4.9 million by 2025, with each person generating 1.2kg of waste per day. The possible negative repercussions of generating such large amounts of MSW are simply staggering. Indeed, once you start to think about them, it’s hard to think about anything else.

The Final Mile It’s easy to bring goods into Oman via plane, ship, or truck but it’s much harder to bring what’s been ordered to houses or offices from the central point to which it was delivered. Indeed, the final mile of urban logistics plays a crucial role in Oman’s supply chain. Get it wrong and you risk alienating consumers, get it right and you may just gain a customer for life. To meet this challenge, we need to reconsider urban delivery solutions that are more effective, customer-centric, sustainable and eco-friendly.

The Role of Small Business How can freight be transported in the final mile, in the most efficient and environmentally friendly way, travelling the shortest distance and without loss of time from its origin to its destination in an urban environment at minimal cost, using minimal land and causing minimal pollution? How do we encourage start-ups and small businesses to come up with solutions to the questions?

Impact We have to realize that continued economic growth can’t come at the expense of Oman’s environment. To address this, we need to further integrate waste management systems while making reduced environmental impact a national priority. The challenge is to reduce the amount of solid waste generated, while increasing the amount of waste diverted from Oman’s landfills through reuse, recycling and other initiatives in an economically and environmentally-friendly way. How do we best achieve this and what commercial opportunities are there in the waste management and circular economy space? And what can we do in particular for young, eco-conscious entrepreneurs?

Green Jobs Research shows that the job creation potential of the re-use sector is significantly higher than recycling, incineration and landfill. It’s estimated that for 10,000 tonnes of waste products and materials, one job would be created if incineration were used, compared to six jobs in landﬁll, 36 jobs in recycling and up to 296 in refurbishment and re-use. The conclusion from these statistics is clear: landfilling kills jobs.

Ithraa News

SEPTEMBER TWENTYSIXTEEN ISSUE THREE

Business Incubating Omani Style Malak Al Shaibani Director General National Business Centre As far back as I can remember, I’ve always been involved in a start-up of one description or another. My first job after graduating from university was with the newly-created Industrial Development Unit (IDU) at the Ministry of Commerce & Industry (MoCI). In fact, my role at that time wasn’t very different to what I’m doing today at the National Business Centre (NBC) – the government-run business incubator on Knowledge Oasis Muscat. During my time at the IDU the government was encouraging the development of Oman’s manufacturing base and working to move the sultanate away from trading and agricultural activities toward an industry-led economy. At that time, and we’re talking about the 1990s, most Omani manufacturers were still in their infancy, and as part of the IDU Team we provided these firms with advisory support, training and trouble shooting. Exactly what I’m doing now with my team at NBC. I worked in the public sector for 15 years and was part of the original team that launched OCIPED - known today as Ithraa – I was tasked with helping attract inward investment to Oman. I moved to the private sector with another green field project, Sohar Aluminum. I worked in both the construction and operational phases of this important international project. Later on, I headed up The Youth Fund (Sharakah), restructuring and rebranding the organization. In 2011, I decided to strike out on my own and launch a start-up, so I know the stresses and strains of setting-up and running a small firm. Then four years ago, I was approached by the Public Establishment for Industrial Estates (PEIE) to lead the KOM-based NBC incubator project. NBC was initially set-up as an expansion of The Knowledge Mine (TKN), Oman’s first ICT business incubator, established on KOM in 2003. However, after studying the business terrain and the needs of young Omani entrepreneurs, it was more than apparent that there was scope to broaden TKM’s remit and create a mixed-use incubator. We officially opened for business in 2013. Today, we run two incubators in Muscat, one in Ghalla as part of a management agreement with Riyada - the government’s Public Authority for Small & Medium Enterprises - and NBC at KOM. The total capacity in terms of office space is 43, and occupancy is around 70% - our tenancy target for 2016 is to reach 85%.

However, it isn’t the percentage we’re after as much as the business ideas and entrepreneurs driving the two incubator programs. Our current batch of tenants work in a variety of sectors, we’ve graphic artists, film makers, jewelers, safety consultants, medical companies, oil and gas services and interior designers. All very talented people.

In 2015 we graduated four start-ups and we’ll do the same this year. These are companies in chemicals, design, ICT and training. The combined revenues have been growing steadily reaching US$3.36 million in 2015, up from US$2.46 million in 2014,

We’re highly selective with regards who we accept as tenants. Our set-up is designed specifically for serious entrepreneurs who want to grow their business and are willing to commit. In exchange, we provide focused training and coaching, mentoring, business networking opportunities, access to funding agencies and Class A office facilities. It’s an outstanding offer.

On a broader note, entrepreneurship isn’t something special that a few people are born with, it’s a way of thinking that can be developed – this is exactly what NBC is looking to nurture. And despite the current global economic challenges and vulnerabilities, entrepreneurship can act as the engine for economic growth as well as provide a successful route to long-term employment, especially if entrepreneurs receive the right support and advice in the business start-up phase.

We expect tenants to be with us for a period of three years, though tenancy agreements are renewed annually. Start-ups can graduate early if they meet a certain revenue threshold or grow beyond five full-time employees. It’s important our tenants are equipped with the necessary skills and know-how before leaving the incubator environment.

If you look at countries that have a long history of enterprise and innovation their statistics clearly reveal the importance of entrepreneurship. For example, in Britain, SMEs account for the vast majority of all businesses and are responsible for 59% of private sector employment and 52% of private sector turnover.

Each of our tenanted start-ups is in the Riyada Mentorship Program (RMP) and RMP training courses are mandatory. However, exemptions to certain modules, given the background and experience of the tenant, can be granted. We create a milestone program that tenants commit to during their NBC tenancy. This is a formal agreement that NBC and the start-up agree to and sign. It’s important to stress, there’s a strong business culture running through NBC, indeed, we’re ambitious, results-driven and very serious about the support services and facilities we offer Omani start-ups.

In the US more than 87% of all businesses have five or fewer employees. These small businesses create new jobs on average at a rate of 900,000 per year. Given the potential of start-ups and SMEs it’s particularly important that Oman fosters the conditions for an enterprise culture at a time of economic crisis when the global job market is stalling. This is a message NBC is looking to convey.

To provide our tenants with the necessary support we work closely with a range of public and private-sector stakeholders, including Injaz, Riyada, Raffd and Sharakah and no incubator program can succeed without ties to local universities and colleges. We’re particularly close to the Higher Colleges of Technology, Modern College and Sultan Qaboos University. Every quarter we seek feedback from our tenants – we want their thoughts on what’s working, what isn’t and how we can improve. And for us, the term ‘tenant’ denotes a relationship which goes far beyond the legal: our team adds value by interpreting the opportunities and consequences of each tenant’s business activities, assisting both the growth of the start-up and its attractiveness to potential investors. I believe an intimate understanding and response to different tenants’ evolving needs during their tenancy is essential. We’re looking to establish a climate of trust with our tenants.

I firmly believe NBC is a place where people can improve and refine their own and each other’s ideas. It’s a place where visions and ideas take form; a melting pot of knowledge, will and success. NBC has all the necessary requirements for a business idea to be born, take its first breath and then its first steps.

To find out more about incubating at NBC contact Malak Al Shaibani on: malak.alshaibani@nbc.om

Ithraa News

SEPTEMBER TWENTYSIXTEEN ISSUE THREE

Exports matter because they represent the very sectors that drive wealth, attract investment and talent, boost productivity and innovation and generate employment in Oman.

Why Export? Most small companies think exporting is purely for large and established firms. However, research suggests it’s as beneficial for small businesses to engage in international trade as it is for large companies. Here are 15 reasons why you might want to consider exporting.

Increase Sales A diversified export market enables businesses to expand sales. It’s often easier and more lucrative to tap a fresh market than trying to maximize an existing one.

Made In Oman Economies of Scale

Innovation Exporting powers innovation. Small businesses that export tend to innovate more in products and processes than non-exporters.

Spread the Risk Businesses active in more than one market are less exposed to region-specific economic issues.

If a business has excess production capacity, it will be more profitable for it to produce more rather than less, and sell the excess in an export market. This way, a small business can benefit from economies of scale.

In many markets, Omani products are associated with quality and luxury – from perfume, petrochemicals, marble and ceramics, food and beverage, steel, cables, automotive spare parts, plastics, batteries to fish – we have an excellent international reputation.

Weather the Storm Exporters generally experience greater revenue growth than non-exporters and are better equipped to weather economic downturns.

Create Jobs The production of exported goods and services creates jobs, both directly and indirectly in the supply chain.

Faster Growth Research suggests that large as well as small businesses tend to grow faster if they export.

Price Flexibility Trickle Down

Companies often have more flexibility in the pricing of their goods and services in an export market than they do at home.

The movement of goods exports and passenger travel for business services and tourism supports jobs and revenues in the port, airport, freight and logistics sector.

More Money

Compete Small businesses may find it difficult to compete with large companies in the home market. One reason is the awareness of the difference in the brand equity of a large company and a small company among local consumers. Tapping into an export market can overcome this issue, because international buyers wouldn’t make the kind of comparisons domestic buyers might.

Export sector jobs pay well. For every US$10 billion in sales in a metropolitan export industry, its workers earn 10% to 20% higher wages than those in non-exporting jobs

Talent Magnet

Good All Round

Omani businesses that export often develop a global presence, which is attractive when it comes to recruitment. Business owners may find it easier to recruit staff with better qualifications and greater levels of ambition - people who wish to help the company develop globally.

Manufacturing generates well-paid jobs in a range of skills and professions and not just on the production side; in fact, many large manufacturing companies are also services companies, in sales, design and so on. Factories plug into local businesses and drive services too. Crucially for any leading economy, manufacturing also drives technological change.

Fight off the Competition If the Omani market is overly-competitive, then it’s a good idea for small firms to enter an export market rather than just compete with larger firms at home.

Ithraa News SEPTEMBER TWENTYSIXTEEN ISSUE THREE

And Finally... Omani Exporters Target Singapore With trade relations between Oman and Singapore spanning centuries, a business and government delegation led by Ithraa, travelled to Singapore in July to hold high-level trade and investment talks. Mrs. Nasima Yahya Al Balushi, Ithraa’s Director General for Export Development spearheaded the 42-strong delegation, she remarked that both countries are looking to capitalize on the Singapore – GCC Free Trade Agreement and enhance and extend bilateral trade relations.

Under the patronage of HE Sheikh Zakariya Al Saadi, Oman’s Consular General to Singapore, Ithraa held B2B meetings at the Marina Mandarin Hotel to showcase Oman’s manufacturing, pharmaceutical, food processing, marble and stone, chemicals, plastics, and agriculture and fisheries sectors. On the export front, Singapore is a strategic entry-point for Omani companies looking to access pan-Asian growth markets. The city-state boasts numerous resources valuable to Omani exporters such as a business-friendly environment, highly-skilled labour, a predominantly English-speaking population, well-established financial markets and highly efficient infrastructure. It also offers Omani firms the opportunity to test-bed new products for the ASEAN region. “The World Bank’s Doing Business survey ranks Singapore as having the best business environment in the world, which is probably why so many global organizations are opting to use the city as a springboard for their ASEAN operations. And as a base for knowledge, partners and talent, Singapore is well-placed to help Omani exporters access increasingly critical markets like Indonesia and Vietnam, where revenues are growing,” commented Mrs. Al Balushi. The ASEAN market has a combined population of 628 million and a nominal GDP of more than US$2.5 trillion and is set for robust expansion. According to the IMF’s latest forecast, the ASEAN-5 – Indonesia, Malaysia, the Philippines, Singapore and Thailand – will grow by 5.5% a year from 2016 to 2020, compared with 1.9% a year for advanced G7 economies.

B2B meetings in Singapore

Ithraa’s Mohammed Al Kindi presenting Oman’s investment offer

“After an extensive market study, we have identified well over 50 Oman-made products that have the potential to succeed in Singapore and other ASEAN markets. In this regard, 33 Omani exporters joined us on this important visit. Our objective was clear, we want to see more Oman-made products in Singapore and in other growing ASEAN markets.” Estimated at US$103 million, non-oil Omani exports to Singapore jumped 10.5 % in 2015. Top exports from the sultanate included methanol, fish, marble and fragrances.

“This growth represents a number of exciting opportunities for Omani exporters,” explained the Ithraa Director General. “ASEAN’s middle class increasingly demands top quality, affordable, imported goods. Omani exporters who excel in the mid-to-high-end market, are well placed to meet this growing demand. This is a very exciting prospect,” enthused Mrs. Al Balushi. In addition to B2B meetings, visits to factories, retailers and wholesalers, Ithraa, in association with the Singapore Business Federation, also organized a one-day Doing Business and Work Culture in Singapore workshop.

Talk to Us Tel: +968 24 62 33 80 Fax: +968 24 62 33 36 www.ithraa.om Ithraa, PO Box 25, Wadi Kabir 117, Sultanate of Oman.

The Public Authority for Investment Promotion & Export Development