Managing Director, United Securities
The capital markets are the barometers of economic activity in any growing economy. As far as the Muscat Securities Market (MSM) is concerned, it is more representative of the financial sector in Oman. Businesses here are owned either by the government or by large family groups that prefer holding them in private. The primary objective of capital markets in our opinion is to bridge the funding gap between businesses and capital providers. Currently, the economy has a high amount of financial liquidity. Banks are flooded with deposits and are looking for ways to lend the excess liquidity. Lower interest rates are also supportive for the lending growth of Omani banks. The underleveraged nature of companies in Oman provides them with more room for borrowing at cheaper costs rather than going down the equity-financing route. This prompts private family houses to retain their control and helps them to avoid the equity markets. However, providing enough tangible incentives for companies to list should attract a few promoters to take the equity route of financing. These incentives should not be just for the sake of listing, but should help in the overall development of the market as well. One way to do so is by giving listed companies a certain weight in transactions related to the government. But currently, we are not seeing any kind of incentives in this direction.
CEO, A’Sharqiya Investment Holding Company (SAOG)
Our objectives remain the same, except that we are more aggressively looking at investment opportunities. We often make our investments through certain structured vehicles. Our objective now is to grow in a much more aggressive manner. For that, we will be building special-purpose vehicles (SPVs) that invest in specific industries and businesses. Each of these SPVs makes a financial contribution of say 25% to each investment, while the remaining 75% may come from external investors, Omani or international. These SPVs would then be leveraged if appropriate to enable participation in larger and much bigger projects. The SPVs managed by this company would hold significant minority rights in each investee company with a board seat. In every company that we invest in, we contribute to the growth of the business. When A’Sharqiya invests in a company, it needs to know what the business will look like in five years. We invest in businesses where there is a good correlation between the investee company’s growth and sectoral growth. We also help the investee company strategize as to the best way to grow, either organically or inorganically. Oman is a relatively small country, and it would be difficult to build economies of scale by only catering to the local markets. Our investee companies, therefore, need to explore outward growth within the region.
CEO, Kalat bin Ghuloom Al-Bulooshi
Our support is a mix of financial and management support. For Gulf Energy, we offered both financial and management support to open and run a business. We provided finance via shareholder loans, as lenders would not typically take start-up and contract risks. Our second part of the model is working with international partners and bringing them to Oman. We have a few success stories bringing in a Portuguese company (Silva Group) during the real estate boom to establish cement making and cement product-manufacturing companies. One was called Oman Portuguese Cement Products (OPCP) in Sohar, which became very successful. We also partnered with Sembcorp Industries from Singapore to build the largest power plant in the Dhofar region; it is a 450-MW facility supplying 13 million gallons of desalinated water per day. Through this, we became the leader in Oman, as the first Omani company to take a 40% stake in an independent water and power plant (IWPP). Also, with the Sembcorp project, we managed to achieve close to $750 million worth of deals during the financial crisis, and we also brought financing from Chinese banks into Oman, leveraging the government-to-government (G2G) relationship between Oman and China. Our other investment is Octal, the largest polyethylene terephthalate (PET) resin plant of its type in the Middle East, and the largest clear rigid PET sheet plant in the world.