International Finance
Economy

‘Ecosystem for SMEs in Oman is still nascent’

Adham Al Said spoke to IFM about the initiatives taken by His Majesty and challenges ahead IFM Correspondent September 2, 2015 SMEs play a major role in any economy. How is it in Oman? Recent reports and studies have suggested that SMEs form approximate 90% of active businesses. Their contribution to GDP is estimated to be 15-20% of Oman’s annual output. These businesses employ 40%...

Adham Al Said spoke to IFM about the initiatives taken by His Majesty and challenges ahead

IFM Correspondent

September 2, 2015

SMEs play a major role in any economy. How is it in Oman?

Recent reports and studies have suggested that SMEs form approximate 90% of active businesses. Their contribution to GDP is estimated to be 15-20% of Oman’s annual output. These businesses employ 40% of the workforce. These statistics do not compare favourably with other countries with respect to importance of SMEs within the national economy. SMEs have yet to fulfill their full potential. Driven by the aspirations of youths and a shift in mindsets, we may see significant improvement gradually. We need to be mindful that the nascent ecosystem has yet to develop into a well-integrated and coordinated environment.

               Adham Al Said How will you describe the startup ecosystem in Oman?

Oman’s startup ecosystem enjoys strong support from His Majesty Sultan Qaboos bin Said. The ecosystem is still at a nascent stage by international standards. However, recent developments in regulation, funding and technical support have had a positive impact on its development. There is well founded vigour towards establishing a more complex and well developed ecosystem. There exists national consensus on the importance of SMEs and their impact on the national economy. There is still a great deal of work that is needed to address various challenges to reach the desired outcomes and impact.

The Omani ecosystem can be described as a non-specialised startup environment where new ventures have started across various industries and sectors. In general, many startups lack scalability and scope; many are micro businesses with a few employees. Having said that, there are exceptions which hold promise of high growth potential. All in all, Oman’s ecosystem has developed positively over the past few years and slowly changing mindsets with it.

What are the strengths and weaknesses of Oman in the context of startup ecosystem?

Encouraged by the recent impetus and initiatives by the government, youth in Oman have taken advantage of the opportunities coming up in the Omani ecosystem. This reflects the strong desire and entrepreneurial spirit of Omanis. Moreover, the enablers and support programmes have provided a good foundation for many startups to establish themselves. Programmes like Riyada (Pubic Authority for Small and Medium Enterprise Development), Rafd Fund and specialised incubators will lead the way in establishing much needed support. Private initiatives have also been of varying degrees of competence and effectiveness. Improvements in funding and capacity building are some of the stronger features observed.

Despite the positive morale, the ecosystem remains sparse and in need of further capacity building and enabling factors. The mindset of society in general is still lagging. The regulation remains scattered across various jurisdictions, which means startups and existing SMEs often spend too much time and energy to establish and develop their businesses. The sporadic nature of these enablers makes synergies and cross linkages between industries less likely. Also, the ecosystem lacks variety in funding mechanism. Bank loans and government soft loans are still the primary modes of financing. Venture capital remains very limited and crowdsourcing is yet to be established. Incubation also presents a significant challenge due to the quality of startups and their scalability.

What is the government doing to encourage women entrepreneurs?

Women’s role in society in general and their entrepreneurial participation is well recognised in Oman. Driven by support and encouragement from His Majesty, Oman has paid specific attention to women’s participation through specialised programmes and incubators. Women have equal opportunities in accessing funds, support and technical training as their male counterparts in many of the public and private programmes. Although specific statistics are not readily available, we find a positive presence of startups by women in various industries. Moreover, women have proven themselves avid risk takers in many instances.

Which sectors are seeing more startups? What could be the reasons for the same?

Many startups are concentrated in retail and services, such as hospitality, tourism and catering (franchises and homegrown). The other areas are Information Technology and Communication, graphic design, mobile application and video production. The appeal of these businesses is low cost of starting business, capital requirement and regulations. They also tend to be less risky and considerably more manageable. Generally, startups in Oman tend to be micro level and thus do not create enough synergies to establish dynamic enterprises in high-growth sectors. Lack of technical expertise and know-how may also be holding back some startups from venturing into more dynamic industries.

Are companies in Oman concentrating on the local or global market?

They are yet to tap the global market in a meaningful way. Tackling the local market is predictably more manageable compared to the challenges of accessing international markets. However, specialised authorities aim to enhance this aspect through technical assistance. The lack of global presence is a by-product of the nature of Omani startups, where they concentrate on retail and service-based industries. This trend is likely to change once more startups focus on manufacturing and exports. This will need strong sustained emphasis by the government on steering startups towards specific high-growth export oriented industries.

 

Adham Al Said is the Honourable Chairman of Oman SME Summit being organised by IFM on September 13-14 at Al Bustan Palace Hotel, Ritz Carlton, Muscat

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