Privatization Methods adopted

 

Privatization in Oman has taken many forms including the sale of government assets, opportunities given to private enterprises to build , own and operate public services which were previously provided by the government and engage the private companies and establishments to manage or provide services on behalf of the government.

1.Sale of government share in existing establishments, companies and public organizations.

Ownership by the government is comprised of share holdings in companies and the ownership of assets of certain public corporations. First, appropriate basis for the sale of these assets have been established to enable sales of such shares in stages taking into consideration the financial abilities of the private sector and their impact on the operations of Muscat Securities Market. Consideration has been also given to the capabilities of supervision, follow-up and the implementation of these programs. Basis observed are as follows:

To find proper mechanisms to enable a maximum number of citizens to purchase shares in order to broaden the base of small investors.

• Sale of government shareholding through Muscat securities Market in cases of joint stock companies or in other cases, in a manner that ensures the maximum possible revenue to the government from the sale of these assets.

Based on the above, the government has sold its shareholdings in certain companies. The most important methods adopted in sale are as follows:

• issuing shares owned by the government for public subscription through Muscat Securities Market.  

• Placing government shares for sale by public auction through Muscat Securities Market, such as shares in Oman Hotels Company .

• Participation with the private sector in providing finances required to increase the capacity of production of industries by inviting the private sector to provide the capital increase, as in the case of Oman Cement Company.

The government still owns in different proportions , the capital of a number of companies and establishments. Government shareholdings in these companies vary between 4.3% to 100%. The assets in local companies and establishments can be considered for sale in a suitable time through Muscat Securities Market or in open auctions. A part of these assets may continue to remain under ownership of the government, if necessary. However the establishments which are wholly owned by the government are candidates for privatization after being restructured through undergoing economic and social feasibility studies followed by decisions taken in this respect.

Privatization program as per the Sixth Five Years Plan emphasizes the importance of privatization of the government shares in the following establishments and organizations:

• Oman Cement Company: The government share amounting to 63.5% was reduced to 51% as a first step, balance of the government share will be divested later.

• Oman Flour Mills Co.: The government share was reduced from 59.5% to 51% with the balance of shares to be privatized later.

• Al Maha Petroleum Products Co.: The government has sold its entire share holding amounting to 65% through Muscat Securities Market.

Further, the privatization program emphasizes the following:

• privatization of hotels, in conformity with the strategy of the development of the tourism sector, which will be designed during the period of the plan referred to above and will coincide with the establishment of the Ministry of Tourism.

• Studying the possibility of privatization of the government shareholdings in Port Services Corporation (35.5%), Oman Fisheries Co. (24%), Oman Chromite Co.(15%), National Medical Industries (30.6%) Salalah Sanitary Drainage Services Co. (100%), Oman Waste Water Services Co. (100%), Oman Transport Co. (100%), Oman Mining Co. (99.8%),Oman International Fair Centre (100%) the Public Establishment for Industrial estates and other companies which the government owns or possesses shares in their capital.

• The plan involves placing shares of the government in companies and establishments for subscription through Muscat Securities Market in phases. Foreign Investments are encouraged to ensure the benefit from foreign capital and technical and managerial expertise. Where these companies and organizations are not to be listed in Muscat Securities Market, the method yielding the maximum possible revenue will be adopted Transparency will be observed in such case.

• Permitting the private sector to participate through the financing,establishment and opertion of production and services projects.

The general government direction in the light of the future vision of Oman’s economy (Oman 2020) emphasizes wide investment opportunities to be given to the private sector either through whole or partial ownership of existing public enterprises or through the implementation of new projects which were previously monopolies of the public sector. Private sector’s ownership involves financing, establishment and operation of these projects.

 

In the light of the above policies and procedures, the government has entered into agreements with the private sector to finance, establish and operate a number of projects through concessions determined in accordance with the nature of each project. This includes the forms of private participation such as build, operate, own, and transfer(BOOT) such as Manah and Salalah Power projects and also the build, operate and own (BOO) such as Al Kamil Power project and Barka’a Desalination and Power project. Special importance is given to carry on work on projects for which studies have been completed and the procedures of their privatization have been taken up speedily, including:

 

ٱ Electricity and the related water sector including Rusail Power Plant, Ghobrah Power and Water Desalination Plant, Wdiljizi Power plant and the communication and distribution Networks.

  

Oman Telecommunications Company.

The Privatization program confirms the importance of studying the possibility of privatization of the following
projects:

• Ports

Drinking water and sanitary drainage projects.

• Solid and risky waste.  

3. Other methods of privatization  

The government has adopted other ways of privatization including :

• Leasing public facilities to the private sector against fixed amounts. Examples are certain tourist facilities established by the government.

• Management Contracts, according to which the facilities are managed by private companies. Profits are shared as per percentages agreed with the government. An example is the present collection of the amounts of water and electricity bills by a private company.

• Provision of services to public facilities by the private sector such as the services of catering to hospitals, cleaning and maintenance of government buildings.

Accordingly, the privatization program as reflected in Sixth the Five Years Plan, emphasizes the importance of studying the potential of benefiting from these ways of management contracts, lease of public facilities, encouragement of private education policy and the provision of health services in addition to typing and messengers services to government departments, laboratory services ..etc.