Leverage our strategic geographical location
Published: 10/04/2017 12:00 pm
Ghalib Al Busaidi
Deputy GM & Group Head – Wholesale Banking, Alizz Islamic Bank
We can learn a lot from the economic miracle witnessed by Singapore. After independence in 1965, Singapote’s GDP per capita was US$435 and unemployment was 14 per cent. Today, its GDP per capita is US$63,000 making Singaporeans the third richest population in the world, with foreign exchange reserves of US$226bn and is recognised as Asia’s prime financial centre. How could all this happen over a period of 50 years, for a country that started with no commodities and precious little of value?
Key to their success was identifying their differentiators and they started by leveraging their location. The Port of Singapore today controls 40 per cent of global trade and is the second busiest in the world. To support their desire to be Asia’s trading hub, they focused on developing a manufacturing base and invested heavily in biotechnology, pharmaceuticals, chemicals and electronics. Simultan-eously, they positioned themselves as a value addition/refining centre and today are the largest refined products (including oil) exporter in the world.
To complement this they needed to ensure they had a highly skilled and educated workforce and an education policy was placed high on the agenda. Recently, the OECD ranked Singaporean 15 year olds as No 1 in the world for universal basic skills including English, Mathematics and Science. English language skills were given top priority in schools as they recognised its importance in attracting FDI and today there are over 3,000 multi-national corporations based in Singapore contributing two-thirds of manufacturing output. The establishment of Singapore as a financial services and wealth management hub was also a by-product of their focus on English language skills and today this sector contributes almost 30 per cent of GDP.
Complementing all these initiatives, formalities to start a business were minimised (it takes just three days to start a business in Singapore according to the World Bank best places to do business report. It is ranked No 1 globally. With personal savings rates amongst the highest in the world at 24 per cent, funding their growth has not been a concern.
There are close parallels with the strategic initiatives currently underway in Oman. It’s clear that our privileged location in the region is our competitive advantage and lends itself perfectly to become a logistics and manufacturing hub – potentially a gateway between Africa (source of raw materials) and Europe/Asia (consumers). Our ability to act as a value addition and refining centre would complement this and the large scale investment into ports (Duqm, Salalah and Sohar) and subsequent development of the hinterlands meets these objectives. The development of human capital has also been a major focus with initiatives like the National CEO programme now producing the next generation of business leaders.
An area for improvement has to be the contribution of the private sector to sustainable growth. In mature economies, the private sector contributes 80 per cent to GDP and jobs. The government is strongly supporting SMEs and ensuring domestic benefits through ICV norms but the private sector still remains overly dependent on government spending.
The banking sector in Oman is well capitalised and provides effective financial support to fund further investment. Although the banks do their part in encouraging a savings culture, the propensity to consume imported products is still high – either these products should be locally produced or the borrow and spend habit needs to change to alleviate pressures on capital account.