Country Report Oman April 2011

Economic performance: Strikes hit the commercial sector

Productivity was hit across a wide range of businesses in March when Omanis working in the commercial sector staged protests or came out on strike, hoping to win similar concessions to those awarded to public-sector employees earlier in the month. Many sectors of the economy were affected. Among the disputes reported by the local media were those at Petroleum Development Oman (PDO, the national oil and gas company), Omantel (the majority state-owned telecommunications firm), banks (BankMuscat, Oman International Bank and Oman Arab Bank), oil refineries, hotels (Al Bustan Palace, InterContinental, Shangri La) and construction companies (Larsen & Toubro, Galfar).

The banking sector illustrates how the responses by management to protesters' demands have varied. More than 60 of Oman International Bank's branches were closed for several days by strike action in mid-March, angering customers who were unable to access their money. The bank responded by giving customers a month's loan repayment waiver, while threatening staff with the sack or prosecution if they did not return to work. By contrast, BankMuscat and the Oman Arab Bank increased the wages of Omani staff. Some changes were imposed upon the banks: at the beginning of the third week of March, the Central Bank of Oman's board of governors announced it was increasing the Omanisation quotas for banks from 50% to 65% and for financial institutions from 75% to 80%.

As Oman's trade union movement is in its infancy, the strikes were largely unco-ordinated. One exception to this was the action taken at the Rusayl Industrial Estate on the outskirts of Muscat where production was halted as hundreds of workers staged a peaceful protest demanding higher salaries and better working conditions. Rusayl is Oman's largest industrial zone with over 150 companies employing a total of about 6,000 workers, of whom about 40% are Omani according to the Times of Oman, an English-language daily newspaper. The army was dispatched to the industrial estate in order to protect the factories: there have been a number of cases of arson, vandalism and looting associated with the protests in Sohar and Ibri. The Public Establishment for Industrial Estates (PEIE), which operates nine such estates throughout Oman, negotiated with the protesters. It then sent a communiqué to tenants at Rusayl and elsewhere directing them to pay a monthly OR50 (US$130) cost of living allowance to Omanis on monthly salaries of less than OR500 and OR30 for those on higher salaries, in addition to giving them a two-day weekend. Coming within weeks of a OR50 increase in the minimum monthly wage for all Omanis in the private sector, the net result of the recent concessions for employers on the industrial estates is a 66% increase in the minimum wage for Omanis and one day a week less production. By late March stories were filtering into the local media that some small and medium-sized firms were considering ending their operations in Oman because of increased costs.

Oman's heavy dependence on low-paid Asian labour was relatively straightforward to manage when the workplace was in effect segregated. From the 1970s to the 1990s many, largely physical, jobs such as construction, factory work and domestic service were performed almost exclusively by expatriates. The large numbers of young Omanis leaving school and looking for work prompted the government to begin its Omanisation programme in the late 1980s, introducing quotas for the percentage of nationals companies were required to employ. Not surprisingly, those sectors of the economy that rely heavily on low-paid Asian labour were unpopular with Omanis. Although the higher pay and improved conditions may appease Omani employees to some extent, they in effect further disadvantages the most poorly paid: the Asian expatriates. The real problem for Oman's economy will come if the 84% of the workforce that is expatriate finds its voice.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
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