Oman's startup opportunity
The sultanate of Oman is gearing up to turbocharge its entrepreneurship ecosystem. While the Gulf state has not been traditionally known for its wealth of startup programmes, Oman’s newly laid Vision 2040 is helping to accelerate the country’s plans to become a global tech and small to medium-sized (SME) hub.
Released during the Oman 2040 Future Vision National Conference in January this year, the draft plan envisages the development of a competitive, globally connected private economy. In its ambitious long-term vision, Oman places specific emphasis on SMEs and the non-hydrocarbons sector. By 2040, Oman plans to transform its oil versus non-oil gross domestic product (GDP) split from 40/60 per cent to 15/85 per cent, according to official figures.
This trend is forecast to continue to 2040, when hydrocarbons are expected to account for just seven per cent of Oman’s GDP.
Forty per cent of Oman’s 4.6 million-strong population is under 25-years-old and nearly half of the nation’s youths are unemployed, according to the World Bank.
According to Wes Schwalje, chief operating officer (COO) at Dubai-based Tahseen Consulting, a “robust, self-sustaining entrepreneurship ecosystem” is critical to youth job generation in Oman.
“A fully-fledged ecosystem will create more high skill, high wage jobs in knowledge-based industries for youth,” he says.
“The amount of unemployed youth is very high and the government is trying to push the unemployed people to go to market and start their own businesses,” says Salim Al Mamari, an entrepreneur based in Muscat who started a drive-through coffee shop and is in the process of setting up a healthcare centre. “The [labour] market cannot absorb all the graduates, that is the main driver for startups.”
Schwalje adds that a functioning ecosystem is vital for nurturing globally competitive, fast-growing companies in priority economic areas that drive economic diversification and mobilising private investment in startups.
SMEs currently account for around 15 per cent of Omani GDP – a figure the Public Authority for the Development of SMEs (Riyada) has forecast will double in the next decade as opportunities are created. Nevertheless, this figure is markedly below the global average of around 50 per cent.
Room to Grow
Oman’s entrepreneurship ecosystem has thus far trailed behind its neighbours, such as Saudi Arabia and the UAE, but the sultanate is showing signs of building the necessary institutional foundations and addressing SME funding gaps.
“Increased competition in the Mena region to improve startup and entrepreneurship ecosystems is pushing Oman towards a ‘fast follower’ approach,” suggests Schwalje.
He predicts that Oman will rapidly learn from its neighbours to become one of several tech startup hubs in the region.
“No country wants to be caught out stuttering at the starting gate of developing foundational digital economy policies and enhancing their business environment when some of their neighbours are advancing bold policies to become global leaders in artificial intelligence, autonomous vehicles, blockchain, advanced materials, and even space exploration,” says Schwalje.
In its boldest move towards plugging the finance gap, Oman utilised $200 million from its sovereign wealth fund to create the Oman Technology Fund (OTF) in 2016.
OTF invests in startups in Oman and Mena in the pre-seed, seed stages and in VC funds and hopes to attract global startups to open up shop locally through partnerships with global leaders, like London-based Hambro Perks and 500 Startups.
The sultanate is also reportedly in talks to invest into Japan’s billion-dollar Softbank Vision Fund. This suggests Oman has ambitions to become global startup capital hub, as well as a regional powerhouse.
“Oman’s global ambition can also be seen in its recent attempts to develop closer ties with emerging global tech leaders like China and India and growing ties with the Asian Infrastructure Investment Bank,” says Schwalje.
In recent years, Oman has ramped up its effort to support its startup community with a range of government initiatives.
SME body Riyada offers one-stop solutions for setting up businesses, as well as financial support, revamped training programmes, discounted land and premises.
Younger entrepreneurs can seek specialist funding, support and business plan advice through Sharakah, the Fund for Development of Youth Projects.
Oman’s National Business Centre (NBC), an initiative launched at the Knowledge Oasis Muscat in 2012, offers local entrepreneurs a physical area to develop their business ideas and advance them into growing ventures.
In a show of intent, Oman has recently introduced a new foreign investment law and a company law. A new bankruptcy protection law is also in the works, but there is a lack of venture capital (VC) firms in Oman and many young graduates still hope to secure a public sector job than risk starting their own business.
In some respects, Oman has already made a head start on its digital policy with its 2030 Digital Oman Strategy or “eOman”.
As Tahseen Consulting’s Schwalje points out, Oman was a first mover within the GCC in terms of “seeing the importance of developing a strong technical and vocational education system and integrating technology skills into the national curricula”.
Schwalje notes that Omani youths have consistently performed well in Microsoft’s global ‘Imagine Cup’ competition over the past several years.
“This suggests that Oman is doing well at cultivating a young generation of tech-savvy critical thinkers that can realise opportunity gaps in markets and fill them,” he says
From a demographic perspective, Oman, along with its GCC neighbours, is home to millions of young, digitally connected consumers with some of the highest mobile penetration rates in the world –– this bodes well for the development of the digital economy in the GCC and across Mena.
According to Saurabh Verma, head of ICT & digital transformation at global management consultants Frost & Sullivan, Oman’s demographics, sizeable population and unique opportunities hold great promise.
“There are significant opportunities for startups to offer products and services to a large population pool within Oman, and also extend them to other regional countries. However, so far, the tech startup in Oman has been relatively slow,” Verma says.
The Frost and Sullivan executive says the past three years have seen some activity within Oman’s startup fintech, education, e-commerce, media and food sectors, but there’s still a long journey ahead. So far this year, only one startup in Oman has managed to raise VC fundin, while the OTF has invested in more Pakistan-based startups than Omani ones.
“Oman is a greenfield, you can enter the startup ecosystem by any kind of activity,” says Al Mamari. “The challenge we are facing is ease of taking the business from a process perspective, there is a lot of paperwork and no alignment from different entities. There are a lot of legacy systems that have to be fixed to make the experience smooth for startups.”
While support from the government has increased according to Al Mamari and access to funding has improved slightly, the country still requires regulatory shakeups to simplify the process for startups to attain the right licences without the red tape.
“Oman has the potential to emerge as a tech startup hub, but the country needs to put a lot more focus on developing its startup ecosystem,” says Verma. “The market opportunity is there, but there is still a need for more incubators and accelerators, an active VC circle, and more government incentive policies.”