The Sultan of Spring

Last year I spent Christmas in Egypt. This year: Oman. Both were scenes of Arab Spring protests last year and are textbook examples of the importance of building a sustainable business climate in times of change. While the youth of Cairo are still protesting at Tahir Square, in Oman, demonstrations petered out almost before they began.

Unemployment. Inequality. Exhausted by catering to a corrupt system. I could see the desperate need for change in every person I met on the streets of Egypt’s Sharm el Sheijk last year. In Oman last week, the people I spoke to were proud, open and enthusiastic about their benevolent Sultan. On the other hand, they have to be; it’s against the law to be anything but supportive.

Beyond the not-so-insignificant issue of freedom of speech, the countries are on polar opposites of Arab nations.

  • Egypt is the most populated of Arab nations with 79 million inhabitants; Oman is one of the tiniest, with close to three million.
  • Oman ranks 57th in a 2010 World Bank index of per capita purchasing power while Egypt ranks 127th on the list of 215 countries.
  • On Transparency International’s 2011 Corruption Perceptions Index on public sector, Oman has a rating of 4.3 on a scale of 1-10 (10 ranking as very clean), among the best rankings in the Middle East. Egypt scored 2.9.
  • In Egypt, unemployment among young people was at 25% last year. Omani unemployment rate is 15%, and higher among younger people. The country has a young population – 43% are under the age of 15.
  • Egypt’s gross domestic product will fall from 5% to 1% in 2011. In Oman, on the other hand, it is expected to grow by 3%

In Spring 2011, 500 Omani protesters demanded more jobs and greater democracy. Sultan Qaboos bin Said recognized the urgency of the problem of disenfranchised youth, and took to heart learnings from neighboring Arab states. He injected money into infrastructure, created 50,000 new jobs, raised stipends for university students by between US $65 and 234 a month and replaced six ministers in a cabinet reshuffle. He freed protesters almost immediately after arresting them at demonstrations. Things have been pretty quiet since.

The Sultan has also been slowly modernizing the business climate, too, with stronger focus on higher labor standards and anti-corruption measures. The country entered into an agreement with the ILO in 2010, called the Decent Work Country Programme, which covers both the interests of nationals and migrant workers.

Corruption is perceived as an issue among local businesses. In a survey of Omani businesses published by the ILO in 2011, almost a fifth of those surveyed believe that corruption and bribery strongly affects the performance of Omani firms and only under a third believe the Government is very committed to addressing the problem (p. 73). But small steps have recently been made and the cabinet reshuffle included reorganizing some of the government institutions prone to corruption.

Some improvements in human rights are visible too. The US State Department reports that in 2010 the Omani government has respected the human rights of its citizens and has established a quasi-independent human rights commission.  Key issues include discrimination of women in the workforce (although there is a law for equal pay for equal work), and cases where migrant workers were forced into labor or abused. Oman is wholly dependent on its ex-pat laborers. In fact, foreign workers constitute at least 50% of the workforce and as much as 80% of the private sector workforce, according to human rights NGO Freedom House.

I’m not saying that the Sultan of Oman is the poster boy for sustainable business climate–far from it.  But is there something that Egypt can learn from them? Oman’s investment climate will continue to grow in 2012. Meanwhile, in Egypt, the number of tourists was down by a third in 2011. Bankruptcies increased by 26%. The value of securities traded on their Stock Exchange fell by 67%. The number of companies started last year fell by 13%. A major acquisition by Standard Charted of the Egyptian unit of Greek bank Piraeus fell through. If the Egyptian government is not seen to heed the best interests of the people, this trend is bound to continue.

There is some indication of positive change ahead, though.  HSBC stated in a recent FT article that they are confident political change in north Africa will foreshadow economic renaissance. In the short term, demand for Egyptian labor increased by 10 points year-on-year in November 2011. The number of newly founded companies in December rose 27% compared to November. During the year, Egyptian investments and acquisitions were announced by Intel, Electrolux and US Oil and gas supplier TESCO, despite concerns of the market.

Like in Oman, anti-corruption measures, public investment and reforms to distribute wealth and human rights more equally among its people will be the linchpin for fulfilling business opportunities in Egypt. Here’s hoping that the winners of the Egyptian elections now ongoing are the same quick learners as Oman’s Sultan Qaboos.