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Monday, July 14, 2025 20:56 GMT

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Liquidity Crunch Strangling Oman’s Construction Sector


A protracted liquidity crisis coupled with a dwindling pipeline of projects is imperiling Oman’s beleaguered construction sector amid the pandemic and the on-going economic downturn, a leading representative of the industry has warned. Shahswar al Balushi, former CEO of the erstwhile Oman Society of Contractors (OSC), also appealed to the Central Bank of Oman (CBO) and commercial banks to provide much-needed succor to the embattled industry by providing access to liquidity and restructuring debts racked up by individual companies.

“Construction companies are now facing quite a challenge in terms of liquidity because of the delay in receivables from the clients’ side, and also the unavailability of credit facilities from banks”, said Al Balushi. “Most of them are trying to sustain themselves through the COVID-19 situation, although a decline in projects since 2016 has affected their ability to access liquidity; some of them have exceeded their credit facility, and restructuring these facilities is costing them a substantial amount as well’’.

The industry veteran made the observation during an online panel discussion focusing on the theme, ‘Omani Construction Sector: Challenges and Opportunities’, organized by Al Nimr Expo last week. Fellow panelists included Hashil bin Obaid al Mahrouqi, Senior Director — Real Estate Investment Projects, Oman Investment Authority (OIA); Fahad al Ismaili, CEO — Tibiaan Properties; Simon Karam, Director, Al Sarooj Construction; and Phillip Higgins, Directors — Ventures Onsite (as Moderator).

Adding to the woes of the sector is a depleting order-book of construction projects in the wake of falling international oil prices, said Al Balushi. While those related to Oil & Gas have helped sustain the energy sector, fewer contracts related to the civil and infrastructure segments of the sector are having an impact on the wider industry. Contracts are not only fewer and far between, but the size of individual projects has shrunk as well, forcing the sector to downsize, he noted.

A key problem weighing down the sector is debt, Al Balushi lamented. “Many companies are facing serious problems in servicing their debts with banks. I have had discussions involving several banks and companies. Still, the financial institutions are not flexible enough in allowing these companies to survive this difficult time by helping them restructure and allowing them to move forward. This may result in a reduction of companies, closures, etc, unless we see a quick recovery for the sector.

Worse, any such closures, etc, will impact the supply chain, such as vendors, subcontractors, and so on, who may have to resort to layoffs, which again will impact the purchasing power particularly of the local workforce’’. An immediate short-term solution for the sector is for the financial institutions to enable debt-laden firms to rejig their debt, said the sector expert, warning that failure to do so would potentially bankrupt many firms that have been in existence for over 30-40 years.

“We don’t want to see these reputable companies to go under because of their debt. We need to see the Central Bank stepping in with proactive solutions together with the local banks, engaging with the companies, and allowing them to restructure themselves in terms of their debt’’. This debt overhaul together with targeted stimulus and reform measures by the government would position the Omani economy for a healthy recovery in less than two years, he stated.

“If we restructure and reform our processes, if we expedite approvals of projects and them get running, if we streamline the sector to become efficient to deliver better projects, and if the government targets its stimulus towards the right sectors, we will see a recovery by the end of 2021 or mid of 2022’’, Al Balushi added.


published:16/09/2020 04:10 GMT

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