Oman’s sovereign wealth fund the Oman Investment Authority (OIA) is examining divesting from six state-owned assets as it seeks to both support the nation's finances and offer strategic investment.
According to Omani media, the fund is considering an IPO of two subsidiaries of the state-owned energy company OQ SAOC and a manufacturing firm and two Asyad projects in the shipping sector. The plans for divestment had been on the cards for a while with the sovereign wealth fund also planning exists from several hotels and resorts. The Sultanate is enjoying an unprecedented boom due to high oil prices and capital inflows as well as a regional IPO trend, which has seen Gulf firms raise more than US$13 billion in the January-May period. Oman itself is set for an IPO boom with the proposed listing of 35 state-owned enterprises over the next five years, including at least oil company this year.
The OIA will exit from six investments in the fields of energy, manufacturing, tourism and logistics as part of its strategy to achieve economic diversification, decrease dependence on oil and enable the government’s efforts to make private sector a leader in the national economy and enhance its role in driving national development, all of which are key objectives under Oman Vision 2040.
OIA aims to generate revenues for the state’s general budget and utilize revenues in financing capital expenditure and operational expenses, as well as invest in start-ups and partnerships with local and international investors. Oman’s strategic focus is manufacturing, mining, tourism and logistics in the local economy.
The OIA was launched in June 2020 as a merger of the Oman Investment Fund and the State General Reserve Fund. The SGRF has been used largely as an oil revenue stabilization mechanism and to diversify the economy away from oil and gas in more than 25 countries worldwide. The OIF on the other hand was the successor of the Oman Oil Fund and invested in long-and medium-term projects at home and abroad. The role of the OIA as a stabilization fund seems firmly entrenched.
The OIA’s portfolio is split in two: the National Development bucket, which includes the 160 government entities and represents more than two thirds of the total value according to Global SWF’s estimates, and the international bucket, which is invested in public markets (69%) and private markets (31%) overseas.
Some of the international efforts have been pursued via JVs with other governments and SWFs, including Pakistan, Qatar (QIA), Vietnam (SCIC), Brunei (BIA), Uzbekistan (UFRD), India, China, and Spain (COFIDES). The latter has been especially active lately, with six investments in Spanish SMEs since July 2019.
The OIA’s Code of Governance seeks to “further improve their operations, enhance performance, and align them with the sustainable development plans and strategic and economic goals in line with Oman Vision 2040.” The focus of the code is transparent and accountable decision-making and results. The emphasis is on an arms-length relationship with the government, with the OIA appointed as a shareholder in the companies and not as an entity of the government.
The Sultanate has one of the smallest shares of crude oil reserves in the GCC and the second highest fiscal breakeven point, after Bahrain. For the period 2015-2021, Omanis needed the oil price to be above US$ 87/barrel to make money – which never happened, until January 2022.
The SWF is part of a broader strategy “Oman Vision 2040” and is currently formulating a new business plan for the cycle 2022-2026. One of the key goals during that period will be privatizing and/or floating 30 of the 160 government companies it currently holds. This is in line with OIA’s efforts to attract expertise, technology, and foreign investment to the country’s strategic sectors. A good example was the sale of 49% of Oman Electricity Holding Company (Nama) to China State Grid in December 2019 for US$ 1 billion.
OIA has become increasingly active as an investor, both domestically and regionally. In February, it announced a collaboration with US-based food company MycoTechnology to set up innovative food production in the country. The Vital Foods Technologies company will aim to produce alternative protein using dates from the country with the aim of enhancing food security, achieving national sufficiency and reducing date waste. The collaboration boosts OIA’s role in attracting foreign investment and building strategic partnerships.
OIA is also focused on regional infrastructure. In January, OIA signed an MoU to develop Malindi Tourist Port with the government of Zanzibar, an island territory that forms part of Tanzania and with which Oman has historical trading links. The MoU includes a feasibility study of a project to rehabilitate, develop and operate the port and develop the waterfront, as well as transfer commercial activities from the current port to the new Mangga Pwani port. Sami bin Abdullah Al Sinani, Senior Director of Logistics and Infrastructure Services at the OIA, said in a statement that the MoU aims to maximize the Sultanate of Oman’s benefit from China’s Belt and Road Initiative.
Oman has attracted interest from other strategic sovereign investors in the region, which could support OIA’s drive for strategic investment. In October 2021, Abu Dhabi’s Mubadala and ADQ representatives were part of a UAE delegation to Oman to discuss investments in technology and infrastructure. The visit came hot on the heels of a Kuwaiti delegation to Oman that included the Kuwait Investment Authority (KIA).
During the visit, the Acting Managing Director and executive director of the General Reserve at the KIA, Bader Al-Ajeel said: “Kuwait has a great interest in exploring the new investment opportunities in the Sultanate of Oman, and search for opportunities that contribute to the Authority’s interest in attractive returns… We attach great importance to our GCC partnerships, with the aim of creating a system of strategic security cooperation in important and vital sectors such as logistics and food security.”