Payment delays still affecting contracting firms in Oman, says Trade body chief

Muscat: Payment delays of completed projects are still adversely affecting contracting companies, with a severe hit on the cash flow and liquidity of the entire sector.
“Many companies were not paid for at least six months. The delay in payments is becoming longer (six months can be an average). We are discussing with the Ministry of Finance. The ministry is working hard to make those payments as far as possible in view of present economic conditions,” Shahswar Al Balushi, chief executive officer of Oman Society of Contractors (OSC), told Times of Oman.
“When the main contractor is not getting paid, the sub-contractors and vendors will not get payment. The effect is impacting the whole market,” Al Balushi said, adding; “This is really difficult for many companies to manage (liquidity).”
“But the Ministry of Finance is working to smoothen the process,” noted the chief of OSC – the representative body of contacting firms, which has 150 companies as members.
The budget constraints have affected timely payment by the Ministry of Finance for completed projects and the Oman Society of Contractors has been discussing with the ministry for smoothening the payment process.
Oman’s budget deficit for the first eight months (January-August) of 2016 surged ahead by 63 per cent to OMR4,371.6 million, as plunging crude oil export revenues started affecting the government’s fiscal balance.
Al Balushi said that earlier contracting firms had several projects on hand and the interim (preliminary) payment was smooth. “Interim payments and credit facilities from banks used to cover cash flow issues earlier. The problem in the past was in finalising accounts.”
“Today, the problem is also in interim payments – periodic payments are not coming,” noted Al Balushi.
Al Balushi also said that there is a reduction in number of tendered projects due to prioritisation policy of the government due to financial constraints. “We have seen it last year.”
Also, contracting firms are now in the process of completing several projects and once these projects are delivered, there will be a drop in work.
Further, the crude oil price has not yet moved up extensively to make a change. “If it remains at this rate between $40 and $50 per barrel in 2017, definitely we will see an impact.”
However, with the ongoing focus on diversification programme, the country will be able to offset some of the shortfalls in construction activity.
Al Balushi added that in case of an improvement in facilitation of investment processes and procedures, it will expedite foreign investment. “This might help the construction companies to find an alternative.”