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Galfar Engineering & Contracting Vice Chairman & Managing Director P.

Mohamed Ali on construction and


infrastructure development in Oman

Dr. P Mohamed Ali is the Vice Chairman & Managing Director of Galfar Engineering &
Contracting SAOG, the largest construction company in Oman. He spoke with The
Prospect Group about Galfars role in the development of Omans infrastructure, Galfars
market share, and expansion outside of Oman.

What role does Galfar currently play in the overall development of Omans infrastructure?

ALI: Galfar is the largest construction company in the country. We work in all sectors of development, whether it is in
the construction of roads, ports, airports, oil and gas facilities, water and sewage networks, or harbours. We do
everything. Thus, we play a major role in Omans construction and development.

What new projects is Galfar involved in and what progress has been made to date? How would you describe
your current ratio between government related and private sector projects?

ALI: We are focusing on all the projects coming in as we are working across all fields. As mentioned, we have some
projects in the oil and gas field. We have been recently reappointed as a service contractor for north Oman. We are
also involved in many road construction projects, such as those in the Batinah Expressway and in the further
development phases of Batinah. We are also operating in the ports and harbour projects. Ultimately, we are focusing
in the mega road construction and infrastructure projects. The majority of our projects are related to the government.
We have limited presence in the private sector. Most of the governmental projects are carried out by companies
whose majority shareholder is the government itself, such as the PDO projects, or Haya Water, or the PAEW (Public
Authority for Electricity and Water). These are the clients, thus our presence is mainly related to the governments
projects across all fields.

How competitive is Omans construction industry? What is your market share and how do you see this
evolving over the next 2-5 years?

ALI: The construction industry is very competitive in Oman. In the past there has been a steady workload for those
contractors that were based here, and this trend is going to continue. Maybe there will be a surge in the construction
industry in Oman because the government has a lot of great plans to add to both infrastructure and the oil and gas
fields. Our overall market share, if you look at road construction, is maybe 30%; for the oil and gas fields, it is
approximately 25%; in the water segment, it is 30%. Overall, in the construction industry, our contribution is 20% of
the construction projects of the country. Definitely, Omans expenditure budget, which has been released for road
construction, ports construction, and rail construction, is going to continue and grow for the development of these
areas.

What are Galfars competitive advantages vis--vis other construction players in Oman?

ALI: Our capacity, our competency, and our readiness to move to any location and overcome all terrestrial challenges,
are among our main competitive advantages. When any of our clients are stuck up with some contractors, whenever
they approach us, we are there for them. We are a readily available team. We have been contributing to the national
development of Oman for more than 40 years now.

Galfars financial year 2012 net profit rose 68% year-on-year to OMR 8.93m ($23.2m). Where have you been
most successful? How do you plan to maintain this strong growth in revenue?

ALI: The 2012 net profit, as you mentioned, was better than 2011. But from 2013 onwards, we are expecting a greater
growth and the return on investment will be much greater than what we obtained in the last 2 years. We provide a
package, which is not exclusive to one field. We, as a contractor, provide a package from earthworks to the
commissioning of all the projects; that is, earthwork, infrastructure, construction of water & sewage networks,
mechanical work, electro-mechanical work, etc. We are currently building 2 airports, 3 seaports, the longest highway,
and we are building the most challenging road network from Hasik to Shuwaymiyah, which nobody has ever
attempted before. So, if you look at any of our projects, you will see that these are the most challenging ones as we
can rely on our competitive advantage, that is, our capacity and our expertise.

The construction industry in Oman relies heavily on foreign labour. However, Omanization requires
construction companies to fill a third of their positions with Omanis. What effect has Omanization had on the
construction sector? How has the decision to raise the minimum wage of Omani workers by 47% impacted the
overall industry?

ALI: Omanization is a necessary initiative for this country to provide employment, most importantly to the local
citizens. In this way, not only can the economy survive, but it can also thrive. In Oman, most of the population is made
up of young people, who are available and ready to work. The only thing is that we have to train them. In Omans
construction industry, we aim at employing at least 20% Omani employees in all fields of interest for Omanis to work
in. For example, in the oil and gas construction segment, there is a higher percentage of Omanization, whereas in the
building sector the percentage is lower. Overall, whenever Omanis are trained, they will definitely take the job and
their place in the industry. I am sure that being a need of the time, this trend will continue. Now, there are many
opportunities in the private sector. There is a lot of focus on training to make Omanis employable and useful to the
industry. Once this happens, the local economy will grow along with the local entrepreneurs and the small and
medium sectors. This will be the main driver and engine for Omans economic growth. Galfar Training Institute is our
group organization which was established for the training of young Omani citizens to take up various assignments
suiting their interest and aptitude.The construction industry is very competitive in Oman. In the past there has been a
steady workload for those contractors that were based here, and this trend is going to continue.

Cement prices in Oman are expected to rise in 2013 due to dumping from the oversupplied UAE market and
increased domestic demand. How will the rise in costs for cement and other base materials impact the overall
construction industry in Oman?

ALI: It is a cost. For every contract we have in place, we work on a best cost basis and honour the return on our
equity. So that is the way it works. If it is a cost, it is a cost for everybody, whether it is for contractor A or contractor B.
A cost is a cost for everybody and it depends upon the profit you want to make. What happens if the oil price goes
from $3 to $20? What I am trying to say is that, it is quite natural for the prices of basic material to increase. 10 years
ago, the salary of the people was lower than what it is nowadays. So, these are all related costs. I would say that it all
reflects on the economy of the country.

What are Galfars expansion plans outside of Oman?

ALI: Galfar is a robust company, with strong foundations, strong capabilities, and a much higher capacity than any of
the other competitors, in addition to having great people behind it. Human resources are the strength of any
organization. The strength of our company is our people, its shareholders, and the strong board of directors. What
else do you want? This is the best combination for any company to have; that is, the capacity, the people, the
commitment, the management efficiency, and an excellent board. Galfar was established in Oman, it is growing in
Oman and now we are growing in the GCC and India. We are also looking at other countries, because with our capacity
and capabilities, our potential in the market will be much greater and this gives us an opportunity for growth and
expansion. We are in the UAE, in Qatar, and Kuwait. We are also planning to penetrate other markets, such as Iraq,
Libya, whenever the situation allows, and India, where we already have 5 projects in place. India will be a good market
for us. With the knowledge we gained constructing the best infrastructure here in Oman, our work will be of great
benefit and use in India and for Indians.

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