New holding company in Oman moves to consolidate transport management and find new efficiencies

 

A major holding company formed to manage state assets in transport and logistics has seen a raft of new activity in the period running up to 2018, as it moves to integrate operations among its subsidiaries and speed Oman towards becoming a top-10 logistics hub by 2040. Overseeing operations from shipping and ports to the postal service and supply chain management, Asyad is a rebranding of state-run conglomerate Oman Global Logistics Group that occurred in June 2017.

Its formation represents the transport portion of a larger overarching government strategy under way since March 2016, in which the authorities aim to create large holding companies of state-owned enterprises with broad oversight powers – such as the Oman Food and Investment Company set up to promote food security, and Nama, a utilities conglomerate managing water and electricity services. “We need a systematic and scientific way to ensure that the logistical setup in Oman remains sustainable,” Abdulrahman Al Hatmi, CEO of Asyad, said at the company’s launch. He added that the transition would take around two years, saving OR7m ($18.2m) in the first six months alone.

BACKDROP: The firm’s existence is the culmination of a vision that began four years ago. In 2013 authorities from the Ministry of Transport and Communications set up a taskforce of 10 experts from state agencies, private companies and academia to develop a long-term sector blueprint with help from 65 specialists. The result, the Sultanate of Oman Logistics Strategy 2040, published in mid-2015, set the ambitious goal of making the country one of the world’s top-10 locations for logistics through a range of state-led investments. In the process, the plan will create 300,000 jobs and raise the sector’s value from OR1.5bn ($3.9bn) to OR14bn ($36.4bn) by 2040. “The impetus behind holding companies like Asyad is to look at each sector comprehensively, unify strategy, and capitalise on synergies in order to gain better control of the markets,” Omar Mahmood Al Mahrizi, vice-president of transport at Asyad, told OBG. “One important result is the greater negotiation power that comes from scale.” Another factor was the need to address the logistics component of Tanfeedh, a diversification enhancement programme set up in 2016 to accompany the release of Oman’s ninth fiveyear plan for 2016-20, its aim being to monitor and manage the process. “We see our role in the style of an NGO,” Al Mahrizi told OBG. “We are not just favouring Asyad subsidiaries in reorganising assets; rather, we are seeking a better balance with the private sector.”

STRATEGY: The group’s strategy rests on three main pillars. The first is to manage a range of investments at special economic zones in the main ports of Sohar, Duqm and Salalah. These offer incentives and tax benefits to foreign firms that are capable of driving logistics as foreign investors build industrial centres under Oman’s long-term development blueprint, Vision 2040. The second pillar is to enhance freight operations through three subsidiaries – Oman Shipping Company, Oman Rail and Oman Drydock Company – to deliver efficient, comprehensive services in shipping. As part of this, Asyad will own several warehouses and spaces for light industry, upgrade technology and practices, and build a connectivity network to serve the country’s growing trans-shipment industry, which receives more than 3000 requests catering to 52 port destinations each year, according to Asyad. “The creation of Asyad is a positive development in Oman’s transport and logistics sector as it will be incentivised to be a strong advocate for simplifying procedures within the sector, Stephen R Thomas, CEO of Renaissance Services an Oman-based investment firm, told OBG.

The third pillar is to consolidate and improve public services through Asyad’s four other subsidiaries: Oman National Transport Company, National Ferries Company, Oman Post and the public bus system, Mwasalat. The underlying goal is rationalisation, achieved through both new investments and reorganisation of existing assets, as well as by modernising logistics processes, reforming import-export procedures and upgrading soft infrastructure. “Currently, 90% of our revenue comes through shipping and handling, and this is very unsustainable,” Al Hatmi explained. “We want to streamline our logistics and shipping, so that it accounts for about 50% of all our revenue.”

LOGISTICS INTEGRATION: Asyad has been busiest in three main areas. The first is integration of data systems. In August 2017 the group floated a tender for consultancy services to conduct feasibility studies on a new ports community system (PCS), an electronic platform that would synthesise data on all logistics activity to streamline operations. Bids closed in mid-September and an award announcement was expected by year’s end, Al Mahrizi told OBG in October.

Modelled on the concept of a single window, the new PCS would integrate disparate datasets from its various stakeholders, including the three main seaports, the international airports, the Royal Oman Police, and the Ministry of Agriculture and Fisheries. These agencies’ data will then be transmitted securely to a central software and analysed for key trends that can inform decision-making. “I am confident that the creation of Asyad will lead to a more efficient and synergistic transport and logistics sector in Oman,” Abdulmalik Abdulkarim Al Balushi, CEO of Oman Post, told OBG.

FERRIES & CARGO: The second main area of activity is maritime transport services. In September 2017 Asyad signed a deal with Qatar Ports Management Company – known as Mwani – to develop ferry services that can carry cargo and passengers between Qatar and Oman. The agreement stipulates that the two will develop a joint strategy for offering cargo and logistics services between Hamad Port in Doha and Oman’s three primary seaports, and paves the way for a commercial venture that would boost joint connectivity and share the costs of the investment. The move is part of a broader effort to enhance bilateral collaboration and deepen economic relations between the two neighbours.

PORT OPERATION: A third major development was announced in October 2017, when the Ministry of Transport and Communications granted Asyad the licence to operate Sultan Qaboos Port in Muscat, including passenger shipping services, starting on January 1, 2018. As of that date the current operator, Port Services Corporation, transferred most of its employees and liquidated its assets, passing full control to Asyad, according to a ministry statement. Oman Investment Fund, the country’s sovereign wealth fund, had owned a 35.5% stake in the company. In December 2017 Asyad announced it had formed a new subsidiary called Marafi specialising in ports management to run the facility.

The move complements efforts by a state-run developer of tourism infrastructure, Omran, to transform the port – long a cargo hub until its commercial operations were transferred to Sohar in 2011 – into a mixed-use development comprising hotels, restaurants and retail outlets in a $1bn partnership with Dubai’s DAMAC called Mina Sultan Qaboos Waterfront. Mina abuts the Muttrah souq (market), one of the oldest souqs in the Arab world and Oman’s most-visited tourist attraction. “Ports management is our most profitable segment, so we are building up capacity in that space,” Al Mahrizi told OBG. “This will enhance multimodal transport and maximise our ability to meet 2040 targets.”

IN THE WORKS: Several other projects still in assessment and design stages at Asyad were shared with OBG. According to Al Mahrizi, one is an integrated call centre merging currently separate systems for the public buses, postal service and ferry transport. Other synergies will be to launch joint products, such as a single ticket valid for all public transport, or to offer unrelated products at a single location, such as the purchase of bus tickets at branches of the Oman Post. “We have identified a model for reviewing subsidiary portfolios: it’s to be asset-light, to own only what we need to,” he told OBG. “This will mean some divestments, but also acquisitions, executed in phases as we complete reviews and feasibility studies. To hit our targets we must move quickly and use funds wisely.” He also said the group is currently piloting a logistics corridor facilitating swifter shipments to Yemen. Under the system, goods could land in Salalah having already declared Customs at their point of origin, thus allowing more seamless trans-shipment across the western border.

ON THE HORIZON: In the medium to long term Asyad has ambitions to expand its operations abroad. According to Al Hatmi, after an initial period of 18-24 months focused on restructuring its domestic assets, the group will target “inorganic” growth through mergers and acquisitions overseas. To make the global top-10 for logistics will require expanding Asyad’s business outside Oman, Al Hatmi told local press in June 2017. “[We] need to go beyond [current port assets] and look at integrating services between a host of supply chains in the logistics sector,” he said. In the meantime, to achieve near-term milestones the company is looking to attract more foreign capital into special-purpose vehicles, adding: “We want more of private investment or foreign investment and less government money.”

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The Report: Oman 2018

Transport & Logistics chapter from The Report: Oman 2018

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