Oman's 2040 strategy aims to elevate infrastructure as key economic instrument


Almost three years into its ninth five-year plan for 2016-20, Oman is beginning to reap the rewards of efforts to restructure and expand its transport and logistics sector. The Central Bank of Oman’s latest annual report notes that transport, storage and communications is one of the economy’s best performing categories, with the growth rate reaching 9.6% in 2017. The sector’s expansion is being driven by private investment, with the government having steadily decreased its current and development expenditure every year since 2014.

Geographic Advantage

Oman’s 2092-km coastline and strategic location have given it a proud maritime culture and a long history of trade. Being situated on the eastern edge of the Arabian Peninsula historically made it the first point of contact for traders travelling between the Indian subcontinent and the Arab world, while the proximity of Africa meant frequent commerce with East Africa, where Oman occupied the island of Zanzibar up until 1856.

With the passage of time, this strategic advantage has only increased. Becoming a founding member of the GCC in 1981 created political and economic ties to a market now worth $1.2trn in global trade, while the location of its Musandam exclave gives the sultanate territorial rights to the Strait of Hormuz, through which around 30% of the world’s exported oil shipments pass. At the strait’s narrowest point, only around 40 km separate Musandam from Iran. Oman’s friendly diplomatic relations with Iran have allowed for continued trade cooperation.

These geographic advantages give the logistics sector major potential, which Oman has been working hard to capitalise on. The country is currently ranked 43rd in the World Bank’s Logistics Performance Index (LPI), up from 62nd in 2012. Meanwhile Oman’s score in the UN Conference on Trade and Development’s liner shipping connectivity index rose to a score of 63 in 2018, up from 62 the previous year.

Sector Strategies

These improvements are attributable to a combination of infrastructure development, private sector facilitation and integrated policy-making that can be traced back to 2013, when the government committed to spending $20bn on transport infrastructure by 2030 and initiated the Sultanate of Oman Logistics Strategy 2040 (SOLS 2040). Developed in consultation with 65 specialists from different sectors, SOLS 2040 was published in February 2015. The strategy outlined key targets for achievement by 2040, including a top-10 position in the LPI, 300,000 jobs in logistics services and a GDP contribution of OR14bn ($36.4bn), a sum that would make the sector the country’s second-largest economic contributor after hydrocarbons.

In keeping with the targets of SOLS 2040, transport and logistics was chosen as one of five priority sectors in the ninth five-year plan for 2016-20, approved by royal decree on January 1, 2016. An execution programme for this plan was developed over the subsequent months and launched the National Programme for Enhancing Economic Diversification, known as Tanfeedh, in September 2016.

The following key performance indicators (KPIs) were targeted for achievement by 2020: growing the contribution to GDP of the logistics sector to OR2bn ($5.2bn); increasing logistics services sector jobs from 67,469 to 100,000; increasing investment by at least OR1bn ($2.6bn); reducing average import clearance time for sea cargo from 7.2 days to 1.5 days; and increasing port capacity from 3.1m twenty-foot equivalent units (TEUs) to 7m TEUs. To achieve these targets 14 initiatives were outlined, focused on a range of topics, from one-stop clearance procedures to bonded warehouses and improved land connectivity with Saudi Arabia.


In early 2015 the Ministry of Transport and Communications (MoTC), led currently by Ahmed bin Mohammed bin Salim Al Futaisi, set up the Oman Logistics Centre (OLC) as an agency with a mandate to oversee the execution of SOLS 2040, while also simplifying government logistics processes under the four pillars of markets, trade facilitation, human capital and technology applications.

As noted by the World Bank in its LPI 2018 report, the creation of the OLC has allowed for increased dialogue and higher levels of trust between public and private stakeholders. Furthermore, it has helped raise the profile of Oman’s logistics sector domestically and internationally. The OLC has overseen the creation of two government holding companies – Asyad and Oman Aviation Group – which between them own or partly own the bulk of the companies that are developing and operating Oman’s transport and logistics infrastructure.

Holding Companies

The larger of the two stateowned firms was launched as Oman Global Logistics Group in June 2016, before being relaunched in June 2017 as Asyad, a name meant to connote the strength of Oman’s seafaring history. Composed of at least 14 distinct companies, Asyad categorises its activities under three headings: ports and free zones, freight and public service.

Asyad’s seven subsidiaries under its ports and free zones arm include all of the key stakeholders in the country’s major logistics nodes: Sohar Port and Free Zone, Port of Salalah, Port of Duqm and Khazaen, a mixed-used logistics and commercial dryport. Asyad’s freight arm comprises Oman Shipping Company, which operates 53 vessels that transport hydrocarbons, petrochemicals and general cargo; Oman Drydock Company, which provides maintenance and conversion services for the shipping industry; Oman Rail Company; and Oman Post Company. Asyad’s public service arm is comprised of Mwasalat, the International Maritime College Oman and the National Ferries Company. According to Said bin Hamdoon Al Harthy, undersecretary for ports and maritime affairs at the MoTC, Asyad has already added significant value to the sector.

“We are very proud of Asyad and have started seeing good results from it already. As well as increasing the flow of information about Omani ports internationally, they are helping to ensure that all the ports reach the same high standards and achieve their KPIs year in, year out,” Al Harthy told OBG.

Tarik Al Junaidi, CEO of Oman Shipping Company, shares this perspective. “Asyad has had a positive effect on the transport and logistics sector. However, reforms of this magnitude are expected to be implemented over a long period of time to ensure balance and stability,” he told OBG.

First announced in July 2017, Oman Aviation Group was established in February 2018, bringing all of the government’s aviation investments under the umbrella of a single holding company. At present, the group comprises Oman Air, the sultanate’s national airline, incorporating Oman Aviation Services, which delivers services in ground handling, cargo management, catering, duty-free retail and hospitality, among other services; Oman Airports Management Company, which manages all of the sultanate’s civil airports; and Muscat Airport City, a mixed-use development adjacent to Muscat International Airport.

Public Funding

Tanfeedh was launched during a time of fiscal uncertainty, which has necessitated greater resourcefulness in funding major transport projects. The sector received a boost in January 2018 when the State General Reserve Fund was granted government approval for a $1bn fund dedicated to transport and energy infrastructure. Increased private sector participation is central to Tanfeedh, which stipulates that at least 80% of the labs’ initiatives and projects should be funded from sources other than government investment.

Privatisation, public-private partnerships (PPPs) and a new foreign direct investment (FDI) law are among the measures proposed by Tanfeedh to increase private sector participation. In February 2018 the government announced that it was soon to establish a PPP authority, while a new FDI law is set to be ratified by the end of 2018, according to the 2017 report from the Implementation Support and Follow-Up Unit (ISFU) 2017. The law is expected to allow for 100% foreign ownership of Omani companies, facilitate investment and remove the current minimum capital requirement.

As for privatisation, the Ministry of Finance (MoF) announced in January 2018 that it would privatise six state-owned enterprises over the course of the year, with the MoF’s privatisation committee planning on generating a total of OR700m ($1.8bn) from privatisation efforts. Asyad was among the first government holding companies to submit its privatisation plan in November 2017. In June 2017 Abdulrahman Al Hatmi, CEO of Asyad, announced that the holding company’s first priority would be “restructuring current companies and making them profitable, in order to make our financial base solid”.


The headline development in the air transport segment for 2018 was the opening of a new terminal at Muscat International Airport, which started operations in March 2018. In development for nearly a decade, the 580,000-sq-metre terminal took over the airport’s primary operations from a 44-year-old terminal that will continue to be used by low-cost carriers. Built at a cost of $1.8bn and with an initial annual capacity for 20m passengers, the authorities are aiming to have the airport in the world’s top 20 airports by 2020. The new terminal will cater to a growing number of destination and transit passengers, dovetailing with Oman Air’s expansion and acting as a focal point for tourism.

Some 14m people passed through Muscat International Airport in 2017, representing a 17% increase in traffic. There was also strong growth in freight traffic, which grew by 24% in 2017, as cargo volumes increased to 200,000 tonnes from 162,000 tonnes in 2016. Traffic growth was driven by an increase in transfer traffic, as well as global delivery firm DHL’s launch of a weekly freighter operation between Muscat and Bahrain International Airport.

These figures are expected to rise as Tanfeedh implements the development of the Muscat International Airport Cargo Village project, which will constitute an air cargo terminal for import, export and re-export, as well as postal shipping and transit centres. The target is to have the cargo village operational by June 2019 and have it increase the value of goods and revenues by OR30m ($77.9m) by 2020.

Drawing on a combination of the city’s rising popularity among tourists and its expanding port and industrial capacities, Oman’s second-busiest airport is Salalah International Airport. A new 65,638-sq-metre terminal opened at Salalah International Airport in November 2015, helping the airport increase its passenger traffic by 78.4% from 841,000 in 2014 to 1.5m in 2017. The value of imports transiting through the airport reached OR8.2m ($21.3m) in 2017, up from OR7.9m ($20.5m) in 2016, but down on the OR10.5m ($27.3m) recorded in 2015.

Sohar Airport, operating in a limited capacity for domestic flights since November 2014, became Oman’s third international airport with the launch of flights to the UAE and Qatar in the third quarter of 2017. Located near Sohar Port and serving a populated industrial region, the new airport also launched a new passenger terminal and dedicated cargo terminal, which will be capable of handling around 250,000 passengers and 50,000 tonnes of air freight per annum when fully operational. According to Oman Airports Management Company, the passenger terminal welcomed 30,000 passengers in its first three months of operation, suggesting full-year figures will be in the region of 120,000.

First opened in July 2014, Duqm International Airport has seen passenger traffic rise in line with the development of Duqm’s port, free zone and associated industries (see analysis). Passenger traffic grew 40% year-on-year in the first nine months of 2017, averaging 30,000 passengers annually during its first four years of operation. A new terminal at Duqm International Airport opened in September 2018 and is set to add 500,000 in annual passenger capacity.

A fifth airport is planned at Ras Al Hadd near the city of Sur in Al Sharqiyah South, an area earmarked for development as an ecotourism destination. Although the first two phases of construction – including the road network, utilities, runway and apron – are completed, tenders for the third phase are on hold until the region’s tourism facilities develop more fully. Once completed, the airport will centre on a 5600-sq-metre terminal with annual capacity for 500,000 passengers.

The Public Authority for Civil Aviation (PACA) is also in the early stages of developing a second airport in Musandam, Oman’s northernmost governorate. As of mid-2018 the PACA was carrying out a location study for the airport, with more detailed studies expected during 2019. Musandam currently has one small airport in Khasab, the governorate’s capital, to which Oman Air operates nine flights a week. Expansion of the airport at Khasab is limited by geographical constraints at the current site.


The national carrier Oman Air has been capitalising on the prioritisation of tourism under Tanfeedh and the opening of the new terminal at Muscat International Airport by expanding its fleet capacity and network of destinations. Setting its sights on becoming the airline of choice for 39m passengers by 2030, the airline, which is majority owned by the government, currently operates 50 flights to domestic and international destinations, including seven flights to European destinations, four to South-east Asia and 11 to India. With new routes to Istanbul, Casablanca and Moscow opening up in 2018, Oman Air plans to expand its network to 60 destinations by 2022. Fleet expansion plans will also see the airline add five new Boeing 737 MAX aircraft and three Boeing 787-9s by end-2018, bringing its fleet to a total of 59 planes, a number which is expected to increase to 70 by 2022.

Low-cost airline SalamAir is a relative newcomer to the market, having launched in January 2017. Owned by the Muscat National Development and Investment Company, also known as ASAAS, a partnership between the State General Reserve Fund, Muscat Municipality and various pension funds, SalamAir has helped increase domestic air travel by lowering prices. SalamAir currently flies to 12 destinations: three within Oman, three in Saudi Arabia, three in Pakistan and one each in Iran, Georgia and Azerbaijan. The airline, which operates three planes flying 116 flights per week, is expected to add six Airbus A320 Neo aircraft by the end of the first quarter of 2019. In July 2018 the airline was reported to be considering 20 new destinations as part of a growth strategy that aims to make it profitable by the end of 2019 and have an initial public offering by 2024.


According to the World Economic Forum, Oman’s roads are the most-developed element of its transport infrastructure. In its “Global Competitiveness Report 2018”, the World Economic Forum ranked Oman’s quality of roads as eighth in the world, while the sultanate’s infrastructure as a whole was ranked 24th out of 140 countries researched.

The MoTC’s latest figures indicate that Oman had 14,846 km of asphalt roads at the end of 2017, with a further 342 km expected to be completed by the end of 2018. These include the Al Batinah Expressway and new roads linking Ibri to Yanqul, Barka to Nakhl and Adam to Thumrait. The Al Batinah Expressway, which opened to traffic in May 2018 and cost OR1bn ($2.6) to build, is a 270-km, eight-lane highway that links Muscat and Sohar Port with the UAE border. The Al Sharqiyah Expressway, linking Bidbid to Sur, is expected to open in mid-2019.

In addition, a landmark 680-km road connecting Saudi Arabia with Oman is being prioritised under Tanfeedh. The road, which runs across the Empty Quarter, is expected to reduce the journey from Saudi Arabia to Oman by 800 km, creating sizeable efficiency gains for logistics stakeholders. The road was initially scheduled to open in 2015, but this date has been pushed back. In early 2018 Tanfeedh’s ISFU said it was working with all the stakeholders to speed up the opening of the road.

In terms of soft infrastructure, Oman is looking to accede to the International Road Transport Agreement. Following the signing of an agreement between the International Road Transport Union and Asyad in 2017, Oman was awaiting the issuing of a royal decree for accession to the TIR system as of mid-2018. The TIR is a globally applicable international Customs transit and guarantee system that enables goods to be shipped from a country of origin through transit countries to a country of destination in sealed load compartments controlled by Customs via a multilateral, mutually recognised system.


Oman has long been planning a 2135-km national railway network that would speed up transportation of freight from the country’s natural resource sites to its top intermediary destinations for export abroad. Planning on the $11bn project has been ongoing since 2010, with the Asyad-owned Oman Rail, founded in June 2014, to lead the project. Initially designed as part of the proposed region-wide GCC rail network, construction plans have recently been scaled down to a longer timeline. According to Tanfeedh’s first-phase handbook from 2017, Oman Rail’s priority is establishing rail connectivity to the country’s mining fields by 2023.

In this regard, Oman Rail issued a tender in December 2017 for PPP advisory services relating to its proposed rail line connecting mineral-rich areas of the southern Dhofar Governorate with the Port of Duqm. Known as the Mineral Line, the 375-km single-track line is expected to transport gypsum and mineral from Dhofar’s Thumrait to Duqm via the mining centres of Al Shuwaymiyah and Manji. Mining Development Oman is also carrying out a study to determine the full size and quality of the mineral resources in Dhofar. The results of the study are likely to prove decisive in determining the line’s appeal to potential private sector partners.


Policy initiatives like an online one stop shop, pre-clearance and bonded storage are helping to increase the efficiency of Oman’s Customs procedures. In the World Bank’s LPI, the sultanate’s score in the Customs category rose from 2.63 in 2014 to 2.76 in 2016 and 2.87 in 2018 as a result.

Bayan, Oman’s online single-window electronic Customs clearance service, was established by the Royal Omani Police’s Directorate General of Customs in January 2016 to bring speed and efficiency gains to Customs procedures at Oman’s land, air and seaports. The implementation of the system, which is intended to contribute to the sultanate’s target of reducing sea port clearance times from 7.2 days to 1.5 days by 2020, is currently ongoing at sea and land ports, with private stakeholders adapting systems and phasing out the use of paper documentation. Customs processes in the air transport segment have already fully transitioned to Bayan, with paper documentation discontinued in April 2018.

In late 2017 the OLC and the Directorate General of Customs launched a trial of pre-clearance procedures for goods and cargo via Bayan. Following the trial, a number of companies agreed to continue carrying out pre-clearance. By April 2018, 14% of goods arriving at Sohar Port were being pre-cleared.

Customs-bonded storage is another potentially lucrative element of logistics infrastructure promoted by Tanfeedh. Customs-bonded warehouses are secured areas in which imported dutiable merchandise may be stored without any payment of Customs duty or value-added tax for a period of time that varies according to Customs legislation. A project proposal to support the construction of Customs-bonded warehouses was released by Tanfeedh in September 2017. The proposal estimates that Customs-bonded storage facilities could add OR100m ($259.7m) to annual GDP and create 350 jobs in direct employment. By mid-2018 the Royal Oman Police had introduced the necessary documentation for Customs-bonded storage through its Bayan system, while Tanfeedh is targeting the private sector to drive growth in facilities infrastructure.

Public Transport

Oman’s public transport is operated by Mwasalat, whose expansion strategy for 2017-18 has seen them add a number of new intercity bus routes, increase its total number of vehicles and launch a Mwasalat-branded taxi service.

Mwasalat Taxi, which is accompanied by a mobile app, had registered around 300 Omani drivers as of July 2018 and delivered more than 100,000 trips in the first six months of 2018. To coincide with the opening of the new terminal and improve passenger services at Muscat International Airport, the company launched a dedicated airport taxi service in March 2018, recording over 73,000 users in its first three months of service. In January 2017 the MoTC issued a ministerial order to initiate stricter regulation of Oman’s taxi services, as it seeks to modernise the industry and bring it in line with international best practice. Electronic meters are now compulsory across taxi lines. They will be phased in with all new vehicle registrations and as existing taxi licences come up for renewal. The ministerial order included stipulations that all vehicles be equipped with navigation systems, carry fire extinguishers and be no more than seven years old.

The MoTC unveiled its public transport strategy in 2017. The strategy includes reducing the government’s share in Mwasalat from 75% to 52%; commissioning a feasibility study on a light rail system for Muscat; expansion of bus routes in and around the capital city; building a new training centre for public transport operators; and founding a new regulatory entity for public transport.

Ports & Free Zones

The sultanate’s 2092-km coastline makes its ports an essential aspect of its ambitions to become a leading logistics provider. The main nodes of Sohar, Salalah and Duqm combine port infrastructure with a variety of industrial and commercial activity under free zone legislation.

A 2000-sq-km special economic zone (SEZ) was established in Duqm in October 2011, with the intention of it becoming a city of around 100,000 people by 2020. The SEZ at Duqm is divided into eight main areas: port, ship dry dock, oil refinery, regional airport, an industrial complex, a residential-commercial area, a tourism area and a logistics services area. The Duqm SEZ Authority acts as the zone’s de facto government, simultaneously fulfilling the roles of developer, authority and landowner.

“The SEZ essentially acts as a country within a country,” Erwin Mortelmans, commercial director at Port of Duqm, told OBG. “It has its own government that can set its own rules and regulations, so long as they do not contravene Oman’s constitution. For example, 100% foreign ownership is allowed at Duqm and it has a lower Omanisation rate of just 10%.”

Other incentives that are offered to potential investors in the Duqm SEZ include competitive land lease rates, a 30-year income tax exemption, no minimum capital requirement, free repatriation of profits and full Customs exemptions.

Duqm was developed as a multi-modal destination, with land, sea, road and rail transport connecting international trade routes to Port of Duqm, Duqm Airport and surrounding industries, as well as to Muscat and Salalah. To capitalise on this connectivity there are a number of dedicated logistics areas, including locations adjacent to the port and airport. Around 1000 ha are dedicated to logistics at Port of Duqm, of which 65 ha have been developed and a further 100 ha are under development. As of August 2018, 95% of the area developed under the first phase had been occupied by domestic and international logistics companies. The logistics zone adjacent to the airport is incentivised for investment by a land rate of OR1 ($2.60) per sq metre per year, as well as an additional 40% discount if investors are willing to provide infrastructure.

The development of Port of Duqm is set to bring considerable gains. “The potential for enhanced bilateral trade between Oman and India with regards to the use of Duqm is tremendous. India’s mineral extraction industry has the capacity to not only benefit the port itself but Oman as well,” Reggy Vermeulen, CEO of Port of Duqm, told OBG.

The free zone at Sohar Port is built on a 4500-ha plot, housing 26 companies, as well as an oil refinery, which expanded its capacity from 120,000 barrels per day (bpd) to 180,000 bpd. Another addition in 2018 will be Oman’s first bitumen refinery, reducing imports of bitumen and asphalt. The port has historically received the bulk of cargo traffic from Muscat’s Port Sultan Qaboos, is now being retooled as a tourism complex. It handled more than 1m tonnes of cargo each week in 2017, with container traffic and dry bulk throughput up 37% and 25%, respectively, while total vessel calls also increased, by 17%.

Like those of Sohar and Duqm, the free zone at Salalah complements the port, which has a capacity of 4.4m TEUs per year and specialises in trans-shipment. Salalah’s free zone is spread across 19m sq metres and has seen more than $5.6bn in investments since its founding in 2006. Despite suffering infrastructural damage as a result of Cyclone Mekunu in May 2018, Salalah Port Company recorded strong results in the first half of the year, with its container terminal and general cargo terminals seeing growth of 10% and 12%, respectively. All three ports are undergoing expansion works to grow capacity and diversify their offering (see analysis).

Also taking shape is Khazaen, a 51m-sq-metre development in the Barka region. Initially envisaged as a multi-modal logistics city, Khazaen is being redesigned as an integrated economic city with commercial, residential and industrial zones, though logistics will still play a part in the shape of Oman’s first dry port. The project’s first phase is expected to be initiated in September 2018.

Training & Omanisation

Given the rate of expansion of transport and logistics infrastructure, one of the challenges facing industry stakeholders is sourcing human resources. The ninth five-year plan for 2016-20 aims to add 14,902 employees to the transport and logistics sector by 2020, increasing the 2015 figure from 63,034 to 77,936. According to Vermeulen, Port of Duqm and the sultanate have a shared objective to develop the industry’s workforce. “Port of Duqm has engaged itself in an ambitious training programme to train Omani youth in the large field of the port activities,” Vermeulen told OBG.

As well as easing national Omanisation rates within free zones, the government is seeking to facilitate human resource allocation by supporting the development of logistics training courses. In September 2017 Asyad and the National Training Fund signed a cooperation agreement to collaborate on training schemes, while the privately run Muscat University began offering bachelor’s degrees in supply chain management and master’s degrees in logistics and air transport management.


With Oman’s economic growth forecast to pick up again in 2018 and 2019, transport and logistics is likely to continue to be one of the sultanate’s leading non-hydrocarbons sources of growth. The sector’s high growth rates are evidence of the effectiveness of strategies such as SOLS 2040 and Tanfeedh, which have expedited essential changes to the business environment as well as addressing hard and soft infrastructure. A number of major milestones are planned for 2020, when Port of Duqm will enter its first phase of operability and the ninth five-year plan for 2016-20 will come to term. Looking ahead, initiatives like the new PPP authority and FDI law are expected to catalyse the investments needed in order to realise the sector’s ample potential.


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The Report: Oman 2019

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