Investment in transport infrastructure help Oman capitalise on its prime location

 

Bolstered by steady investments from a government cognisant of its potential, Oman’s transport and logistics sector has continued to expand even as the impact of lower oil prices continues to be felt. The sector’s real growth rate registered at 1.1% in 2015 after rising 9.4% in 2014, giving it a value of OR1.7bn ($4.4bn), according to the latest available figures from Central Bank of Oman (CBO). It has been sustained by robust growth in passenger arrivals by air, and of cargo by land and sea. With a coastline of 2100 km at the mouth of the Gulf, and a history of friendly relations with its neighbours, Oman has a unique opportunity to become the logistics gateway to the GCC’s 50m-plus consumers, and a key trans-shipment centre between Europe and Asia.

Government officials have given this idea traction by making investments in transport infrastructure a key pillar of the country’s diversification plans. In recent years they have facilitated investments in the billions of dollars into expanding the country’s ports, not just at established centres like Sohar and Salalah, but also a greenfield free zone site at Duqm that aspires to become the top industrial and trans-shipment hub on the Indian Ocean rim. This push was accelerated in 2017 by a 50-year development deal with Chinese companies that has already secured around one-third of $10.7bn in planned investment.

A new airport terminal in Muscat looks set to open in 2018, driving fresh growth in the airline industry, which saw a new budget carrier formed in 2017. On land, investments in the road network continue apace, as vehicle registrations reach new highs. Though postponed in 2017, a $14bn national rail project holds significant potential for efficiency gains in overland transportation, particularly to support the country’s burgeoning mining sector.

STRATEGY FOR GROWTH: All of this brings important opportunities for foreign investors. The country’s ninth five-year plan for 2016-20 foresees investments of OR6.1bn ($15.8bn) and an annual growth rate of 5.4% over that period, raising the sector’s GDP contribution from 6.2% to 7%.

With the oil price recovering modestly in the second half of 2017, to around $65 a barrel from roughly $45 in June 2017, many projects that were pared back or paused in the 2016-17 budgets – which assumed a $45 oil price – could be revived under more cost-optimised plans. Private firms and multinationals should also have ample opportunities to share in the industry’s growth story in the years ahead: the government’s logistics strategy and most recent five-year plan both call for a greater role for the private sector, including through joint ventures and public-private partnerships.

“After a decade of strong investments Oman’s transport infrastructure is now at a solid threshold, reaching critical mass,” Erwin Mortlemans, commercial director at Port of Duqm, told OBG. “In the current macro environment, however, investors are becoming more careful with their choices, requiring a proven business case to support each project.”

SIZE & PERFORMANCE: By nearly all measures, Oman’s transport and logistics sector has seen consistently strong growth patterns in recent years. In 2015 the sector was worth an estimated OR1.7bn ($4.4bn) at current prices, or 5.6% of GDP, according to the CBO. At constant (2010) prices, this represented growth of 1.1% on the previous year, following a 9.4% rise between 2013 and 2014. This was driven by increasing movements of goods and people in, out and within the country as Oman builds its connectivity in line with its economic development plans.

International aircraft arrivals numbered just over 49,000 in 2016, bringing 5.8m passengers and 104,700 tonnes of cargo, according to the most recent full-year data from the National Centre for Statistics and Information (NCSI). Four years earlier, the figures were roughly 33,700 flights, 3.5m people and 71,700 tonnes – with more or less linear upticks in the intervening years. Growth in domestic traffic was also strong, with 8750 internal flights in 2016 transporting just under 1m people and 2600 tonnes of cargo, up from around 6000 flights, 610,000 passengers and roughly the same tonnage in 2012.

Port activity also grew substantially over that period, especially in its mainstay category of oil exports shipped, which rose from 37m barrels to 321m barrels in 2012-16. Goods received by sea totalled 21m tonnes in 2016, nearly twice the 11m tonnes of 2012, while those coming by land more than doubled from 7000 to 18,000 tonnes in that span. Road traffic remained robust, judging by the number of issued driving licences having grown from 129,000 in 2012 to 172,000 in 2016.

MANPOWER: As of end-2016 there were just over 90,000 people employed in the private transport and storage sector (aggregated with communications in official data), of which 80% were expatriates and 20% Omanis, according to the NCSI; fully 94% were male.

The public sector – consisting of ministry officials and state-run port operators – while a fraction of the private sector workforce at just 1188 workers, showed the opposite demographic trend, with 98% being Omani and 2% expatiate; some 75% were male. Disaggregated data from the Ministry of Transport and Communications (MoTC) show the transport and logistics sector workforce was around 40,000 strong as of mid-2015, with the Sultanate of Oman Logistics Strategy 2040 (SOLS 2040) aiming to double this figure by the end of the decade.

To facilitate this expansion while reducing its reliance on foreign labour, the Ministry of Manpower began exploring the possibility of building a logistics training centre in Muscat in September 2016, as well as a professional association to help attract more Omanis to work in the sector. Though no update had been announced as of late 2017, in September state-owned logistics holding company Asyad and the National Training Fund signed an agreement to collaborate on training schemes, and the privately run Muscat University began offering bachelor’s degrees in supply chain management, and master’s degrees in logistics and air transport management. The International Maritime College Oman, founded in 2005, also offers two- and four-year degrees for Omanis wishing to enter the sector’s workforce.

“Mechanising production processes could improve the attractiveness of the logistics sector to Omanis, who do not think well of manual jobs,” Warith Al Kharusi, executive director at Al Safwa Group & Partners, a supply chain management firm for the oil and gas sector, told OBG. “As sector integration increases, such upgrades will better align efficiencies between large and small companies, allowing new job creation at a higher value added per worker.”

REGULATORS: The sector’s main regulator is the MoTC, which is responsible for overseeing the building and maintenance of the country’s roads, airports, seaports and other infrastructure, as well as drafting policies and improving the quality of public transport services. Founded in 1973 soon after independence, it was originally merged with the public services ministry until 2000-01, when it was divested of its responsibilities in housing and gained comprehensive oversight of communications. Led by Ahmed Salem Al Futais, the MoTC is currently overseeing large investments in public infrastructure under the ninth five-year plan for 2016-20 and its long-term development blueprint, Vision 2040. In early 2015 the MoTC set up an Oman Logistics Centre to implement and oversee the country’s logistics strategy.

The Ministry of Finance controls budget allocations for both current and development outlays, while the Ministry of Manpower oversees vocational training and Omanisation quotas at public and private companies. Industry clusters, of which several are located in port free zones, are created and regulated by the Public Establishment for Industrial Estates. Founded in 2012 by royal decree, the Public Authority for Civil Aviation regulates the country’s airspace in concert with the Oman Airports Management Company and the National Service of Meteorology; it also issues licences for airline and maintenance crews, and develops and enforces policies on transport security. The NCSI and CBO detailed sector statistics on a monthly, quarterly and annual basis to inform decision-making among authorities, while Ithraa, the state investment promotion agency formed in 1996, assists foreign investors with things like business registration, information requests, finding local partners and project proposals.

NEW MANAGEMENT: One significant change in the sector’s organisation in recent years has been the formation of two large holding companies, Oman Aviation Group and Asyad. They were tasked with managing state assets in aviation and logistics, respectively. Asyad, a rebranding of Oman Global Logistics Group founded in 2016, serves as an umbrella group for a host of subsidiaries that include some of the sector’s largest companies. “The creation of Asyad is a welcome development for the transport and logistics sector in Oman,” Tarik Al Junaidi, CEO of Oman Shipping Company, told OBG. “It will streamline the kind of coordination necessary to foster multimodal transport, and ultimately the sultanate’s position as a global logistics hub.”

Firms under Asyad fall into three categories, which corresponds to its main branches of remit: ports and free zones, freight and public services. Among the companies it controls are several free zone-related entities (Salalah Freezone Company, Sohar International Development, Oman International Container Terminal and Oman Logistics Company); a number of freight service providers (Oman Shipping Company, Oman Drydock and Oman Rail); and a range of sectoral public service entities (Oman Post, the Mwasalat public bus system, the National Ferries Company and the International Maritime College Oman). In each of these spheres, it has been charged with reviewing assets and coming up with more efficient ways of managing them – a task in which it has been very active so far (see analysis). “Growth in the Oman market has led to a greater need to strategise, regroup and accelerate decision-making,” Omar Mahmood Al Mahrizi, vice-president of Asyad, told OBG. “What we are finding in our sector-wide review of state companies is that there are great economies of scope as well as of scale.”

LEGISLATION: The sector is governed by Oman’s Basic Law, which lays out the legal structure for the country’s institutions, as well as a maritime law passed in 1981 in line with UN standards on territorial claims; the labour law of 2003; the traffic law of 1993; free zone legislation of 2002; and a series of environmental laws passed in 1990, 2001 and 2004. More recently, in March 2016 the MoTC issued a Land Transport Law that came into effect a year later laying out rules governing transport activities. It obliges all companies or parties conducting transport activity to obtain approval from the ministry, and establishes rights and duties of carriers and commission agents, issues strictures on liability for logistics firms, and sets out compensation and penalties. In early 2017 work began on drafting a multimodal transport law that will clarify the roles and duties for each party involved in a multimodal contract. According to Hanah Al Rahbi, the ministry’s director-general of planning and studies, the law will boost the confidence of foreign firms in shipping their wares to or through Oman.

A workshop held in February 2017 called for ideas from more than 50 representatives from the public and private sectors, seeking to codify international best practices that can give certainty for managing risk in transport activities. Al Rahbi said he expected the law to be issued by early 2018.

Oman also benefits from several cooperation agreements on land transport, including with Turkey (2004), Syria (2005), Yemen (2006) and Jordan (2013). It is working on securing a similar agreement with the UAE; another with Spain has been signed but not yet approved by Parliament as of late 2017.

STRUCTURE: Given the public interest inherent in developing transport connectivity, the state runs most of the largest firms across the sector, particularly those under the Asyad umbrella. However, the authorities are increasingly looking to the private sector for investment and expertise, particularly to develop the project pipeline through joint ventures or public-private partnerships, such as Khazaen Logistics City, a greenfield development still in design stages. Many ports throughout the country, for example, are managed by foreign firms. The Dutch operator APM Terminals runs the Port of Salalah, while the Port of Duqm Company is a joint venture between the government and Belgium’s Consortium Antwerp Port. Duqm is currently looking for private operators to run the four terminals it is developing for containers, general cargo, bulk goods and liquids.

COMPETITIVENESS: In the World Economic Forum’s “Global Competitiveness Report 2017-18”, the sultanate moved up four places to rank 62nd out of 138 countries. Landing above the MENA average in all four of the report’s “basic requirements” pillars – institutions, infrastructure, macroeconomic environment, and health and primary education – it received particularly high marks for the quality of its transport infrastructure, scoring 4.4 on a scale of 7. That is well above the MENA average of 4 and ranks 40th best in the world. Oman also made top ranks in many sub-indices, placing 32nd for overall infrastructure quality, as well as 14th for its roads, 48th for ports and 56th for airports.

In a second international benchmark, the World Bank’s logistics performance index, Oman ranked 48 out of 160 countries in 2016, with a score of 3.2 on a scale of five, above the MENA average of 2.9. In fact, it outstripped the MENA average in every one of the six “key dimensions” on the index: at 2.8 to 2.6 for efficiency of Customs clearance, 3.4 to 2.8 for transport infrastructure, 3.4 to 3.0 for international shipment pricing, 3.3 to 2.8 for logistics service quality, 3.1 to 2.9 for ability to track and trace consignments, and 3.5 to 3.3 for timeliness of delivery.

This is notable considering Oman had fallen from its 2007 ranking of 48th to as low as 62nd in 2012, before climbing back up through the ranks thanks to a half-decade of large infrastructure investments and reforms to logistics processes. Its 2016 rank also surpassed the average for other high-income, non-OECD countries, according to World Bank data.

“To achieve its goal of becoming a global logistics hub, Oman must benchmark itself against the best practices of the likes of Hong Kong, Singapore, Antwerp and so on,” Pankaj Khimji, director of Khimji Ramdas, an Oman-based conglomerate, told OBG.

STRATEGY: The country’s current economic transformation is guided by its overarching development blueprint, Vision 2020. This lays out broad goals for economic diversification and government strategy, subsumed under its four pillars – economic balance, human resources, economic diversification and private sector development. Objectives of the strategy include expanding the country’s industries, growing the share of Omanis in high-paying jobs, boosting in-country value by encouraging value-added innovations, developing small and medium-sized enterprises, and involving the private sector more comprehensively in contributing to the economy. Vision 2020 is currently under review by the Supreme Council for Planning, which is developing a new iteration called Future Vision 2040.

Subordinate to these blueprints, Tanfeedh lists transport and logistics as one of five priority sectors (alongside manufacturing, tourism, fisheries and mining) for furthering diversification through stateled initiatives and policies. Its targets for the sector include achieving growth of 5.4% a year, investing OR6.1bn ($15.8bn) over the five-year period, and raising its GDP contribution from 6.2% to 7%.

TANFEEDH: The government launched the National Programme for Enhancing Economic Diversification, or Tanfeedh, in 2016 to monitor and implement initiatives aimed at diversifying the economy. The programme will follow eight steps, the fifth of which – the implementation phase – is set to begin in 2018. The result of step three – following nearly 52,000 man-hours of analysis by stakeholders from both the public and private sectors – was the identification of 121 specific projects and initiatives worth a combined OR14bn ($36.4bn) for implementation through to 2020, as well as 263 key performance indicators, and 2000-plus pages of detailed proposals. In mid-2015 the authorities also issued its logistics strategy, SOLS 2040, aimed at transforming Oman into a top-10 logistics centre by that year.

Through a range of long-term initiatives – including expanding deepwater ports and free zones, developing the road and airport network, and building a national railway – the plan aspires to double the sector’s GDP contribution to OR3bn ($7.8bn) by 2020 and to OR14bn ($36.4bn) by 2040, in the process doubling sector employment to 80,000 then 300,000 jobs, respectively. In May 2017 the MoTC unveiled a public transport strategy laying out government plans for urban transit through to 2025, including 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.

FREE ZONES: A royal decree issued in 2002 allowed authorities to create free zones offering special financial incentives to investors. These include 100% foreign ownership, exemption from income tax and Customs duties, zero minimum capital, lower Omanisation requirements, no restrictions on imports or repatriation of capital, and easier access to visas and residency permits for foreign workers. Since that year, the country has established four such zones, three at the main ports of Sohar, Salalah and Duqm and one 4 km from the border with Yemen called Al Mazunah. The zone at Sohar, built on a 4500-ha plot and housing 26 companies and a large oil refinery, in 2014 received the bulk of cargo traffic from Muscat’s Port Sultan Qaboos, which is being retooled as a tourism complex (see Tourism chapter). Salalah’s free zone has seen more than $5.6bn in investments since its founding in 2006. The 19m-sq-metre free zone will complement the port, which boasts a capacity of 4.4m twenty-foot equivalent units (TEUs) per year.

Duqm, the most recent of the three, was set up in 2011 on 2000 sq km, with planned investments of more than $10.7bn under way in the industrial city complementing the port. All three ports are seeing large expansion projects in 2017-18 (see analysis).

Al Mazunah, built on 450 ha and divided into 100 plots of 2000-16,000 sq metres, has seen the number of projects operating there rise from 33 in 2012 to 115 in 2016. Its throughput volume has nearly tripled in that period from 10,000 to 28,000 tonnes, according to the zone’s director-general, Salah Al Alawi.

INVESTMENT: Due to lower oil prices Oman’s public budget has faced constraints, particularly in 2016 when its fiscal deficit reached 21% of GDP, driving a series of budget cuts. Its civil current spending on transport (and communications) continued to rise over 2012-16, from OR45.7m ($118.7m) to OR61.4m ($159.4m), while outlays on civil development were pared back in that period from OR712m ($1.8bn) to OR532m ($1.4bn), a drop of 31%, according to the central bank. Bank lending to the sector was also trimmed, from OR1.1bn ($2.9bn) in 2014 to OR782m ($2bn) in 2016, or about 4% of total bank credit.

Another proxy for organic investment in transport, as well as possible augur of future demand, is imports of machinery associated with the sector. In 2016 Oman’s foreign purchases of this type of kit – including vehicles, aircraft, vessels and transport equipment – totalled some 306,000 tonnes worth OR1.1m ($2.9m). This was a considerable deceleration on the 488,000 tonnes and OR1.8m ($4.7m) purchased in 2015, and the 654,000 tonnes and OR2.6m ($6.8m) in 2014. It was driven by lower oil prices during those years, affecting private outlays and state spending on sector projects and developments.

AIRPORTS: Air traffic within and through Oman has seen increasing volumes in recent years. As of November 2017 the country’s airports facilitated over 98,625 international flights, including landing and departures, and handled 14.1m passengers, according to the NCSI. In November 2017 passenger numbers at Muscat International Airport (MCT) reached 12.8m, up 16.8% year-on-year. Aimen Al Hosni, CEO of Oman Airports Management Company, told press in December 2017 that he believed MCT would welcome 13.5m passengers by the end of2017, while the smaller Salalah Airport would handle 1.5m, up from 1.2m passengers in 2016. Both of these figures represent records for Oman’s aviation segment. Cargo throughput, meanwhile, reached 2.6m tonnes in 2016, down from around 3m the year before but roughly even with the 2012-14 average.

Meanwhile, as of early 2018 a new terminal at MCT was scheduled to open by the end of the year. Under construction since 2010, the facility will have a capacity to handle 12m passengers. In June 2017 the Oman Airports Management Company tendered a contract for a new warehouse and maintenance services for the airport’s electromechanical systems, followed in September by bids to provide customer services, manage a trolley system, and run a feasibility study on installing solar cells to power parts of the terminal. According to local media, the company conducted three weeks of “readiness trials” in late autumn 2017 to test its systems and ensure smooth flow of passengers once the terminal is open.

CARRIER INDUSTRY: The country’s airline industry experienced significant changes in 2017. This started with the founding of the nation’s first budget airline, SalamAir. Having obtained an air service licence the year before, the carrier began operations in January with a fleet of Airbus A-320s, flying three daily flights from Muscat to Salalah and two daily to Dubai. In April 2017 the airline added a new route to Jeddah, Saudi Arabia, and it has plans for a fourth destination – Taif, Saudi Arabia – in the future.

An investment of Muscat National Investment and Development Company, or ASAAS, SalamAir’s entrance should boost competition in the industry. Its budget offerings for three categories of travellers – “light” (those carrying only hand baggage up to 7 kg), “friendly” (with up to 20 kg checked baggage) and “flexi” (the above plus priority check-in and free flight changes) – put downward pressure on prices.

Meanwhile, another potential entrant has aimed at the market’s top end. In July 2017 a second, private airline called Salalah Air geared up to launch charter flights, signing a memorandum of understanding (MoU) with Brazil’s Embraer to purchase two aircraft – a Phenom 300 and Legacy 450 – as “flying taxis” for hire, targeting businessmen travelling to the country’s tourism resorts and industrial areas. This followed a deal earlier that year with Canada’s Viking Air to supply two mixed-use aircraft with a capacity of 19 passengers each. In August 2017 it signed a third MoU with RUAG Aviation for six Dornier 228s, also 19-seaters. As of December 2017, however, the service had not yet taken off.

Sector-wide, the number of routes and seats have been increasing. In August 2017 Sohar Airport saw Qatar Airways begin operating three flights a week from Doha, adding to the existing three from Salalah run by SalamAir, and three from Sharjah in the UAE run by Air Arabia. Oman Air boosted its seat capacity for flights between Muscat and Salalah by some 57%, to around 1600 per day, during June-September 2017, to cater to increased demand during the monsoon season, known as the khareef, when many locals retreat to Dhofar to enjoy that region’s soft summertime rains. In the whole of 2016, Oman Air raised its seat capacity by 20% to cater to growing demand, partly through the purchase of four new Boeing 737-800s. Adding new routes that year to Guangzhou, China and Najaf, Iraq, its passenger numbers grew 21%, to 7.7m, with its revenues rising by 1% to OR472m ($1.2bn), according to its 2016 annual report. Routes to Manchester, UK and Nairobi, Kenya opened in 2017. As a result of these increases to routes and capacity, Oman Air saw its passenger numbers rise another 10% to 8.5m in 2017. Opening access to new tourism and business markets is likely to be key in maintaining growth. “Airlines in the region are coping with a challenging economic environment marked by intense competition, supply and demand imbalance, and lower oil prices,” Abdul Aziz Al Raisi, acting CEO of Oman Air, told OBG.

SHIPPING: Port expansions in 2017 have occurred in tandem with the ambitions of the country’s shipping and maritime industries. The largest domestic shipping firm, state-owned Oman Shipping Company – with a fleet of 51 vessels and a total capacity of 8m deadweight tonnes – took early steps to move into the bulk carrier market during the year.

According to local media reports, elevated growth in aggregate exports has led the firm to seek two to 10 bulk carriers for transporting loose cargo, partly to serve the needs of a recent deal with Kuwait to supply crude oil to Oman’s planned 230,000-barrerl-per-day refinery in Duqm. Company officials told press in October 2017 that the firm was also seeking two second-hand carriers with a 3000-TEU capacity each to replace its current chartered ships.

MARITIME: The maritime industry is likewise taking steps to expand further. In June 2017 Oman Dry-dock Company, an Asyad subsidiary founded in 2006, announced plans to set up a new ship-repair unit offering “on-voyage” services to vessels at sea that are in distress or need standard repair while en route or at anchorage off-shore. The new unit – composed initially of “flying squad” vessels based in centrally located Duqm – would also be despatched to all waters in the vicinity of the three commercial ports at Sohar, Salalah and Muscat. “If the ship cannot come to the shipyard, the shipyard is coming to the ship – wherever required,” its CEO, Stephan Aumann, told local press. This potentially gives it access to a ready market on its doorstep, tapping the large stream of traffic heading towards or into Gulf waters.

On land, meanwhile, the firm is looking to build out its crane-lifting kit, as well as construct a new floating dock to give it more flexibility in addressing its queue of vessel repair orders.

Mid-2017 also saw the drydock repair two large carriers of iron ore for Oman Shipping Company, the first such services provided under a new umbrella effort by Asyad to integrate the offerings of its subsidiaries. “Oil majors are moving out of shipping to focus on their core business,” Wasam Moosa Al Najjar, general manager of corporate affairs at Oman Shipping Company, told OBG. “By taking over the management of those services and integrating them with other state-owned enterprises in logistics, we can achieve better performance through cost reduction, and eliminate the need for third-party fees.”

Shipping capacity continues to grow in line with demand forecasts. Container volumes at Sohar Port saw year-on-year growth of 24% in the first quarter of 2017 and 11% in the second, according to the latest data. Having reached 1m tonnes a week at the end of 2016, the volume of sea cargo handled has stayed above that level, as of July. This comes on the back of three-fold growth over the past five years at its Terminal C, which can handle vessels of up to 20,000 TEUs. Upgrades of soft infrastructure have aided this: Sohar recently added remote-controlled quayside cranes, integrated with a new automated gate and appointment systems to shorten wait times for drivers hauling freight to and from the port. In August 2017 the port entered a partnership with Qatar shipping firm Milaha, allowing it to set up logistics and warehousing operations in Sohar Freezone.

That same month, the greenfield Port of Duqm saw its first containers arrive from global shipping lines CMA CGM and Mediterranean Shipping Company, bearing equipment to be used for expansion of its commercial quay. Its more-developed sister port, Salalah, meanwhile saw its throughput grow 29% in 2016, to 3.33m TEU, lifting its rank 17 places in 2017 to 44th out of 100 top ports worldwide on the Lloyds List, the world’s oldest shipping journal.

In short, both quality and quantity are combining to lift Oman’s presence on the international logistics stage. “Recent consolidation in the global shipping industry means competition is tighter and shipping companies are demanding lower tariffs,” Ahmed Akaak, deputy CEO of the Port of Salalah, told OBG. “Oman fits well into this environment not just because we have a convenient location on trade routes, but because we are investing in infrastructure and increasingly integrating services to provide better connectivity and efficiency.”

ROADS: Until Oman’s national railway is completed, road transport remains the staple method of inland transport. The number of driving licences issued reached a record high of 172,000 in 2016, up from 156,000 the year before and just 129,000 in 2012, according to the NCSI. As of November 2017 the total number of registered vehicles in the country was 1.44m, up from 1.4m in March 2017.

Such increases, occurring alongside rapid economic and population growth, have sustained a need for building new highways. As of end-2016 Oman had 37,000 km of paved roads – 7.4% of this being dual carriageway – and 32,300 km of graded roads, representing increases of 18% and 2.3% on 2012, respectively, according to NCSI data.

Several recent projects have contributed to this increase. MoTC records show that as of mid-2017 there were 118 road projects under way, including 77 interchanges, 41 bridges, 23 flyovers, 67 underpasses and 34 pedestrian bridges throughout the sultanate. Among the largest were the Mirbat-Hasik rehabilitation project, a $500m road stretching 200 km between Bidbid and Sur, and the 283-km Al Batinah Expressway – all set for completion by the end of 2018, the ministry has reported.

The Batinah project, a four-lane carriageway stretching from the outskirts of Muscat to the border with the UAE at Shinas, is split into six separate packages comprising 31 bridges over wadis (valleys), 23 interchanges, roadway pull-off areas for traffic control and emergency vehicles, and internal and external shoulders spanning five metres on each side.

In March 2017 the MoTC opened a 34-km stretch of the road from Shinas to the Liwa interchange south-eastwards towards the capital. This followed the opening of another chunk connecting Barka, on the western outskirts of Muscat, to Rustaq, at the foot of the Jebel Shams mountain range and home to one of Oman’s most frequented tourist attractions. As of June some 93 km of the expressway had been opened, according to the ministry.

The Bidbid-Sur Road is a six-lane highway of some 247 km being built between its two namesake cities. At a cost of OR423m ($1.1bn), the infrastructure package consists of two underpasses and two overpasses, as well as nine interchanges, 171 reinforced culverts and retaining walls. Construction has been under way since 2011, and in November 2017 the ministry announced it would start work on two additional tunnels of 450-600 metres each, added to the project post-tendering to protect vehicles from potential landslides. The ministry is also expanding its network of dirt roads linking remote villages to main thoroughfares. The most recent completion of this sort came in July 2017, when the Muscat municipality announced it had opened a 33-km stretch of road tying in the eastern villages of Quriyat, including Ta’ab, Harima, Salmah, Al Adnah and Faiq.

RAIL NETWORK: Oman has long been planning a national railway, a network of 2135 km that would speed up transportation of freight from the country’s natural resource assets to its top intermediary destinations for export abroad.

Billed at an estimated cost of around $11bn, the rail service would be built virtually from scratch, with its main arteries connecting Muscat to border crossings with the UAE and Yemen as well as to the country’s three main three ports – Sohar in the north, Salalah in the south, and Duqm in the centre. Additional offshoots would then link it to key mining assets in Ibri, Ibra and Thumrait, as well as to oil and gas fields in the country’s central desert hinterland.

Designed as a double-track, standard-gauge railway system capable of supporting double-stack container trains with axle loads of 32.4 tonnes, the project would require construction of some 12,000 km of railway lines, 35 km of tunnels, 132 km of bridges, as well as 245 overpasses and underpasses, according to specifications reported in Rail Journal.

OMAN RAIL: Planning has been in the works since at least 2010, with a state-owned enterprise called Oman Rail founded in June 2014 to lead the project – in 2017 its ownership was subsumed under Asyad. Initially designed as part of the proposed region-wide GCC rail network – and including the possibility of upgrading to passenger services – the Oman railway continued to move forward even when the regional project was paused in 2016 on the back of lower oil prices, particularly after the UAE’s Etihad Rail suspended its tender for railway links to Oman. Work on the first segment, a 207-km stretch from the UAE border at Al Ain to Sohar, was to start in 2018 and be up and running within two years.

COMMERCIALLY DRIVEN: Recently, however, Oman too has seen construction plans delayed until further analyses are completed. In May 2016 the MoTC nullified a $149m consultancy contract under way with Spain’s Tecnicas Reunidas “to avoid extra costs”, while giving assurances the project itself had been delayed, not cancelled. Feasibility studies and design work continued in 2017 as the government adjusts its models to fit a more commercially driven system based on expected development in the mining sector.

In a positive sign, a royal decree issued in mid-July 2017 announced that Oman Rail had completed initial design work and prepared tender documents for a 655-km segment of railway running from Haima in central Oman to Thumrait. The planned railway is expected to require nine bridges, two road crossings, 11 loading stations and 10 rail maintenance facilities.

OUTLOOK: Oman’s strategic location will serve it increasingly well as its logistics infrastructure grows and connectivity improves. This will be complemented by ongoing expansion of industrial estates and state-owned enterprises (see Industry chapter), which provide anchor clientele for logistics and can build fresh momentum in trans-shipment, adding further appeal for foreign investors. Such synergies between industry and logistics should see the sector grow by 6.9% annually until 2020, according to consultancy Frost & Sullivan.

The challenge in the short term will be financing amid budget constraints and oil price uncertainty. By the language of official strategies, this will involve a larger role for the private sector, not only in providing capital, but increasingly in tie-ups with the public sector to help manage state assets. In public announcements and the signing of contracts, authorities have made one thing clear: their willingness to partner with businesses in cases where they can provide credible proposals that optimise costs. “The new thinking with public investments is that commercial viability comes first, but also that the state is no longer the primary source of financing and expertise,” Akaak told OBG. “The government may provide infrastructure and guidance, but development needs to be driven by the private sector.”

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The Report: Oman 2018

Transport & Logistics chapter from The Report: Oman 2018

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