Looking local: Increased government spending and added aquaculture infrastructure are expected to boost self-sufficiency

A long-standing pillar of the economy, the fishing and farming sector remains one of the sultanate’s major employers. To keep up with changing times, however, Oman is now allocating significant resources to modernise the sector, focusing on agro-business, aquaculture and marine infrastructure, which will require innovation and the development of technical know-how. In line with these investments and the government’s long-term economic diversification strategy, the sector’s contribution to GDP, especially that of fisheries, is expected to reverse its recent decline and is targeted to reach 5.1% in 2020.

Land

According to the UN Food and Agriculture Organisation and Oman’s Ministry of Agriculture and Fisheries (MAF), the sultanate has a landmass of 30.95m ha, 1.77m ha of which is considered agricultural land and 73,500 ha of which can be cultivated. The majority of arable land is situated within the Al Batinah coastal plain, found in Oman’s northwestern corner between Muscat and the UAE. A combination of local wadis (valleys) and a high water table produces seasonal water flows, and thus adequate irrigation, making this area suitable for cultivation. The south-western Dhofar region, where the major port city of Salalah is located, is Oman’s second-most-productive agricultural zone. The seasonal khareef (monsoon), typically from July through September, gives this region a more tropical climate than other parts of Oman and the GCC.

Performance

As oil prices and industrial growth have picked up since the turn of the century, the agricultural sector’s contribution to overall GDP has decreased, falling from 2.8% in 1995 to 1.1% in 2012. However, this is more a reflection of the growth of other sectors than a decline in production in real terms. Indeed, growth rates for the sector are increasing, and the government is upping its investment to help maintain this. In the fisheries segment alone, production increased by 21% in 2012 compared to 2011, bringing in revenues of OR142m ($369m), according to the MAF. Furthermore, the government’s eighth five-year development plan ( 2011-15) allocates OR200m ($521.2m) for agriculture and fisheries spending, and highlights significant infrastructure and management expenditure intended to support the sector. Such projects include OR11.6m ($30.2m) for date palm management and OR25.6m ($66.7m) for marine fishing ports in Barka, Al Musanah, Muhout, Sadah and Al Shuiymiah. Overall, roughly 4% of the development plan’s spending will be allocated to agriculture and fisheries, which is the government’s initial step towards reaching the desired goal of 5.1% of GDP by 2020.

Crop Production

Agricultural production has gradually increased over the last decade, peaking at 1.39m tonnes in 2011 and dipping to 1.25m in 2012, according to the latest statistics from the MAF. Vegetable production increased from 192,100 tonnes in 2009 to 193,072 tonnes in 2012, while fruit production rose from 319,900 to 350,646 tonnes. Similarly, field crop output rose from 46,037 to 48,400 tonnes over the same period, and perennial fodder crops grew from 630,500 to 658,089 tonnes.

Dates are the principal crop in the sultanate and accounted for 80% of all fruit area across the country in 2012, according to the MAF. Date production increased from 262,927 tonnes in 2009 to 281,323 tonnes in 2012. In the latter year, there were approximately 7.4m date palms in Oman as per the 2012/13 agricultural census, predominantly located in the north-west and south-west regions, and revenues from the annual harvest amounted to OR52.7m ($137.3m), according to researchers at Sultan Qaboos University (SQU). To ensure long-term sustainability, the MAF has allocated OR11.6m ($30.2m) to date palm management under the eighth five-year development plan, with a particular focus on growth strategies and pest control.

Other significant crop yields, according to 2012 ministry data, include tomatoes (193,072 tonnes), cucumbers (41,223 tonnes), corn (28,229 tonnes), watermelon (16,908 tonnes), and fodder crops such as Rhode grass (334,232 tonnes) and alfalfa (276,964 tonnes). Steady increases in crop and livestock yields have allowed the sultanate to achieve solid levels of self-sufficiency. As of early 2013, Oman produced 75% of its fruit and vegetable needs, according to Fuad Jaffer Al Sajwani, the minister of agriculture and fisheries. As per MAF figures for 2009-12, Oman is 72% self-sufficient for fruit, 62% for vegetables, 41% for milk and 31% for poultry.

Livestock

Since 2008, livestock statistics also illustrate steady growth, specifically in the number of goats, sheep, cattle and camels. According to 2012 ministry data, goats account for the dominant share of livestock (1.79m), followed by sheep (404,111), cattle (346,260) and camels (134,800). Livestock product volumes were reported as follows: eggs (236m), milk (724,100 tonnes), poultry meat (41,800 tonnes) and red meat (24,970 tonnes).

Poultry demand has increased substantially worldwide, particularly in developing economies, and Oman is no exception. Due to a growing youth population in Oman and the GCC, higher levels of per capita GDP and an expanding expatriate community, the demand-supply gap is increasing, according to Kanaga Sundar, the head of research at Gulf Baader Capital Markets in Muscat. In 2012 demand for poultry in the local market was approximately 65,000 tonnes per year, with 40% of this met by local producers and the remainder imported.

The gap has left space for local producers to expand their output, which is precisely what A’ Saffa Foods has done. The Omani-based food producer held over a quarter of the market share with an annual production capacity of 17,000 tonnes. In 2012 the company completed an expansion that increased its capacity by a further 4000 tonnes. “Omanis are extremely loyal consumers and currently there is a growing demand for locally produced goods. It is more important now than ever to emphasise the quality of local products,” Saleh Mohammed Al Shanfari, chairman of A’Saffa Foods, told OBG.

Food Processing

Other segments within the food processing market have seen sizeable investments as well. In early 2013 the Oman Sugar Refinery Company (OSRC) announced that it would develop a $200m processing plant in Sohar, just north of Muscat. The plant is expected to come on-line by 2016 with an annual capacity of 1m tonnes of refined sugar, according to Ashwin Rana, project director for OSRC. Domestic demand for sugar is estimated at 120,000 tonnes annually, 100% of which is imported, so the new facility intends to export the majority of output. Raw sugar will be sourced from Brazil, Thailand, India and Australia, and supplied by Tate and Lyle Sugars. The Port of Sohar is in the midst of developing a major dry bulk terminal and the new refinery’s proximity to the port will facilitate exports.

A cocoa-derivatives processing facility is also being established at the Salalah Free Zone (SFZ). The Côte d’Ivoire-based CK Group signed a memorandum of understanding with the SFZ to construct a $150m factory on a 200,000-metre plot, which is expected to begin operations in 2014.

Dhofar

Due to the unique climate of the southern Dhofar region, there have been efforts to boost fruit and vegetable production in Salalah, the region’s port city and Oman’s primary trans-shipment hub. In mid-2013, scientists from SQU published their findings from a comparative regional assessment regarding agricultural conditions across the sultanate. Due to Salalah’s occasional rains, in addition to its monsoon season, the soil is very fertile and well-suited to growing fruit and vegetables. According to Mumtaz Khan, associate professor in the department of crop sciences at SQU, “The average temperature range in Salalah is 22 to 28°C. This means that onions, garlic, tomatoes, watermelons, bananas, cucumbers and chilli peppers can be comfortably grown in this area.” Onions, oranges, potatoes, garlic and tomatoes are currently the country’s top five fruit and vegetable imports. Thus, with efficient planning with regards to water and fertiliser management, production of many of these could be expanded in Salalah, thereby helping to reduce imports.

Census

All of the aforementioned MAF statistics will be updated with the publication of the 2013 agriculture census. Data collection for the new census began in December 2012 and the results should be made available by late 2013 or early 2014, according to the MAF’s planning department. New data to be included in the census will outline and analyse the following areas: agricultural holdings and corresponding geographical locations, coordinates, total area, sources of water for irrigation, methods of irrigation and livestock data, as well as the number of agricultural workers, funding sources, site exploitation, product marketing, supply usage and animal production, according to the ministry.

Fisheries

The fisheries segment is poised for substantial growth, as large-scale investments are allocated towards harbour and port infrastructure. As part of the eighth five-year plan (2011-15), OR100m ($260.6m) has been set aside for fisheries development, and the government has approved investment of $1.3bn into fisheries between 2013 and 2020. “By 2020, there will be 31 fishing ports in all. Each port will have land available for investors to set up their own projects,” said Hamed Said Al Oufi, the undersecretary for fisheries at the MAF, told local media. “As of now Oman has 21 ports. The construction of four new ports will begin soon, and six ports are in the design, tender and other stages,” he added. The significant rise in the number of ports would be a welcome development for the more than 40,000 fishermen that navigate Oman’s 3165 km of coastline. As of 2011, MAF statistics showed that 2.4% of the workforce was employed in the fisheries sector, which contributes 34% of agricultural production.

In 2012 Omani fishermen reeled in over 191,000 tonnes, up 21% from 158,000 tonnes a year earlier, according to the MAF. Around half of the annual catch is exported to states in the Gulf, including the UAE, Saudi Arabia, Kuwait and Qatar, while the rest goes outside of the region to China, the EU, Southeast Asia, Brazil and the US, among other places, generating revenues of OR142m ($369m) in 2012, according to Gulf Baader Capital Markets. The ministry expects to hit a $1bn export target by 2030. The vast majority of the catch comes from Oman’s 15 major fishing companies, two of which are listed on the stock market: Oman Fisheries Company (OFC) and Dhofar Fisheries Industries Company.

In mid-2013, OFC secured 24 licences from the government to develop its coastal fishing fleet, which will reach up to 100 vessels by the time it is fully operational. In addition to the government’s new harbour investments, which will boost domestic fishing capacity, procurements from local fishermen have increased considerably over the past several years, according to Said Rashid Al Rawahi, the general manager of OFC. Since 2007/08, procurements have grown at a compound annual growth rate of about 25%. This has allowed fishermen to increase their catch, with OFC purchasing 26,039 tonnes in 2012/13, compared to 11,980 tonnes in 2007/08. Oman’s fishing industry is divided into three segments: coastal, traditional and foreign commercial. Prior to 2011, foreign fleets accounted for about 15% of the annual catch, a number that has fallen to below 10% today, as overfishing from foreigners has been detrimental to the local fishing community, according to the MAF.

One of the more highly anticipated projects in the sector is the development of a fisheries industrial zone at the Duqm Port, set to be the largest multipurpose fisheries facility in the Middle East. As of mid-2013, the project was under review at the Tender Board, and more than 20 firms had submitted bids, according to Al Oufi. The government will contribute $250m for the development of the hub, which is expected to include processing plants, cold storage, laboratories and training centres.

Aquaculture

The government views aquaculture as one of the most underserved segments of the agriculture and fisheries sector, and therefore it has prioritised its development under the eighth five-year development plan (2011-15). With OR100m ($260.6m) set aside for fisheries development under the plan, and approximately $1.3bn already approved through to 2020, aquaculture development is poised to receive ample funding. “We have big plans for the aquaculture sector and very soon we would be inviting local and foreign investors to participate in this development,” Al Oufi told local media in 2012. “As of now, the aquaculture sector has not been exploited well, with a miniscule catch of 200 tonnes. We propose to raise the output to 200,000 tonnes by 2030.” This increase in output would generate an additional OR340m ($884.5m) in revenue.

Indeed, the government has already provided a commercial licence for the first private shrimp farm, which involves a total investment of OR40m ($104.2m), and the project is expected to be operational by 2015. The project would complement the pending $250m fisheries zone at Duqm Port, where new facilities will include aquaculture infrastructure, such as a research centre to ensure quality and sustainability. Since the aquaculture segment has yet to contribute significant revenue or employment to Oman’s economy, the investments in these projects have the potential to help establish a new industry in the country, thus developing a different job market while improving food security.

Al Rawahi told OBG, “Fish farming has its challenges. At the moment, for instance, there is a lack of available hatcheries as well as factories to produce feed. However, these challenges also make for interesting opportunities for investors.”

Challenges

While development of the agricultural sector is promising, obstacles remain, many of which are the results of geography and nature. The dry climate and diminishing aquifer levels in a majority of the coastal regions have led to inadequate irrigation and seawater seepage, limiting the industry’s development. The Directorate of Statistics at the MAF estimates that only 70,000 ha of arable land is fully utilised, due to the limited water supply.

Global food prices also have a significant effect on the local market, as Oman is not fully self-sufficiency for its staple products. In order to mitigate this risk, the government and private investors are increasingly looking at innovative ways of improving the efficiency and sustainability of production. The development of greenhouses and hydroponic systems has become more popular, and the ministry provides loans or subsidies to incentivise companies to use such methods. In April 2012, Al Hosn Investment Company, a partnership between Qatar Holding and Oman’s Ministry of Finance, arranged a $26m deal with two Spanish agricultural firms to develop a 12-ha hydroponic greenhouse project in Barka in the Al Batinah region in northern Oman. In Salalah, the ministry’s research centre operates a 270-sq-metre hydroponic greenhouse with the aim of cultivating lettuce and cucumbers.

Dams & Desalination

To further assist with water and reservoir management, the Ministry of Regional Municipalities and Water Resources announced in mid-2013 that it would implement three dam projects to boost water harvesting. According to the ministry, the dam in Nizwa, in the Ad Dakhliyah governorate, will be 310 metres long with a maximum height of 19.4 metres and a storage capacity of 4.05m cu metres. In Izki, in the Ad Dakhiliyah governorate, the dam will be 145 metres long and 17.4 metres high, and it will have a capacity of 630,000 cu metres. The final dam will be in Seeb, in the Muscat governorate, and will have a length of 1170 metres and a height of 65 metres, with a capacity of 7.72bn cu metres.

Desalination has also become a prevalent water management method across the GCC. In Oman potable water demand is expected to increase from 216m gallons per day in 2012 to 318m by 2019, according to Oman Power & Water Procurement. To meet the growing demand, various desalination plants are now being expanded. The Barka I desalination project, developed by ACWA Power Barka, announced that it would increase its capacity by around 45,000 cu metres per day, leading to a total potable water output of some 136,200 cu metres per day by October 2013. This facility supplies water to Muscat, Al Batinah North, Al Batinah South, Al Buraimi, Al Dakhiliyah and, eventually, Al Dhahirah. An additional 191,000 cu metres of capacity for these regions is expected to come on-line following the commission of the Al Ghubrah Independent Water Project in October 2014.

Sustainability

The sustainability of fishing is another challenge for the sector, compelling the government to impose quotas and short seasons to limit overfishing. In May 2013, for example, the MAF reduced the harvest season for shrimp from seven months to three months, as overexploitation had led to smaller yields. According to the MAF, 854 tonnes of shrimp were caught in 2010, 680 tonnes in 2011 and 792 tonnes through November 2012. “There was an almost negligible catch of 10 tonnes for us this season, ending in March,” said A N Kumar, marketing and sales manager at OFC. “The new decision is good, as it will help replenish the stocks.” Similarly, as Omani fishing firms build up their fleets, they will have to be aware of changes to the regulatory climate designed to deal with overfishing.

Outlook

As new technologies and government investments are set to bolster Oman’s agriculture and fisheries infrastructure, it is likely that production will continue to rise across the major export categories and that downstream processing will play a larger role in the domestic market. The challenges of climate and food security are evident; however, the growing effort to invest in research centres and innovative agricultural techniques, with the help of international partners, illustrates the authorities’ commitment to sustainable production and resource management. The fisheries segment, in particular, seems to be poised for significant growth going forward, as substantial resources are being allocated for harbour development as well as to support new and emerging segments, such as aquaculture.

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The Report: Oman 2014

Agriculture & Fisheries chapter from The Report: Oman 2014

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