From the monsoon-swept south to the scorching, dry hills of the Musandam Peninsula in the north, Oman’s geographical diversity runs in parallel with some divergent levels of economic development, as well as cultural and historical differences. In recognition of this, and of the challenges such diversity brings to the prosperity of the whole country, the government has long undertaken a policy of regional development, investing away from the busy, urban hubs, such as Muscat in the north and Salalah in the south, to more remote and less wealthy districts.
This policy, which seeks to create a more equal standard of living with greater equity of opportunity across the sultanate, informs Vision 2020, the country’s long-term economic development plan. Vision 2020 has also been a foundation of the country’s shorter-term, five-year development programmes. The fruit of these efforts is now becoming readily apparent, as large-scale regional projects begin to take shape across the nation.
A Country Of Regions
Until October 2011, Oman was divided into five regions and four governorates. Following a major administrative change, however, the sultanate was reconfigured into 11 governorates, covering the entire country: Muscat, Dhofar, Buraimi, Musandam, Al Dakhiliyah, Al Batinah North, Al Batinah South, A’Sharqiyah South and A’Sharqiyah North, Al Dhahira North and Al Wusta.
Each governorate has a governor who exercises power under the supervision of the Ministry of Interior (MoI). The governorates – known in Arabic as muhafazah – are then subdivided into provinces, or wilayat, of which there are currently 61. The previous subdivision of the country had followed very traditional patterns, with the governorates of Muscat, Dhofar and Musandam directly under the sultan, while the others came under the MoI. The 2011 reorganisation created a more level footing.
In terms of geographical division, the country has three main areas, plus the exclave of Musandam, which overlooks the entrance to the Straits of Hormuz – one of the world’s most important shipping lanes. The three main areas are the southern, more mountainous area and former national capital, Salalah; a region in the north around the present capital, Muscat, which is also mountainous; and a largely flat, stony desert that lies between the other two. There is a second exclave as well, the 75-sq-km Wadi Madhah, which is within the territory of the UAE, close to the Khorfakkan-Fujairah highway.
Consequence Of Division
This geographical division has also had economic and demographic consequences. The major population centres are in the north and south zones, while the central, desert zone has long been scarcely populated.
The Salalah and Muscat zones also have significant differences in economic activity and wealth within them, as their mountainous nature has led to the development of isolated villages in many valleys and made communication between them difficult. Indeed, until quite late in the 20th century, even some of what are now districts of the capital were quite isolated from each other by the rocky terrain.
This is not the case nowadays, however, although the income disparities between mountain and coast, north, south and central do remain to some degree. Vision 2020 thus sets out as one of its principle objectives “that all the citizens benefit from the fruits of the development process”.
Khareef Season
The largest of the country’s governorates by surface area – with 99,300 sq km – Dhofar is also one of the most distinctive regions of Arabia. Every summer, between July and September, the area around the regional capital, Salalah, is swept by the tail end of the Indian monsoon. Known locally as the khareef, these rains transform the mountains and seaboard into a lush green that then quickly fades when the dry and hot weather returns.
According to the most recent figures available from the National Centre for Statistical Information (NCSI), the population of the governorate was 377,376 in July 2014, breaking down into 187,503 expatriates and 189,873 Omanis. This was roughly the same level as a year earlier. Yet during the monsoon season, there is a major increase in the number of people in Dhofar – thanks to its popularity as a tourist destination, especially amongst GCC citizens. During the 2014 khareef season, 431,105 tourists visited, according to the Ministry of Tourism (MoT) – more than the total local population.
Zoning In Dhofar
Dhofar’s geography encompasses a coastal plain, hemmed in by steep mountains, the jebel, which then give way further inland to the nejd – rocky and then sandy desert at the beginnings of the Empty Quarter and the Saudi Arabian border. To the south-west, the governorate shares a border with Yemen. There are several different language groups within the governorate, with a variety of Jebali tongues, along with Arabic.
Breaking down into 10 provinces, Dhofar’s economy was traditionally a mix of livestock farming in the jebel, pastoral (principally camels) in the nejd, and agriculture, fishing and commerce on the coast. The khareef makes the region one of the most agriculturally productive areas in Arabia, and the Salalah plain is a good source for fruit and vegetable farming, along with growing fodder.
All of these activities still continue, yet these days the main economic powerhouses of the governorate are Salalah – and in particular, its port and special economic zone – and Dhofar’s second free zone, at Al Mazunah, on the border with Yemen.
Global Trans-Shipment Hub
As part of the sultanate’s plans for regional development, major investment has gone into the port of Salalah and its environs in recent years. Nowadays the port is a key location in the international trans-shipment business (see Transport & Logistics chapter). This is because the port, which is some 15 km south of Salalah, is strategically located close to the main shipping lanes of the northern Indian Ocean, where traffic from Europe – via the Suez Canal and Red Sea – East Africa, India, South-east Asia and East Asia interconnects, along with shipping to and from the Gulf.
According to the latest figures from the NCSI, the Port of Salalah handled a total of 6.04m deadweight tonnes (dwt) of cargo in the first seven months of 2014, up 28.9% on the same period of 2013. Some 2047 vessels moored at the port over those seven months, down from 2204 in the same period of 2013 – illustrating the increasing capacity of the port to handle larger vessels. In August 2014, the Port of Salalah berthed the largest container ship ever to call in the sultanate, the MSC London, at 16,652 twenty-foot equivalent units (TEUs).
Expansion Programme
The Port of Salalah has also been undergoing a major expansion programme in recent years, creating jobs and establishing businesses for the region. The latest part of this programme is the General Cargo Terminal (GCT) Liquid Jetty project, which aims to capitalise on already growing general cargo volumes. Figures given to the local press by the port showed the existing GCT handled 2.68m dwt in the first quarter of 2014, up around 40% on the same period the previous year.
Emphasis is being placed on general cargo to enable local companies to increase imports of bulk and break-bulk materials that can then be processed for re-export, boosting the value added of the sultanate’s trade. This is mainly geared towards the companies based in the Salalah Free Zone (SFZ), which is adjacent to the port (see analysis).
Free Zones
Located on two sites, the SFZ currently focuses on three sectors: chemical and material processing, manufacturing and assembly, and logistics and distribution.
Petrochemicals firms such as Octal and the Salalah Methanol Company are in residence, taking advantage of Oman’s own hydrocarbons industry, as well as international trade routes. Other products under manufacture include aluminium rods and caustic soda, along with building materials. This latter group leverages another local advantage – Dhofar’s sizeable mineral resources, such as limestone – plus a national one: the recent passing of a new minerals law, greatly freeing up the industry. Manufacturers include those specialising in automobile and truck parts, as well as textiles, while DHL and SAGA run their logistics operations from the SFZ.
Dhofar’s second free zone, at Al Mazunah, started operations in 1999 and is dedicated to cross-border trade with Yemen. The free zone is home to 21 businesses and also includes an exhibition area. Visa-free trade can take place within the zone, which is situated some 260 km from Salalah and 245 km from Al Gaydah, the closest Yemeni city.
Airport Expansion
Back in Salalah, the growth of the port and SFZ has had an impact on the city’s expansion, which is also being fuelled by government investment in transport and tourism. Regarding the former, Salalah International Airport (IATA code SLL) is a major showpiece. A new terminal capable of handling 1m passengers per year is now coming onstream, and it has been designed with expansions to 2m, 4m and 6m passengers per year in the years ahead. The airport will have a cargo-handling capacity of 100,000 tonnes per annum, as well as hanger capacity for one wide-body aircraft. The total floor area of the new terminal will be 65,638 sq metres, with 10 contact stands and boarding bridges and a 4000 x 60 metre runway. This will build on SLL’s continuous growth in recent years. In 2013 the airport handled 746,994 passengers and 7944 civilian aircraft movements, up from 629,305 passengers and 6175 movements the previous year.
In tourism development, a major new project is the Salalah Beach integrated tourism complex (ITC). These complexes are special zones, offering freehold purchase of villas, town houses and apartments to non-Omanis – the only areas in the sultanate where this is possible. The ITCs combine this with major tourist facilities, with Salalah Beach’s plans including two 18-hole golf courses, marinas and seven hotels. Two of the latter have opened – the boutique Juweira and the Rotana – with a Movenpick and Club Mediterranee also booked, all taking advantage of the ITC’s 8.2 km of beachfront.
Meanwhile, tourism in Salalah itself is expanding, with 2016 due to see the 210-key Shaza Salalah and the 100-key Crowne Plaza Salalah extension open.
Duqm Development
Leaving Dhofar and heading north, the flat, stony desert lands separating Salalah from Muscat are home to most of the sultanate’s oil and gas reserves, either on or offshore. As a result, this area – largely covered by the Al Wusta Governorate – was for many years known principally by employees of Petroleum Development Oman and international oil companies. The small fishing village of Duqm lies along the coast, with a population of 5100 as of 2008, while in July 2014 NCSI figures put the population of the whole governorate at just 40,913. If developments in Duqm go according to plan though, by 2025 its population will increase nearly 20-fold, to around 100,000 – totally transforming the region and turning Duqm from a sleepy fishing village into a global port and hydrocarbons hub.
The Duqm Special Economic Zone and Port represents one of the largest development projects in the region. The port can accommodate the largest ships, with a depth of 19 metres in the approach channel and 18 metres alongside the quays. Further quay extensions, to some 10 km of commercial berths, are planned for phase two. The port’s $1.5bn dry dock, managed and operated by the Oman Dry Dock Company (ODC), is already in operation, with the first container services due to start in late 2014 and ramping up later to a capacity of some 3.5m TEUs, from a 1600-metre-long dedicated quay.
“The ports in Oman are not here to compete with each other – rather to complement one another,” explained Port of Duqm CEO Rien van de Ven.
Central Location
ts proximity to many of the country’s oil and gas fields, 70% of which are within 100 km, also makes Duqm a natural home for the port’s forthcoming oil and liquids terminal, which would feed to and from a $6bn refinery and a $9bn petrochemicals complex at the Duqm Special Economic Zone (DSEZ, see analysis). It is also set to become a centre for minerals refining, with the zone aiming to capitalise on processing locally sourced and imported minerals and then exporting them, ideally to the booming Gulf construction sector.
The strategy is for these major industries to also act as catalysts for the development of a range of support services, as well as for ancillary industries and spin-off businesses.
Accommodationg The Future
Duqm will also be served by a new airport, which is set to have a capacity of some 250,000 passengers per annum on completion, with a total passenger floor area of 6000 sq metres. At the time of writing, the airport’s 4000 x 60 metre runway had been completed, with passengers being processed in a temporary facility while the new terminal is constructed. Duqm will also be able to process 50,000 tonnes of cargo per year and will have four aircraft stands.
Meanwhile, new hotels have also sprung up to cater for the large numbers of business travellers, as well as tourists. A new Crowne Plaza has opened, as have a City Hotel and Park Inn by Radisson. A 25-sq-km area with a 19-km waterfront within the DSEZ has been allocated to tourism development, with Al Madinah Real Estate building a shopping centre, apartments and a golf course. Duqm port is also planning a new cruise liner dock.
To accommodate its future population, Duqm is the site of a project to build homes, schools, hospitals, roads and bridges, offices, entertainment and leisure facilities, and shops for the future inhabitants. They will live in a smart city, with an integrated transport and utilities service part of the current master plan. To date, projects announced in this area include the state-owned Duqm Development Company’s Duqm Front facility, which will include 344 luxury housing units. An OR60m ($155.36m) second stage, due for completion in 2017, will add commercial, entertainment and more residential areas. Renaissance Services Group, meanwhile, is working on a OR38m ($98.4m) housing project aimed at providing accommodation for some 10,000 people. As of late 2014, the project was largely on schedule, with the DSEZ headquarters set to move to Duqm in 2015, when the main road from the SEZ to the port is due for completion. A hospital will also be finished in 2015, along with a camp for the large number of workers needed to construct the next phases.
In November 2014, too, the Ministry of Agriculture and Fisheries announced plans to invest $250m in developing a fisheries zone at Duqm, within the DSEZ. This would integrate a new harbour for fishing boats and fish and seafood processing facilities. The move came as part of an ambitious country-wide development plan for the fisheries sector, which should see 10 additional harbours constructed and fish production more than doubled by 2020, from its 2013 catch of 206,000 tonnes to 0.5m tonnes.
Spreading Out
North of Al Wusta lies Ad Dakhiliyah Governorate, home to the ancient capital of Nizwa and a population of 403,426 in July 2014, according to the NCSI. Next to that is Ad Dhahirah, with a population of 185,795, and the Ash Sharqiyah North and South Governorates, with populations of 242,309 and 267,667 respectively.
Sur is the capital of the latter governorate, an important coastal port now somewhat overshadowed by Port Sultan Qaboos in Muscat and Sohar Port, beyond that. A’Sharqiyah South is, however, receiving significant regional assistance in the form of a major new airport at Ras Al Hadd. The area’s beaches are a hatching ground for green sea turtles, a draw which is helping to make Ras Al Hadd an increasingly popular tourism destination.
Ras Al Hadd’s new airport will have six aircraft stands and a capacity of 250,000 passengers per year. At time of writing, phase two of the airside infrastructure works for the 4000 x 60 metre runway and the overall airport construction package were under way, although there had been delays in the project, with a major terminal building construction tender package cancelled at the end of 2013.
Accelerated Development
It is hoped that the airport will act as a catalyst for accelerated development of a centre focused on ecotourism and geo-tourism – the latter involves visiting geologically interesting environments. Qatari Diar becameinvolved in developing the area in 2012, signing a memorandum of understanding with the MoT to develop a mixed-use complex at Ras Al Hadd, including a five-star hotel, villas and apartments. Meanwhile, an important new road project, the Bidbid-Sur dual carriageway, will help to improve land access to the region, with the existing single carriageway along a 255-km stretch currently being widened.
The governorate of Ad Dakhiliyah is also seeing a major boost from tourism as it works to capitalise on Nizwa’s history – its role as a centre of science and learning in medieval times earned it the epithet “egg of Islam” – and its status as the location of Jebel Shams, the highest peak on the Arabian Peninsula, at just over 3000 metres. The governorate is close to Muscat and set in the western slopes of the Al Hajar mountains. In recent times, the MoT has focused tourism development on a three-star hotel and restaurant complex at Samaiel, a 12,000-sqmetre entertainment centre on Jebel Akhtar and a 10,000-sq-metre tourism camp at Nizwa.
Oman Development Bank
The Oman Development Bank (ODB) is a key player in these initiatives and in others in neighbouring governorates. These include hotel and restaurant complexes in the A’ Sharqiyah North and South Governorates, an adventure tourism centre in Ad Dhahirah, as well as environmentally friendly guesthouses in Al Batinah North.
Indeed, the ODB is a key player in the sultanate’s regional development. Established in 1997 through the merger of two specialised development banks, it has as a core concept the provision of soft loans to small and medium-sized enterprises (SMEs) across the country’s regions. Since 1997, the bank has provided total funding of OR42.2m ($109.27m) to some 338 tourism projects around Oman, the majority of which are small-scale but high-impact initiatives.
Capital Governorate
Muscat Governorate, to the north-west of Sur, is home to the greatest concentration of people and economic activity of any region in the country. As of July 2014 it had a population of 1.2m, around one-third of the sultanate’s total population, some 735,733 of which, or about 60%, were expatriates. While figures for each governorate’s GDP are not available, some indication of its level of economic activity can be gleaned from the fact that of all the fixed phone lines in Oman, 57% are in Muscat.
Sohar
The government’s regional development policy is largely aimed at facilitating economic activity and extending the benefits of growth outside of the capital, with one clear example of this being the development of Sohar, located in Al Batinah North Governorate, north-west of Muscat. In July 2014, this governorate had a population of 656,332 people, around two-thirds of whom are Omani citizens.
Sohar has long been an industrial and commercial centre in the sultanate, as the location of a major port as well as an Oman Oil Refineries and Petroleum Industries refinery complex – currently undergoing a major upgrade – and Sohar Aluminium, which has an annual production capacity of 375,000 tonnes at its plant outside the city.
Sohar’s port has been vital to its industrial and commercial development, with Port Sohar undergoing a major expansion in recent years, in partnership with the Port of Rotterdam Authority and in line with the sultanate’s port strategy. The latter has involved shifting container, bulk and break-bulk traffic away from Port Sultan Qaboos (PSQ) to Sohar, leaving PSQ to serve cruise lines (see Transport chapter).
From now on, Sohar is meant to be the main port for industrial and commercial activity, not just for the north of the country, but for Muscat as well. In August 2014, the final date for this switch-over passed and the year ahead will see a “new normal” in the regional supply chain, as the bottlenecks experienced in late 2014 are ironed out.
Given this major shift, the port has also seen a corresponding expansion of its free zone. This contains three clusters – for logistics, petrochemicals and metals – and has some key global tenants, including Vale of Brazil. Terminal operations are also in the hands of major international companies, such as Hutchinson Whampoa of Hong Kong.
The expectation is that as more traffic switches over to the port, the demand for all kinds of logistical and warehousing facilities will also increase, thereby helping to facilitate the development of more service sector businesses and jobs, and thus expanding the city and its environs still further.
Connecting To Sohar
Alongside the port and free zone expansion is a new airport expansion project, which will see an increase in both domestic and international capacity. Sohar will also have a capacity of 250,000 passengers, with two aircraft stands, along with the ability to handle 50,000 tonnes per year of cargo. As of the start of fourth quarter of 2014, the civil and infrastructure work, rainwater protection, a 4000 x 60 metre runway and 30 km of service roads had been completed, with bids just registered for the new airport terminal building. In November, the airport saw its inaugural flight – an Oman Air ATR plane– and the national carrier now has scheduled flights three times a week. As with Duqm, flights have thus started even before the terminal has been completed, with passengers currently being processed in temporary facilities.
Sohar is also on several important land routes – from the capital north to the exclave of Musandam, and also across to the border with the UAE. With so much of the capital’s imports and exports now dependent on the port – which is some 220 km away from Muscat – alongside the growth of Sohar’s own industries, new roadways are thus vital to ensuring regional development and diversification.
As a result, projects such as the Al Batinah Expressway, with an estimated cost of OR1bn ($2.6bn), will be key going forward. An eight-lane, 265-km highway that will link Muscat to Khatmat Malaha, on the border with the UAE, via Sohar, the Al Batinah Expressway is due to be completed in 2016, with the project rolled out in a series of tender packages.
Musandam
Finally, the most northern governorate, Musandam, is also a focus for regional development efforts. Here, the emphasis is on tourism, with the port of Khasab issuing a call for cruise ships. The region’s spectacular coastal landscape, consisting of many flooded wadis, or river valleys, gives it a fjord-like feel, and it has proven to be a popular draw for foreign tourists.
Access to Musandam Peninsula has long been a bottleneck, as has travel around its mountainous terrain. This latter difficulty is expected to be aided by the Diba-Lima-Khasab road project, a 65-km coastal road through the exclave designed to have 18 bridges and seven tunnels upon completion. Access to a string of new hotels in the region will then be much improved, with two Atana hotels already operating there – Atana being Oman’s own- brand hotel chain, run by OMRAN, the government tourism development company.
Outlook
Oman’s decision to try to ensure greater equity in economic development across the country has involved a great deal of government investment out of necessity. The scale of the ongoing and upcoming projects and their difficulty makes them daunting to many private sector entities. Yet the overall plan is underscored by a commitment to involve the private sector as much as possible in the process. One of the other objectives of regional policy is to spread wealth creation around, investing in projects that will help local businesses and industries get off the ground in regions where little value added has previously been offered.
This geographical and sectoral diversification will undoubtedly get a major boost from the upcoming Oman Rail project – the construction of a twin-track railway system connecting all of the sultanate’s major cities and also linking up with the wider Gulf railway network. This project may well act as a catalyst for economic development across the nation, in much the same way that the coming of the railways did in Europe and North America.
With strong government backing for several development efforts, the future of Oman’s regions looks to be bright. While Muscat will likely continue to be the sultanate’s leading economic driver, a lot is now happening in other parts of the country as well.
