Oman’s geographic location and positive regional diplomatic relations offer multiple strategic opportunities that, if skillfully harnessed by the government, could see the sultanate become a regional and global transport and logistics centre. Indeed, strengthening transport capacities and capabilities is central to Oman Vision 2040, the government’s overarching socio-economic development plan.
Significant infrastructure expansion works have taken place across the transport sector, with roads, maritime ports and airports receiving sizeable investment, while plans to build a national railway that would connect with a broader GCC-wide network appear to be advancing following years of uncertainty. It is hoped that the sultanate’s recently improved public-private partnerships law will help attract additional private finance into upcoming projects (see Economy chapter).
Restrictions on movement throughout the Covid-19 pandemic negatively impacted Oman’s transport sector; however, it has rebounded since restrictions were lifted. Moving forwards, the government will look to build on the sector’s recent momentum and harness its capacity for direct and indirect job creation, with the Omanisation of the workforce another of Vision 2040’s central tenets.
Vision & Strategy
The ultimate goal of the Sultanate of Oman Logistics Strategy 2040 (SOLS 2040), which was launched in 2015, is to re-establish the country’s historical status as a regional centre for trade and shipping activity. The government has set a target of seeing the sultanate place among the top-10 global logistics centres by 2040. Other notable SOLS 2040 targets include increasing the sector’s contribution to GDP to 14%, which would make it the second-largest industry in terms of economic contribution – behind only hydrocarbons – and raise the total number of workers employed in logistics in the country to approximately 300,000.
The transport sector as a whole is central to Oman’s medium- and long-term economic diversification plans. In addition to strengthening logistics capacities, passenger transport and tourism-related activities are afforded high priority in the government’s 10th five-year development plan, which runs from 2021 to 2025. The plan is designed to guide progress towards the goals of Vision 2040 – itself launched in December 2020.
Critical to the eventual success of both sector-specific and broader development goals is the government’s ability to attract greater inflows of private and foreign direct investment into the sectors targeted to drive development. That fact has prompted reforms to Oman’s investment legislation and general business environment in recent years, while significant opportunities for local and international investors have also been unveiled.
Structure & Oversight
The Ministry of Transport, Communications and IT (MTCIT), established in September 2020, oversees and regulates Oman’s land and sea transport activities. The creation of a single ministry to preside over both the sector and ICT developments reflects the government’s intention to digitise the sultanate’s logistics networks and operations to raise efficiency. Indeed, due to its capacity to drive multi-sector growth, the transport sector is a key area of focus in the government’s medium- and long-term plans for economic diversification. The MTCIT plays a leading role in managing transport infrastructure development, with a number of significant projects either under way or in the pipeline.
The ministry also aims to broaden the country’s public transport offerings. In February 2022 it announced plans to launch sea taxi services – similar to those operated in Istanbul, Turkey, where the Bosphorus is harnessed to ease traffic congestion and to offer a convenient alternative to daily commuters. Meanwhile, Oman’s public transport provider, Mwasalat, was established in 1972. Mwasalat operates extensive bus and ferry public transport routes.
Oman’s government aims to leverage the sultanate’s proximity to MENA and Asian markets and the Strait of Hormuz to achieve its long-term goals for the sector. Government-owned integrated logistics company Asyad was established in 2016 to drive sector expansion and progress towards SOLS 2040 objectives, with $20bn worth of infrastructure projects announced alongside its launch. According to the company’s website, Asyad was valued at $4bn as of early 2023. It orchestrates logistics activities at Oman’s three deepwater ports and four auxiliary commercial ports. The combination of Oman’s modern, robust transport infrastructure and the convenience provided by Asyad’s centralised, integrated logistics services is helping to attract private investment into the sultanate’s industrial sector. This mix is key to diversification efforts while supporting emerging segments such as e-commerce.
The Civil Aviation Authority (CAA) was established by royal decree in 2012. The CAA is afforded legal, financial and administrative autonomy, and is responsible for regulating and managing national aviation activities. It also provides meteorology and flight navigation services. In recent years the CAA has been successfully strengthened bilateral cooperation regarding air travel and flight routes, and in December 2021 signed an agreement with the EU to that effect. Following a five-year implementation period, Oman and the EU will operate an open skies policy, establishing improved mutual access to respective markets. A similar agreement was signed between Oman and Indonesia in June 2022.
Size & Performance
One of SOLS 2040’s core goals is to boost transport and storage activities’ contribution to GDP to 14% by 2040. In 2015 sector GDP was OR1.7bn ($4.4bn), which was equal to 5.2% of GDP. By the close of 2021 both metrics had undergone contractions, with the former dipping to OR1.6bn ($4.3bn) and the latter to 4.8%. While a prolonged stagnation will be a concern for the government, the sector did expand by 6.3% over the course of 2021. It made further progress in the first nine months of 2022, accounting for 5.3% of GDP and recording growth of 28.4% over the same period of 2021. While the pandemic negatively impacted transport-related businesses, the decline in the sector’s GDP between 2015 and 2021 was progressive, with its contribution to overall GDP never exceeding 5.2% during that period.
Meanwhile, shipping activities underwent 26.6% growth between September 2021 and 2022, with the sultanate closing out the first nine months of 2022 with an OR7.8bn ($20.3bn) trade balance. Total merchandise exports for that period were valued at approximately OR19.1bn ($49.6bn), while re-exports came to OR121.4m ($315.5bn).
According to a statistical report published in December 2022 by the National Centre of Statistics and Information (NCSI), 96,243 people were employed by transport and storage businesses in Oman as of November 2022. Expatriate workers accounted for roughly 75% of that figure, leaving the sector short of its Omanisation target of 60%.
Ports
Oman’s seven maritime ports are at the heart of its logistics networks, strategies and long-term sector goals. Its three deepwater ports – located in Duqm, Salalah and Sohar – serve special economic and free zones spaced along the length of the sultanate’s Gulf- and Indian Ocean-facing coastlines. Between them, they connect with around 90 ports across approximately 40 countries. The Port of Duqm is Oman’s newest deepwater port (see analysis), with its ongoing development presenting attractive investment opportunities, while the Port of Salalah is the country’s largest and busiest.
While Asyad is responsible for guiding logistics activities, day-to-day operations at the three deepwater ports are carried out through concessions and a number of joint ventures (JVs) with private and international investors. The Port of Salalah, for example, operates through a JV. Netherlands-based terminal management company APM Terminals holds a 30% stake in the company, and Asyad has a 20% shareholding, while government pension and insurance entities (23%), and institutional and other investors make up the balance (27%).
The Port of Salalah, which was established in 1998, handled 4.1m twenty-foot equivalent units (TEUs) in 2019. In both 2021 and 2022 it surpassed pre-pandemic levels, reaching the 4.5m TEU mark. In 2021 the World Bank ranked the port the sixthmost efficient container port globally, while in 2022 it was named the world’s best among ports capable of handling 4m or more TEUs annually.
In November 2022 the continuing expansion of the Port of Salalah’s services brought news of a new trans-shipment connection with China and Yemen. With Danish shipping company Maersk as partner, the maritime portion of the route will run between the Chinese port of Ningbo and Salalah, where road transport will see shipments carried across the Oman-Yemen border via Al Mazunah Free Zone, located in Dhofar Governate.
In 2019 the Port of Sohar, a 50-50 JV between the Port of Rotterdam and the Omani government, handled 7.7m containers, including 795,000 TEUs. By 2021 those volumes dropped to 7m and 725,000, respectively; however, the first three quarters of 2022 indicated a rebound, with 4% growth in total container handling compared to the same period in 2021. Meanwhile, total import and export throughput at Sohar underwent a 32% year-on-year expansion during the first nine months of 2022.
The four non-deepwater ports – comprising Port Sultan Qaboos, Port Shinas, Port Suwaik and Khazaen Dry Port – contribute to the country’s robust maritime infrastructure by supporting targeted industries and trans-shipping activities. Port Sultan Qaboos is being positioned as a regional cruise and tourism gateway, Port Shinas supports aquaculture and agricultural trade, and Port Suwaik’s proximity to Khazaen Dry Port is being strategically harnessed.
Aviation
In its monthly statistical bulletins, the NCSI presents flight and passenger data for four airports in Oman: Muscat International Airport, Salalah International Airport, Sohar Airport and Duqm Airport. The latter three are each in close proximity to the aforementioned deepwater ports.
Muscat International Airport is the country’s primary aviation centre, situated 35 km outside Muscat. Upgrades to the airport were completed in 2018 with the new $2bn, 580,000-sq-metre terminal assuming the bulk of operations from the old terminal and increasing annual passenger handling capacity to 20m. By the end of October 2022 Muscat International Airport experienced a total passenger throughput of 5.9m from the start of the year, roughly 96% higher than over the same period in 2021. Indeed, with pandemic-related travel restrictions easing and demand rising, the 47,268 international flights handled by the airport during the first 10 months of 2022 was around 76% more than the 26,858 handled in the same period of 2021.
Meanwhile, NCIS data shows that by October 2022 some 51,017 flights altogether had either landed or departed from the sultanate’s three international airports. The accumulated passenger throughput across all four airports during that period was 7.8m.
The CAA aims to increase Oman’s annual air freight volumes to 730,000 tonnes by the end of National Aviation Strategy 2030’s life cycle. Between 2016 and 2019 volumes rose from 160,000 tonnes to 231,677 tonnes before falling by 53% to 108,999 tonnes in 2020. This was primarily due to the temporary curtailment of transport activities during the pandemic. That level was maintained for 2021; however, the first half of 2022 brought a rebound in activities, with Muscat International Airport recording 67% higher freight volumes than it did over the same period in 2021.
A new airport in Ras Al Hadd, located in the country’s north-east at the entry to the Gulf of Oman, is being constructed as part of an initiative to develop Oman’s Gulf coast as an ecotourism destination. The latest reports indicate that while the first two phases of construction are complete, the final phase will not be carried out until the relevant authorities install suitable tourism infrastructure in the area.
Roads
Reducing traffic congestion through the development of a more extensive and efficient road network, such as reducing carbon emissions and facilitating cross-border trade and transport connectivity, is key to achieving SOLS 2040 goals. A number of major projects, including the $2.6bn, eight-lane Batinah Expressway, which runs through Muscat and Sohar to the Oman-UAE border, have been completed in recent years.
In the first quarter of 2023 the Public Authority of Special Economic Zones and Free Zones is expected to award the contract for the construction of a dual carriageway that will run south from Duqm Airport to Ras Markaz. The development incorporates the construction of over 100 km of road, eight roundabouts and other vital infrastructure such as street lights. The numerous bids for the contract, submitted prior to the June 2022 deadline, range from $149m to $196m, with the fourth quarter of 2025 earmarked for project completion.
As of end-2021 there were 1.55m licensed vehicles in Oman. That number rose through September, October and November of 2022 to approximately 1.58m, 1.59m and 1.6m, respectively. Around 79% of those vehicles were privately owned, 14.9% were commercial vehicles and the remainder belonged to other categories. An average monthly increase of 10,000 vehicles is considerable, so work to alleviate congestion will likely continue to present opportunities for investors. Indeed, as of January 2023 local business activity tracking company Oman Projects listed tender information on its website for 50 projects relating to Oman’s road transport infrastructure and related commercial services.
Rail
The Asyad-owned Oman Rail Company’s plan to construct a metro system in Muscat could prove to be crucial in Oman’s bid to ease traffic congestion in and around its capital. In March 2022 it was announced that feasibility studies were under way and would take around one year to complete. Metro systems have been implemented in other GCC nations to tackle traffic congestion, with Qatar announcing in January 2023 that the Doha Metro had carried 100m passengers since it opened in 2019.
A 2000-km GCC-wide rail network has long been in the offing, yet progress has remained limited until recently, with regional economic and diplomatic barriers among the causes for delay. In June 2022 the centralised GCC Rail Authority was formed – the clearest signal for a number of years that the bloc’s member states remain committed to the project. Saudi Arabia and the UAE have announced major rail investment plans, and all GCC nations appear keen to capitalise on the potential economic multipliers such a development could bring (see analysis).
In September 2022 Oman Rail Company and Etihad Rail announced that they would establish – with equal shareholdings totalling $3bn – Oman-Etihad Rail Company to design, develop and operate a 303-km rail network connecting Sohar Port with Abu Dhabi. In addition to boosting cross-border trade and economic relations between Oman and the UAE, the development will significantly reduce transit times between the two locations.
Digitalisation For Growth
Oman’s ambition to establish itself as global transport and logistics centre is comparable to the plans of its GCC neighbours, with regional governments targeting similar status as part of their own national development agendas. However, in 2018 PwC-affiliated analysis company Strategy& Middle East identified such sector stagnation as a regional trend, citing a lack of end-to-end digitisation for GCC logistics industries as a key factor. A follow-up report published in 2022 stated that many of the key issues remained four years on. According to the report, most of the GCC members’ logistics strategies and investment in logistics parks and special economic zones have yet to return the desired economic benefits. Most still operate under manual processes that do not harness the significant time and cost savings enabled by the integration of advanced and emerging technologies – particularly artificial intelligence. While these issues will continue to be a concern for governments, efforts are under way to deploy disruptive technologies to drive logistics growth.
With enhanced innovation ecosystems a core focus for Oman and other GCC countries, significant investment opportunities are available in this area. At the same time, enhanced cooperation across the region could allow Oman and its neighbours to reinforce their collective and individual standing in a global logistics industry that is forecast to expand by 50% from its 2020 level to $12.8trn by 2025.
In July 2020 the Port of Salalah held a webinar discussing the growing importance of advanced digitalisation in port and broader logistics operations, with key stakeholders such as senior Asyad officials and target investors attending the online event. The webinar also brought news of the port’s new customer e-portal, which has since gone live. The portal enables online bookings and transactions, significantly raising end-to-end efficiency.
In addition, the Port of Sohar and Freezone has adopted the Routescanner application developed by the Port of Rotterdam. Designed to boost supply chain efficiency and reduce carbon emissions, among other features, Routescanner displays all routes that incorporate the Port of Sohar and offers end-to-end planning to the 160 operators that have adopted the technology as of November 2022.
Outlook
Recent disruptions to global trade flows have contributed to a somewhat constrained performance in the sultanate’s transport and logistics sectors in recent years. However, there is a sense that Oman’s government is both cognisant of the key issues constricting sector growth and willing to make the necessary changes.
Certainly, the dual area of purview afforded to the MTCIT since 2019 and the importance given to digitalisation in priority sectors in mediumand long-term development plans demonstrate the government’s recognition of the importance of technology in transport and logistics. Ongoing improvements to legislation should also enable the government to attract private finance into its infrastructure projects. Indeed, the level of investment gained in a short space of time by the new – and still partially operational – Port of Duqm suggests that the international business community recognises advances made by the government and appreciates the strategic advantages offered by the sultanate.
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