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$20bn investment to reposition Oman as gateway to the Gulf

Article - March 26, 2014
The sultanate’s transport and logistics infrastructure provides solutions to increasing demand

Oman is seeing further renaissance in its transport infrastructure, where everything from seaports and airports to railways and roads are the target of heavy investment. In bygone days, the country played a much bigger role in regional trade than it currently does. With a host of infrastructure projects at varying degrees of completion, the government aims to take advantage of Oman’s unique position on the eastern edge of the Arabian peninsula: outside the Arabian Gulf and opening out on to the Indian Ocean and its trade routes to Asia and East Africa. 

“Oman, due to its strategic location and well geographically seated place in front of the peninsula, has always historically been the gate of the Gulf,” says Minister of Transport and Communications, Dr Ahmed bin Mohammed bin Salim Al Futaisi.

“However, now due to the requirements for big infrastructure, Oman has really in the last few decades not played the role of gateway and all the traffic, especially the ships, has transferred to the other GCC [Gulf Cooperation Council] countries.”

The government is tackling all fronts simultaneously, building six new airports, its first-ever railway network, further developing its ports and laying thousands of miles of new roads – all of which will help integrate Oman with the rest of the Arabian Peninsula. The budget for these massive projects tops the £20 billion mark.

The fast track to the GCC

The GCC Rail Project plans for 1,395 miles of tracks traversing the Arabian Peninsula and connecting the GCC economies for the benefit of regional trade. It will link major cities and towns such as Muscat and Sohar to each other and to Oman’s borders, where it will continue into the UAE and on to Bahrain, Qatar, Saudi Arabia and Kuwait. The first line is due to begin operation in 2018. 

Dr Al Futaisi foresees that the new rail network will be a guaranteed boon to cargo transport, yet getting people to switch from cars to trains will take a bit more work. “For the passengers, we really need to work harder to gear the mentality and the minds of people to different modes of transport other than cars,” he says.

Oman’s ports of call

Of the six ports, the key contributors to the economy are those in Sohar, Salalah and Duqm. The former, located 143 miles northwest of the capital, will become the new main cargo port, serving the densely populated Al Batinah region and Muscat Governorate, and freeing up the capital’s Sultan Qaboos Port for tourism purposes. 

According to Andre Toet, CEO of Sohar Industrial Port Company, the Sultan Qaboos Port simply has no more room to grow. “It has reached capacity. So the decision was made to close it for commercial cargo and to transfer the cargo to Sohar,” he says.
The Port of Salalah, in the far southwest and already ranked among the world’s top 30 ports, will be the main transhipment hub. “Our proximity to rapid growth markets is quite unique,” said the port’s former CEO, Peter Ford. “That demand has shown that there is a need for continual investment. We have expanded twice in our history already; we have had over 600 per cent growth on both the container and general cargo sites since we started in 1998.”

Duqm, situated about halfway down the eastern coast, is to be Oman’s biggest industrial area. Dr Al Futaisi calls it “a flagship for Oman” and it comes complete with a special economic zone, a dry dock and a new airport (see page 12 for more on Duqm).
Active in all areas of shipping, including LNG, crude oil, refined petrochemicals and dry commodities, Oman Shipping Company (OSC) is one local firm that is helping raise the level of local participation. CEO Tarik Mohamed Al Junaidi says OSC is also “looking at adding value to the value chain” by providing a greater array of services that would contribute directly to the economy through additional revenues, job creation and support services. 

OSC – a closed joint stock company owned by the Ministry of Finance and Oman Oil Company – owns and manages more than 40 vessels and charters many to third parties. Its own container line, the Gulf Express, makes regular trips between Jebel Ali in the UAE, Sohar and Muscat.

Off to a flying start

With improved transport comes improved business opportunities and, by extension, higher tourism traffic.

“A lot of the air freight that enters Oman comes via Dubai and is trucked across the border because we do not have sufficient capacity,” points out Vic Allen, acting CEO of Oman Airports Management Company (OAMC).

“So once we have built a new airport, that will all change. We will be able to attract much greater volumes of cargo and air freight through Muscat, which will help a lot in terms of freshness of produce, range and depth of product, etc.”

A new terminal is being built at Muscat’s airport, with a capacity for 12 million passengers a year. In 2012, the Muscat International Airport served more than 7.5 million passengers, up more than 1 million from the previous year. Transport Minister Dr Al Futaisi remarks that passenger traffic has grown on average by 18 per cent every year and that by 2020 figures might even reach 14-15 million.

On the other hand, Salim Al Aufi, CEO of the Public Authority for Civil Aviation, sees things the other way round. Not wanting to put the cart before the horse, he says: “The first thing we need to do is really start marketing Oman as a destination for business or tourism. With that, you get the heavy traffic; and with the heavy traffic we can start to take the next step toward expanding the existing airport to the next phase and so on.”

OAMC’s Mr Allen points out that tourism infrastructure is being developed to prepare for a niche, high-end market.

“It is visitors who will appreciate what this country has to offer, which is a mix between modernity and tradition. It is the friendly people,” he says, adding that Oman Air is also expanding its offer of point-to-point non-stop flights in order to make Oman a more attractively convenient destination.

The investment opportunities that these projects are opening up are ones that Oman is keen to draw attention to and foreign expertise is unambiguously welcomed. The Transport Minister says there is an “open invitation to all the investors, to all companies to come and share with us in such big developments.”