historic potential as a regional hub has never been more
By Oliver Cornock
In addition to its sizeable reserves of oil and gas,
Oman enjoys another geographical advantage. It is
central to the region, and its position at the mouth of
the Persian Gulf makes it an obvious location for the
trans-shipment of goods. As the Sultanate looks to
reduce its dependence on hydrocarbons, a wealth of
ambitious road, rail and air projects is now in the
pipeline to develop the country’s huge potential as a
‘gateway’ to the region.
In April, Oman United Engineering Services (OUES) and
Portugal’s Sociedade de Construções Soares da Costa –
who are ranked among the world’s 100 biggest contractors
– won a contract to build road infrastructure linking
the new Muscat International Airport with the Muscat
Expressway. Valued at around $62m, the Omani-Portuguese
partnership saw off several contenders for the bid.
Focus on infrastructure
This is the result of increasing infrastructure
prioritisation within Oman, which means that realising
the Sultanate’s historic potential as a regional hub has
never been more achievable. The latest five-year plan
(2011-2015) allocates some $78bn toward infrastructure
spending, representing a 113 per cent increase on the
last five-year plan. This government investment is
planned for a range of large-scale projects, including
over $25bn on building construction, $15bn investment in
Salalah Free Zone, investment of $1bn on developing a
medical city (also in Salalah).
Last year, a report by Business Monitor International
described Oman’s construction and infrastructure sectors
as “fragile”, citing the Oman Cement Company’s 77 per
cent drop in 4Q profits for 2010 as evidence of a weak
sector, which would struggle to recover. Yet, less than
a year later, the situation has been transformed. If
Omani infrastructure was ever considered “weak” in the
past, it must surely now be recognised as one of the
most promising sectors going forward.
The results of the marked rise in sector spending speak
for themselves; since the implementation of the latest
Five-Year Plan, the non-hydrocarbon sector has exhibited
rapid increases in their GDP contributions, including
manufacturing (with 17.5 per cent growth), electricity
and water (9.5 per cent) and construction (5.8 per
Of course, oil and gas continue to play a
significant role in Oman’s economic performance,
contributing just under half of GDP in 2011. Indeed, the
government is continuing with its plans to diversify,
modernise and “Omanise” the economy to the extent that
oil will only contribute 9 per cent of GDP by 2020,
according to Vision 2020, Oman’s diversification policy.
As part of these plans, infrastructure upgrades play a
key part in supporting non-hydrocarbon growth.
Specifically, it’s the transport sector that is set to
be the big winner from this increased funding. The
current Five-Year Plan sets aside around $20bn for
transport infrastructure projects up to 2015. This
includes a new terminal at Muscat International Airport,
which will be completed by 2014, with the capacity to
handle 12mn passengers annually. Furthermore, Oman’s
connection with the inter-GCC railway network will be a
significant development, bringing enhanced freight and
passenger access to the entire region.
The government’s strategy is to provide a solid platform
for economic diversification. Infrastructure upgrades
will create a positive cycle of improved connectivity
and transport linkages, which in turn will make Oman
more attractive to business and foreign investment.
The positive spin-offs that investment in infrastructure
will bring to the Sultanate’s diversification drive are
clear. The expansion of the airport and passenger
handling capacity, for example, will support growth
plans for Oman’s travel and tourism industry, which
Vision 2020 forecasts will contribute 6 per cent of the
country’s total GDP by 2021. Additionally, although
specific details have not yet been announced, Oman
intends to build or expand six airports, including
Salalah airport. To further facilitate the growth of
tourism, the government has already approved the
spending of around $8bn on tourism-related property
developments across the country, with the aim to attract
around 12 million visitors a year by 2020.
With regard to overland transport, Oman’s challenging
topography has traditionally posed difficulties with the
development of transport links in Oman’s interior, yet
the increase in funding, together with technological
improvements mean that long-awaited projects can at last
go ahead. Indeed, the idea of a GCC-wide railway has
been talked about since 1981, but the region is closer
than ever to achieving this. According to the Ministry
of Transport and Communications, when operational the
Oman-GCC railway will be 2000 km long (with 1000 km of
track in Oman), running from Kuwait’s border with Iraq,
down to Salalah in the southern tip of Oman. The
expected total cost of the regional project is estimated
This will allow Oman to tap into regional trade (and
vice-versa), stimulating commerce by facilitating the
movement of goods. The Port of Salalah, for example, is
strategically located on the major shipping lanes
between Europe and East Asia, and greater access by rail
will increase its competitiveness with other Gulf ports.
Given that the difference between docking at Salalah and
Dubai is three days’ journey, Salalah has a huge amount
to gain from enhanced rail linkages.
The projects are bold and ambitious, but the Omani
government is in no way passive or complacent about
drawing in foreign developers; rather, with construction
projects picking up momentum, Oman is actively courting
international participation. In April, Malaysia’s
minister for International Trade and Industry was
welcomed to Oman as part of a broader invitation to
Malaysian companies to take part in infrastructure deals
in the Sultanate. Although to date no Malaysian firms
have ventured into Oman, companies are now showing
interest in the Sultanate’s construction, retail and IT
sectors, as well as the halal meat segment.
Furthermore, October will see Oman host an international
exhibition for infrastructure and industrial projects –
“InfraOman” – for the second time. Last year’s InfraOman
expo, the first of its kind to be held in Oman and the
GCC region, was attended by a host of international
firms, generating a great deal of interest in Omani
construction projects spread across a range of sectors,
including power, water and renewable energy technology.
Whereas last year the attention was mainly on heavy
industry and equipment, InfraOman 2012 will also have a
special focus on affordable housing, interior design and
building materials, areas which the Sultanate wants to
focus on in order to improve housing availability and
Taking into account Oman’s geographical advantages, and
renewed spending drive on transport connectivity and
network upgrades, infrastructure investments in the
Sultanate are set to become increasingly attractive to
foreign investors. Oman’s huge potential as a gateway to
the region is set to become a reality.
May - 2013
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