Country Report-Oman There is optimism in the air for the Sultanate’s logistics sector

Digital and investment initiatives to boost logistics sector in the Sultanate of Oman

The Sultanate’s Oman Logistics Strategy lays out long-term objectives for increasing the contribution of the logistics sector to GDP.

Oman’s strategic objectives over the past several years have focused on easing congestion and enhancing capacity by investing in infrastructure and technology for new ports and road links, as well as expanded routes for national airline carriers.

Oman aspires to leverage its deepwater ports on the Gulf of Oman and the Indian Ocean to become one of the world’s top ten logistics hubs by 2040.

Omani ports are connected with 86 ports in 40 countries. The strategic port town of Duqm, located halfway between Muscat and Salalah on the Indian Ocean, is Oman’s flagship development project. Duqm will eventually include a new port; naval base; dry dock; fisheries hub; industrial free zone; hotels; power and desalination plants; a refinery; a 250-kilometer pipeline network from interior oil fields; liquid jetty; and an oil tank storage terminal.

The government also aspires to build a rail line to facilitate the transfer of mineral resources from the Shweimiyah area in Oman’s Dhofar governorate to the port.

The strategic port town of Duqm

Focus on regional development

Road construction is another major focus of domestic and regional development. The government opened more than 100 miles of roadways along the Sharqiya Expressway in 2020 connecting the city of Bidbid, near Muscat, with the governorates along Oman’s coastline.

The government plans to open a new road through the Empty Quarter connecting Riyadh with Muscat and other major Omani cities, including Duqm and other Omani ports. Oman has an ongoing drive to improve its public transport infrastructure through the expansion of its bus system and private taxi services.

Khazaen Economic City, a 20-square mile logistics-led development outside Muscat, will feature an automobile market, according to current planning. The government is also considering privatizing the national bus and ferry networks.

In April 2021, the Sultanate’s flag carrier, Oman Air, entered into a codeshare agreement with Qatar Airways which includes Qatar Airways’ direct flights to the United States as part of a general strategy to expand routes and designations. Oman’s first budget airline, Salam Air, launched operations in 2016 and has expanded its regional routes. With reduced business due to the Covid-19 pandemic, these carriers are likely to focus on cost optimization initiatives in the short term.

Revamped Airport

The new Muscat International Airport opened in March 2018. Duqm Airport’s passenger terminal opened in September 2018 and the airport hopes to add regional and international routes in the future.

Government restructuring saw the transfer of transport and road responsibilities to the new Ministry of Transport, Communications and Information Technology in 2020. It also moved government agency Asyad, which focuses on port, free zone, shipping, drydock, and e-commerce services under the Oman Investment Authority.

In light of tightened budgets, the government anticipates a larger role for the private sector in the future, not only in providing capital, but also in tie-ups with the public sector to help manage state assets.

Leading Sub-Sectors

Oman imports vehicles for domestic sales and for re-exports to regional markets. In addition to a continuing market for passenger vehicles, Oman is importing construction, airport, and port equipment including buses, aircraft, X-ray security screening equipment, cranes, rubber tire gantries, port access control and security solutions, logistics software, and engineering, project management, and consultancy services.

Opportunities

Oman’s strategic location on the Strait of Hormuz, as well as its deep-water ports on the Gulf of Oman and Indian Ocean outside of the Strait, are main selling points as its logistics infrastructure grows and connectivity improves. The

The new Muscat International Airport opened in March 2018

short-term challenge will be financing amid budget constraints and oil price uncertainty. Many large infrastructure projects are currently on hold or delayed.

The Special Economic Zone Authority for Duqm and the Port of Duqm are actively seeking foreign investment to help finance development. In addition to the massive array of construction projects, Duqm requires infrastructure development in sewage treatment, drainage, water desalination, power plants, buildings, telecommunication services, and landscaping.

In June 2021, the Port of Duqm floated a public tender to select a terminal operator for its new container terminal. In July 2021, Asyad built its first new ship at Duqm’s dry dock, which also provides ship repair and maintenance services. Saudi Arabia is considering establishing an industrial zone in Duqm.

The Duqm refinery project offers transportation and logistics opportunities. Oman’s two established ports in Sohar and Salalah also present significant opportunities. Sohar’s free zone has been at the forefront of Oman’s downstream manufacturing growth.

Salalah is in a prime location at the crossroads of East-West shipping, with weekly connections to and from the U.S. East Coast. Its port has a container terminal with seven berths of up to 18 meters’ draft and a general cargo terminal of 12 berths of up to 16 meters’ draft, with infrastructure to handle the world’s largest container vessels, as well as bulk cargo, bunkering and warehousing.

Oman is increasingly looking to the private sector for investment and expertise, particularly to develop its projects pipeline through joint ventures or PPPs. The government will also rely on PPPs to run the four terminals for containers, general cargo, bulk goods, and liquids at Port of Duqm; and in the developments of ports at Khasab and Shinas in the north. The government seeks to transform Port Sultan Qaboos into a mixed-use waterfront cruise and leisure destination under a PPP model.

Oman supply chain network

The Oman supply chain network is expected to benefit from the economic diversification initiatives that focus on non-oil sector development, including transportation infrastructure across the main industrial and port locations.

Initiatives related to Sultanate Oman Logistics Strategy (SOLS) focus on improving national, regional, and global connectivity and to be amongst the top 10 global logistic players by 2040.

Infrastructure and technology improvement is one of the key pillars identified in the 10th five-year development plan(2021-2025) which is aligned with SOLS (2040). State-owned Asyad Group is playing an important role in the expansion and moderinzation of port infrastructure assets and facilitate development of free zones. It also aims to enhance the logistics and technology infrastructure capabilities to enable Oman to become a logistics hub.

T J Sivan, Senior Consultant, Supply Chain & Logistics Practice, Frost & Sullivan

Some of the major infrastructure related investments includes the following projects:

Establishing and expanding rail and road networks to facilitate inter-regional connectivity such as Land Connectivity with the Kingdom of Saudi Arabia which was one of the priority areas for transportation infrastructure development. Oman rail focuses on the development of domestic rail infrastructure. To improve export performance of minerals from Al Wusta and Dhofar governorates, the mineral rail project connecting processing plants and key ports such as Port Duqm is being explored under a Public-Private partnership mode.

Duqm Special Economic Zone will be one of the key infrastructure projects being undertaken, which includes a multi-purpose port, facilities for repairing ships, airport, and tourist, industrial, and logistical areas. Private investments in the Special Economic Zone of Duqm in Oman has increased to USD 9.35 billion with more than 400 projects in various stages of development and operations. Investments in Oman’s Duqm SEZ is expected to cross US$ 10 billion by 2022 Salalah port capacity expansion, strengthening of feeder connectivity among the ports in the Gulf region, upgradation of port infrastructure with port community system are some of the key initiatives undertaken in recent years. The development of South Al Batinah land port is expected to improve and strengthen connectivity, while a dry port at Khazaen economic city is expected to streamline cargo movement between all major ports in the country.

Digitalization Initiatives

National digitalization transformation initiatives include National IT Infrastructure, The National Program for Digital Economy, and The National Program for AI and Advanced Technologies. The National Program for Digital Economy aims to accelerate the adoption of digital technologies in smart governance, digital society, and business digitalization to transform Oman into a knowledge economy.

Specifically, this program’s focus areas are expected be as follows: strengthen IT infrastructure relating to data centers and cloud services, develop cyber securityrelated infrastructure, and facilitate the adoption of digital technologies among the key economic sectors such as manufacturing, logistics, finance, and healthcare sectors. Oman Technology Fund is another technology-related initiative that aims to make the country a preferred destination for technology investment for SMEs and start-ups to explore digital applications opportunities across economic sectors.

Some of the other key developments in digitalization include the following:

Tawseel, a national cloud-based technology initiative, was launched by Oman Logistics Centre (ASYAD) to enable logistics providers to adopt the latest logistics solutions.

Oman Blockchain Club was established to explore potential applications in international trade processes based on blockchain technology and facilitate rapid adoption of this technology in other economic and trade sectors.

Bayan System-a one-stop-shop for customs clearance and inspections–was released by The Directorate General of Customs, which made the customs clearance processes completely paperless.

Tech Try was launched by Asyad Group for testing applications of drone technology in logistics. Some pilot tests include using drones in port operations, last-mile delivery operations and stock analysis in modern warehouses.

The National Program for Artificial Intelligence (AI) and Advanced Technologies explores applications of AI in business processes to improve operational efficiency and reduce costs across multiple industries, including supply chain and logistics.

About the Author:

T J Sivan, Senior Consultant, Supply Chain & Logistics Practice, Frost & Sullivan

Over 15 years of experience in the areas of economic, industrial and supply chain and logistics research and consulting space. He has hands-on experience in developing insights and actionable strategies for various strategic and operational challenges relating to supply chain and logistics.