Logistics by Ithraa Oman

The Public Authority for Investment Promotion & Export Development

Briefings from Oman

Logistics

Logistics Briefings from Oman

Briefings from Oman Published by Ithraa, the Sultanate of Oman’s inward investment and export development agency, Briefings from Oman is a series of ten sector-specific documents that explore waste management, logistics, tourism, health, manufacturing, agriculture and fisheries, and more. Designed to connect the world with contemporary Oman and its dynamic business community, each Briefing provides a snapshot of one sector in the sultanate and the ambitious projects and innovative business ideas currently driving that space. Informative, realistic and easily digestible, the Briefings are intended to inspire business, investors and our partners at large to consider the significant opportunities these sectors present.

Distribution Briefings from Oman are offered free-of-charge and distributed to Omani embassies, ministries, foreign trade missions, at international trade shows, B2B meetings, as well as to schools, colleges and companies across Oman. If you would like to share Briefings from Oman in a hotel or at a business event, please send an email to info@ithraa.om for further information.

Disclaimer Although every effort has been made to ensure the accuracy of the material contained in this document, complete accuracy cannot be guaranteed. Ithraa will not accept any responsibility whatsoever for loss or damage occasional or claimed to have been occasioned, in part or in full, as a consequence of any person acting, or refraining from acting, as a result of a matter contained within this document. All or part of this document may be reproduced without further permission, provided the source is fully acknowledged.

Oman Logistics A Snapshot The logistics sector plays a vital role in Oman’s modern and ambitious economy and is key to increasing inward investment, non-oil exports and the nation’s competitiveness. Logistics isn’t only an important sector in its own right but also a critical enabler for businesses of all sizes operating across the sultanate - from the gypsum quarry in Thumrait, hypermarkets in Seeb, battery manufacturer on Rusayl Industrial Estate, the pelletizing plant in Sohar to the plastics exporter on Salalah Free Zone. A well-oiled logistics sector provides Omani businesses and manufacturers with ways to increase efficiency, go greener and drive profits. Earning revenues of US$7.87bn in 2013 that are forecast to reach US$12.02bn in 2017, Oman’s logistics sector is already competitive, contributing 4.9% to the sultanate’s GDP in 2015. The industry is led by multinationals offering a comprehensive range of sophisticated logistics services, down to smaller national freight forwarders offering the simple storage and shipping of merchandise. Oman’s logistics industry is expected to grow at a CAGR of 7% between 2015 and 2020. The key drivers for economic growth are the infrastructure investments in ports, free zones, industrial estates, roads, airports and rail network, economic diversification efforts and trade with GCC states, Asia and Sub-Saharan Africa.

Published December 2016 Editorial: Taleb Al Makhmari Dave Pender Sajda Al Ghaithy Nadia Al Lamki Lubna Al Harthy Walyam Al Said Design: Lamahat

Editor-in-Chief Advisor Senior Editor Editor Production Manager Production Associate www.studiolamahat.com

Photography courtesy of Ithraa & PEIE

Logistics Briefings from Oman

BIG A

Investment

Following an announcement in October 2013, Oman will spend over US$50bn in infrastructure projects over the next 15 years, US$20bn of which is earmarked for the transport sector. This sizeable investment in infrastructure offers widespread and attractive opportunities for logistics providers, particularly those with a significant presence in the global freight forwarding business. Investment in infrastructure is also expected to create 80,000 jobs in logistics by 2020, rising to 300,000 by 2040.

Network Sea

Road

Air

Serving the emerging markets of the GCC, Asia, Africa and Iran are the deep-water ports of Salalah, Sohar and Duqm and their respective free zones. Oman’s three key terminals offer businesses an attractive alternative to more costly ports of call in the Gulf, saving time and fuel and providing access to other modes of transport.

The recently opened 680km road between Oman and Saudi Arabia which runs through Rub Al-Khali will increase road freight by providing a more direct route between the two countries as well as reducing the number of border crossings. The highway on the Oman side is about 160km long, starting from Tanam in Ibri and ending at the Saudi border. From Saudi Arabia, it stretches 247km from the Omani border to the Shaybah Oil Field and 319km from Shaybah to the Batha-Haradh road, which leads to Riyadh.

Recent investment in Muscat, Salalah, Sohar and Duqm airports, the growing number of Oman Air destinations and the launch of Salam Air, the sultanate's first low-cost carrier will all help further facilitate international trade and the development of Oman’s logistics sector.

Sea transport accounts for more than 80% of freight which is expected to grow by 4.8% in 2016, this growth is being driven by increasing intra-region GCC trade as well as demand from Europe and the emerging markets of Asia and Africa.

Rail Oman continues to develop a national rail network: a modern, mixed traffic railway for the movement of freight and passenger services. This new railway system will connect the centres of population and growth drivers of Oman and will form part of the wider GCC Railway Network. To achieve this, Oman Rail will link the Sultanate’s three main deep water ports, free zones, logistics hubs, mineral resource and petroleum development areas with the population centres of the country and with the GCC. It will provide customers with an efficient domestic and international rail-based logistics solution for intermodal containers, bulk minerals and liquids, break bulk and industrial freight, bulk minerals/liquids and passengers. The railway network will be a major step in Oman’s journey to become a key logistics hub for the region and the gateway to the GCC. The Oman Rail Project offers a unique opportunity for the country to enhance local capacity - people and industry whilst substantially contributing to the overall wealth of the country through In Country Value (ICV) and wider socio-economic benefits. Once completed, the estimated total length of the railway network will be 2,135km. The Project is one of Oman’s largest infrastructure projects, with a capital investment expected to be up to US$20bn.

The Project is one of Oman’s largest infrastructure projects, with a capital investment expected to be up to US$20bn.

Logistics Briefings from Oman

Key Trends Driving Oman's logistic Sector Oman’s location on two major international shipping routes which are within two weeks of some of the world's major ports.

Direct trade routes to GCC India Africa

Publication of the Sultanate of Oman’s Logistics Strategy 2040 (SOLS 2040). A blueprint designed to transform Oman into a world top 10 logistics location by 2040.

Major re-development of Muscat and Salalah Airports and the construction of regional airports in Sohar, Duqm and Ras Al Hadd.

Sophisticated road network linking ports, free zones, airports and industrial estates.

Deep-water ports in Salalah, Duqm and Sohar.

Strategically located free zones in Sohar, Duqm, Salalah and Al Mazunah.

Construction of a national railway network and its connection to the GCC rail network, improving efficiency and reducing logistics costs.

Oman’s logistics industry currently employs 30,000 people and handles over 3 million TEU. However, by 2020 the logistics sector is targeted to employ 80,000 people and handle over 10 million TEU.

Oman’s strategic location in the Arabian Gulf makes it a major trans-shipment hub on the East-West trade route. As a member of the GCC, Oman benefits from regional trade policies, customs regulations and the integration of national and regional transport corridors.

Investment in infrastructure and technology to upgrade ports and free zones in Sohar, Salalah, Duqm and Al Mazunah.

The introduction and roll-out of a National Broadband Strategy.

Investment of over US$180 million in large-scale extensions of PEIE’s industrial estates.

Completing 49 road projects at a cost of US$5.4 billion covering 1,650 kilometres.

Leveraging free trade agreements with the US and Singapore, the GCC customs union and the General Arab Free Trade Agreement.

Launch of Oman Global Logistics Group SAOC, a government holding company, to synchronize and leverage government investments in the sultanate’s ports, free zones, logistics centres and rail, maritime and land transport companies and to achieve strategic development objectives.

Logistics Briefings from Oman

Potential

SOHAR Port

Oman lies at the crossroads of two important waters – the Arabian Sea and Indian Ocean – through which a sizable chunk of global shipping and trade passes. Suitably leveraged, Oman’s strategic geographical location offers comparative advantages to industries and investors targeting markets in the GCC, Asia and East Africa. Indeed, the sultanate’s location offers faster access into and out of the

GCC markets - land based transport with rail could be up to 36 hours faster than shipping with feeders. More reliable access into and out of the GCC markets, avoiding the politically sensitive Strait of Hormuz and the congested ports of other GCC countries. Cheaper access into and out of the GCC markets up to US$250,000 savings on fuel charges per vessel.

Cost Savings Suez Canal

Jebel Ali (UAE) Sohar

For Oman’s ports the logistics opportunity is there for the taking. Ministry of Transport & Communications commissioned research on consolidation in the container shipping industry estimates that on a benchmark voyage direct from Singapore to Suez, a weekly call at Salalah for an ultra-large container vessel would represent an annual cost of US$4.47m, at Duqm US$8.69m and at Sohar US$17.09m. Dubai’s Jebel Ali, by contrast, would cost an estimated US$24.62m.

Duqm

Salalah

Sohar

SOHAR Port received its first vessel in 2004 and today welcomes well over 2,500 vessels a year and handles over one million tonnes of cargo every week. With investments exceeding US$25 billion, Sohar is one of the world’s fastest growing port and free zone developments. Located outside the congested Strait of Hormuz and with a draft of up to 25 meters, it is the deepest port in the Gulf and South Asia region. Set-up as a 50:50 joint venture with Port of Rotterdam in 2001. The adjacent Freezone was added in 2010. The Port and Freezone operate on a landlord-tenant basis. Leading global partners were on board from the outset to operate the port’s main terminals: Oiltanking Odfjell for bulk liquid and gas storage; C. Steinweg for general cargo and stevedoring; Hutchison Whampoa for containers; Vale for dry bulk; and Svitzer for marine services, among others. The port was established around three main industrial clusters: metals, logistics and petrochemicals. Recently a fourth, food cluster was added. Work is progressing fast on the construction of a US$170 million state-of-the-art Food Zone, combining the region’s first dedicated agro terminal with rice, flour, and sugar mills, as well as the infrastructure for downstream food manufacturing and processing industries.

Singapore

Jebel Ali (UAE)

Sohar

Salalah

Duqm

$US 24.62m

$US 17.09m

$US 4.47m

$US 8.69m

Plastics

Metals

Petrochemicals Food

Estimated annual costs for a weekly call for ultra-large container vessels

Ambitions

Top Spots

Oman jumped 11 places in the World Bank ranking of global logistics performance, reflecting major improvements in logistics quality, customs, infrastructure and competence. According to the World Bank's latest Logistics Performance Index Report, Oman is ranked 48th globally as against 59th in 2014.

With regards fastest-growing emerging market sea freight trade lanes to the US and EU, Oman occupies the top two spots - up 56.7% to the US. Sea exports from Oman to the US have increased following the 2009 free trade agreement between the countries. For Oman-EU freight, growth of 56.7% is predicated on chemical-related exports, with organic chemicals and fertilizers sparking most of the growth. EU-Oman sea freight was up 59.4% in 2015.

Once completed, the new Food Zone will be able to handle 700,000 tons of grain and 1.5 million tons of raw sugar imports every year, largely eliminating the need for the sultanate to import refined sugar. Improvement work is nearly completed at Orpic, to reduce environmental impact and increase capacity at their Sohar refinery to over 198,000 barrels/day. Furthermore, the recent US$6 billion investment in Liwa Plastics Project at SOHAR Port supports Oman’s ambitions to become a global leader in the plastics industry. The project will give Orpic a total of 1.4 million tons of polyethylene and polypropylene production by around 2020, and will create one of the best-integrated refinery and petrochemical facility combinations in the world, creating many opportunities for new, downstream businesses in the Port and Freezone.

In 2014, all commercial traffic from Port Sultan Qaboos was redirected to Sohar to make way for new tourism facilities and a modern cruise ship terminal at the old city port in Muscat. This increased container traffic at Sohar by over 60% in the following year, that also saw a 46% rise in break bulk cargo. Container throughput continues to grow steadily, increasing over 18% in the first half of 2016. The new container Terminal C boasts remote controlled quay cranes that are ready for next generation 20,000 TEU vessels. Terminal C is equipped for 1.5 million TEU and planning work for a fully automated Terminal D, that will boost capacity at Sohar to 6 million TEU, is also well underway. Massive investments in infrastructure are creating modern and uncongested highway links that will connect Sohar across the region and reduce onward transportation times. These include a new direct highway to Saudi Arabia that will avoid the UAE borders altogether and will cut the journey from Sohar to Riyadh by around 800 kilometers. The recent opening of Sohar Airport comes after Middle East cargo carriers reported a 7.8% growth in demand for airfreight services. Located just a few kilometers outside the city, the new airport underpins plans for the transformation of the regional economy along the North Batinah coast. With a planned capacity of 50,000 tonnes of cargo and 500,000 passengers a year, the new facilities bode well for Sohar’s long-term growth strategy. Sohar not only offers easy access to Saudi Arabia, the UAE and Iran, it is also within easy reach of a market of more than two billion consumers across Asia, India and Africa. As one of the driving forces behind Oman’s US$2 billion plus trade surplus, the planned Rail Terminal in Sohar will be an important junction along the Sultanate’s 2,135 kilometer leg of the new GCC railway network. With the advent of rail connectivity and modern rail-to-port material handling logistics technologies, it is estimated that SOHAR Port’s commodity handling capacity could be increased by tens of millions of tonnes per annum.

Logistics Briefings from Oman

Port of Salalah Ideally located to service the lucrative East-West shipping lanes, the Port of Salalah, part of the APM Terminals Global Terminal Network, reached 1.584 million TEU in the first half of 2016. This represents a 29% increase over volume handled during the same period the year prior. The Port of Salalah, on the Arabian Sea, is one of the largest container ports in the Middle East Region with a 2015 volume of 2.56 million TEUs. Its general cargo terminal (GCT) handled 12.543 million tons in 2015 as compared with 10.314 million tons in 2014. The completion of a new deep-water General Cargo and Liquid Bulk Terminal in December 2015 has enabled significant growth, with the facility handling approximately more than one million metric tons monthly. This mainly reflects increases in shipments of limestone and gypsum as well as methanol and bagged cement. The new berths are used for discharging grain, loading bagged cement, berthing of the multi-national navies engaged in anti-piracy operation, and for cruise vessels. With the advent of rail connectivity and modern rail-to-port material handling logistics technologies, it is estimated that the Port of Salalah’s bulk mineral capacity could be increased to 50-60 million tonnes per annum.

Oman Drydock Company The container liner services that call at the port link all major ports in Europe, the Mediterranean, the US East Coast, East Africa, the Indian Sub-continent, the Red Sea and the Arabian Gulf.

Salalah

The port’s efficiency and record-breaking productivity is second to none. The Port of Salalah prides itself on customer service levels, which have helped attract major shipping lines as well as the world’s naval fleets and increasing numbers of cruise ships. The Port of Salalah is increasingly turning to a new model to drive growth in the logistics sector. In addition to its trans-shipment and other historically successful port activities, improved trade facilitation and better access to onward land and air routes are seen as keys to future success.

Port of Duqm From a geographical and geopolitical standpoint, overlooking the Arabian Sea and Indian Ocean, and its proximity to some of the world’s busiest shipping lanes, the Port of Duqm is one of the GCC’s most promising mega ports. A 50:50 joint venture between Consortium Antwerp Port and the government of Oman, the Port of Duqm Company SAOC was set up in 2010 to develop the new maritime gateway via a 28-year concession, which formally started in July 2015. Duqm’s operations were launched in May 2012, and ever since, the port’s activities have grown at steady pace. The current focus is on the handling of general, break bulk and heavy lift cargo, primarily for the oil and gas industry. The port has also started with bulk exports of mineral products, produced in quarries in its direct vicinity. The Port of Duqm is already capable of handling containers in an early operations container terminal. In the next phase, the Port of Duqm is preparing for the commissioning of state of the art container handling terminals which will have access to 1,600 meters of quay and a handling capacity of 3.5 million TEU per annum. As a green-field port surrounded by an abundance of available land, the Port of Duqm enjoys a location that places virtually no limits on its potential for growth in the long-term.

Consolidation & Distribution Hub A key par to Duqm’s appeal lies in its potential to become a consolidation Duqm and distribution hub serving the wider region. With the massive area available around the port, multinational manufacturing companies could set-up consolidation and distribution centres in Duqm to supply markets in the Indian Sub-continent, East Africa and the Middle East. The Port of Duqm’s appeal will be further accentuated when it is connected to Oman’s National Rail Network and the newly-opened 680-kilometre road cutting through the Rub Al-Khali at Ibri linking Oman to Saudi Arabia. The new road will reduce the travel distance between Oman and Saudi Arabia by 800 kms, as previously, the only route was via the UAE. Air connectivity between Duqm Airport and other international and domestic airports within Oman will also fuel sea-air freight growth.

Location, Location, Location With the advent of rail connectivity and modern rail-to-port material handling logistics technologies, it is estimated that the Port of Duqm’s bulk mineral capacity could be increased to 50-60 million tonnes per annum.

Moreover, the location of Duqm involves minimal deviation from the Asia-Europe trade lane. Dubai is located 2,092kms from the route between Suez and Singapore, whereas Salalah and Duqm are only 209kms and 644kms away, respectively, added to which Duqm is much closer to the GCC, enabling it to better double up as a gateway port and trans-shipment hub.

Oman Drydock Company (ODC) is one of the largest and most modern ship repair yards in the Middle East. Located in the Port of Duqm, ODC is strategically located on the southeast corner of the Arabian Peninsula outside the Strait of Hormuz and is in close proximity to the busy regional trade routes traversing Oman’s coastal area. In addition to its ship repair activities, ODC’s capabilities include: the engineering, procurement, fabrication, erection, installation, tests, and trials for offshore projects; fabrication of steel structures for steel

bridges and buildings; and fabrication of structures and components for other industrial uses. ODC’s strategic location, climate, world-class yard facilities, experienced technical team and integrated services provide significant benefits to its international and domestic customers.

Duqm

Oman Shipping Company S.A.O.C. As Oman’s preeminent maritime transportation services provider, OSC is key to the government’s logistics plans. It is a closed joint stock company, incorporated in 2003 and owned by the government through the Ministry of Finance (80%) and Oman Oil Company (20%).

OSC has established a feeder line linking SOHAR Port, Port of Duqm, Port of Salalah and Dubai’s Jebl Ali Port. The feeder line is a multi-purpose vessel with a capacity of 650 containers, or 8,874 tonnes.

OSC’s customers have included: Shell, Mitsubishi Corporation, Itochu Corporation, Oman LNG, Qalhat LNG, VALE, Sohar Aluminum, Oman Trading International, Petronet, Qatar Gas and Oman Refinery & Petrochemical Company.

OSC has a total of 50 vessels under operations. This will increase to 52 by the end of 2016 for a total load carrying capacity of over 8 million dead weight tonnage. With OSC’s future expansion plans, the fleet is expected to swell to a formidable 60 vessels in the next five years.

South Al Batinah Logistics Area (Khazaen) The South Al Batinah Logistics Area (Khazaen) promises to further drive the Sultanate’s ambitions to become a logistics gateway for the wider region. A project site spread over 95 million square meters has been identified at the intersection of the Barka - Nakhal Road and the Muscat - Al Batinah Expressway route, as well as the planned National Rail link between Sohar and Muscat. Khazaen’s strategic location, coupled with the abundance of land earmarked for the project, will help underpin its long-term growth. Activities and facilities at Khazaen will include a customs bonded inland port (dry port), an intermodal rail terminal, warehouse and distribution facilities, light industry, cold storage facilities, open area storage yards, truck parking and service centres. Business activities in Khazaen’s light industrial area are expected

Barka

to include textile production, electronics manufacturing, food processing, commercial bakeries, automobile and equipment machinery repair and processing. In addition, Khazaen’s commercial and residential area will attract and support investment in real estate, retail outlets for consumer-based products, wholesale facilities, office space, restaurants, car showrooms, a convention centre, hotels and other community facilities.

Logistics Briefings from Oman

Oman’s Economic Free Zones Oman has four economic Free Zones. Three are located adjacent to the deep water ports in Sohar, Duqm and Salalah, each comprising an efficient port-free zone industrial and commercial cluster. The fourth is located in Mazyounah, providing investors with efficient access to the Yemen market border gateway located only 4 km from the Free Zone. All four comprise large land areas with existing commercial and

industrial developments as well as unoccupied space to accommodate future expansion and development. The Free Zones are supported by modern road networks, telecommunications infrastructure and other necessary utilities and services. Their strategic location and framework of incentives provide investors with attractive investment opportunities.

Khasab

Containers

Linkages with industrial estates, special economic zones – current and future, mining and logistics clusters, as well as major urban centres will help fuel growth in all parts of the sultanate.

Sohar Buraimi Muscat

The railway will be double track, non-electrified and designed to serve mixed freight and passenger traffic. It has been designed based on international standards and best practices to achieve interoperability with the GCC railway network.

Ibra Ramlet Khelah

When completed and brought into operation, Segment 1 will connect SOHAR Port with the GCC rail network at Oman’s border with the UAE at Buraimi and Khatmat Milahha. It will also serve as a logistics corridor for rail-based freight to and from SOHAR Port to markets deep in the Arabian Peninsula.

Once operational, the railway will provide the most cost effective and reliable international logistics corridor into and out of the GCC.

It’s expected the railway will attract a significant increase in international container traffic to Oman’s ports within the first year of operations, to be distributed into and out of the wider GCC by rail. Given the sultanate’s strategic geographic position, the rail network will enable Oman to capture a disproportionate volume of GCC cargo growth (current growth rate of 8% p.a.).

Industrial Goods, Bulk Commodities and Consumer Products It’s expected that the railway will attract numerous shippers of industrial goods, bulk commodities and consumer products to import/export their goods through Oman ports to avoid the politically sensitive Strait of Hormuz.

Inward Investment

Haima

Four intercity passenger stations are planned along the 207 km route of the Sohar-Buraimi corridor, representing Segment 1 of the 2,135 km National Rail Network. These are Hafeet (medium GCC intercity type), Sohar City (medium GCC intercity), Zurub (commuter) and Buraimi (small/medium GCC intercity).

Oman Rail – Value Proposition The establishment of the rail network will help Oman capitalize on its geographically advantageous location, increase the sultanate’s competitive advantage and boost international trade. Once operational, the railway will provide the most cost effective and reliable international logistics corridor into and out of the GCC.

Oman Rail: Connectivity Rail connectivity promises to be a transformative force for Oman’s logistics industry – a game-changer. Divided into nine segments, the 2,135 km network will run the length of the sultanate from Buraimi and Khatmat Malaha in the north to Duqm in the southwest and Salalah and Mazyounah in the south and southwest.

The establishment of the rail network will help Oman capitalize on its geographically advantageous location, increase the sultanate’s competitive advantage and boost international trade.

Duqm

Oil Field Gas Field

Mazyounah

Minerals

Thumrait

Cities/Towns Ports

Salalah

Free Zones/Logistics Areas

Oman’s rail network will drive growth in attracting inward investment. As more customers distribute their GCC destined cargo through the sultanate, the opportunity for Oman’s free zones and logistics centres to offer value added services such as warehousing, packaging and assembly will increase. In addition, as the establishment of the rail network enables a more efficient and reliable value chain, Oman will become more attractive to international companies looking for a safe and secure GCC business base.

Competitiveness The rail network will provide Omani companies with a more efficient value chain solution, enabling them to become more cost competitive domestically and internationally. In addition, the railway will enable Oman to exploit its significant natural resources such as gypsum, limestone, dolomite, chromite, gabbro and marble due to improved capacity and logistics solution economics. It’s estimated that the transformative nature of the railway can be used to transport many tens of millions of tonnes of commodities per annum to each of the three major ports following the implementation of rail-to-port connectivity.

Currently, a 60,000-tonne bulk commodity ship can take approximately 3 – 5 days, or more to load using traditional transportation, material handling and loading methods. Integrated mine, rail and port bulk commodity logistics solutions employing modern high capacity material handling equipment and infrastructure can improve that significantly to achieve a 60,000 tonne ship turn-around within less than a day, thereby improving marine transport efficiency and increasing port capacity.

Automotive By 2020, over 3 million new cars are forecast to be sold annually in the GCC. Currently, new vehicles are distributed by car manufacturers to each GCC country. There’s clear potential to consolidate distribution in one country, with Oman being able to offer a highly attractive value proposition once the railway is developed.

Rail & Mineral Exports Oman has a substantial mineral resource base, predominantly found in the mountains which span 700 kilometres by 150 kilometres – containing chromite, dolomite, zinc, limestone, gypsum, silica, copper, gold, cobalt, iron and other resources. The sultanate has vast non-metallic mineral wealth that is proving to be highly popular internationally. For example, approximately 70% of the marble mined in Oman is exported, all of which is in processed “finished” form. Exports of Omani gypsum and limestone, among other minerals, are projected to grow exponentially with the launch of Oman’s ambitious rail network which will connect the country’s mining areas to the sultanate’s world-class, deep-water gateway ports at Sohar, Duqm and Salalah. Such an increase provides Oman the opportunity to meet the rising mineral needs of India, Japan, Taiwan, Indonesia, Vietnam, Bangladesh, East Africa and beyond. Exports of processed finished marble are also expected to grow with improved transportation and terminal logistics solutions. Finally, the railway will reduce congestion on Oman’s roads, improve road traffic safety and provide a more environmentally sustainable logistics solution for the country and the GCC region.

Logistics Briefings from Oman

Airports Integral to Oman’s logistics ambitions is a modern air transport system comprising a network of international and domestic airports connected by a world class fleet of aircraft. The new US$1.8bn facility at Muscat International Airport will have a net floor area of 334,995m², capacity of 12 million annual passengers in the first phase, 24 million in the second, 36 million in the third and 48 million in the final phase. In addition, a cargo terminal with a capacity of 260,000t of cargo per year will be part of the terminal. The airport’s runways are being extended to a length of 4,000m and width of 60m. Both runways will be able to accommodate the Airbus 380 aircraft, the world’s largest aircraft, after the expansion. The first runway expansion was completed in December 2014. The expanded airport is due to open Q2 2017. The upgraded US$777m Salalah International Airport opened in June 2015. The improved airport includes a new runway, terminal,

control tower, cargo terminal of 100,000tpa capacity (expandable to 200,000tpa) a wide body hangar and maintenance, repair and overhaul facility. Salalah has the capacity to handle 1 million annual passengers. Further expansions to 2 and 6 million annual passengers are planned when the demand arises. New airports in Duqm and Sohar opened in July and November 2014, each with a terminal capacity of 250,000 passengers per annum and passenger terminal floor area of 6,000m2. Runways are 4,000 x 60 metres capable of serving the Airbus A380. The Ras Al Hadd Airport will have 500,000 passenger terminal covering over 8,000m2 as well as a 4,000 x 60 metre runway. All boast sizable air cargo terminals helping airfreight logistics grow exponentially in the coming years. With the current development of Oman’s ports, linked by the National Rail Network to GCC countries, coupled with the development of airports, Oman is in a strong position to develop its logistics sector.

MENA E-commerce

A key component of the ‘soft infrastructure’ necessary to underpin Oman’s logistics industry is pervasive Internet connectivity and high-speed broadband access. Towards this end a National Broadband Strategy was adopted in 2013. The aim is to provide efficient and affordable broadband infrastructure connecting all residents and businesses in Oman. A key outcome of the plan was the establishment of the Oman Broadband Company (OBC), a government start-up mandated to implement a national broadband network. The National Broadband Strategy centres on a plan for the rollout of high-speed and large capacity broadband infrastructure across the length and breadth of the country over a 10-year timeframe and at a potential cost of around US$1.3bn. The strategy calls for, among other things, providing key Omani cities with fibre-to-the-home, fibre-to-the-building, especially government buildings – improving 4G and LTE mobile Internet access for most of Oman. For remote areas, Internet access via satellite services is envisaged.

According to research, 60% of consumers in the MENA region are under the age of 25. These are current and future online buyers. In the GCC, 43% of Internet users buy online at least once a month, and the average value of e-commerce orders is US$102 for domestic purchases, compared to US$139 for overseas purchases.

Cross-border B2C e-Commerce

Air Freight Air freight is a key driver within the SOLS 2040 strategy and in 2015 Oman Air partnered with Luxembourg-based Cargolux, one of Europe’s largest scheduled all-cargo airlines. The joint venture agreement provides Cargolux with access to the belly capacity of Oman Air’s passenger fleet, which operates to 11 destinations in India, as well as destinations in East Africa. This gives Cargolux opportunities to carry livestock, cargo aircraft-only freight, odd size cargo, vehicles and aircraft engines from Oman to India and a number of other large emerging markets.

Soft Infrastructure

It’s anticipated the Oman Air – Cargolux partnership will build on the success of its high-quality air cargo service to Chennai and Mumbai and in the future expand airfreight services from Oman to destinations in China, Europe, Africa and the United States.

Currently, around 2.7 billion people - 39% of the world’s population - have Internet access. Increasingly, those 2.7 billion people are making online purchases. According to Accenture, the global B2C cross-border e-commerce market will balloon in size to US$1 trillion in 2020 from US$230 billion in 2014.

230 billion

trillion

USD

2014

2020

Ground-handling & Warehousing Oman Air has also partnered with Singapore-based ground-handling, warehousing and freight specialist SATS to create a new joint venture company for cargo handling at the airline's Muscat hub. The arrangement will see Oman Air transfer its cargo-handling business and related assets to its subsidiary Oman Air Cargo. SATS will acquire a 33% equity stake in the business which will be renamed Oman SATS Cargo. This strategic partnership will enhance connectivity for cargo customers across Asia and strengthen Oman’s position as a transit hub.

The new company is expected to begin operations in 2016 and will become the single source provider of cargo-handling services firstly at Muscat International Airport's existing cargo facility and then at its new, state-of-the-art cargo terminal. The strategic partnership is expected to enhance connectivity for Oman Air’s cargo customers across Asia and strengthen the sultanate’s position as a transit hub.

Today, the supply chain has now been extended as a result of changes in consumer buying patterns. As people turn to the Internet to purchase lighter-weight, less-expensive goods and do so more frequently, the supply chain extends right to the customer’s mailbox.

E-commerce in the MENA region is expected to grow from US$95 billion in 2013 to US$200 billion in 2020. B2C e-commerce will represent 30% of the total value followed by government-to-business or customer (G2B/C) at 25% and B2B e-commerce at 20%. As B2C e-commerce grows, so do home deliveries. For the postal services, the volume of letters is falling, while package deliveries are rising. This affects the supply chain, requiring logistics companies to provide warehousing, inventory, delivery, invoicing, handling cash-on-delivery and product-returns support. In brief, the role of logistics in B2C e-commerce is to reduce the risk that arises from the virtual relations. Additionally, e-commerce logistics needs to reduce the risk in the relationship between the vendor and the buyer by ensuring that the right product is delivered to the right customer, at the right place and at the right time. Moreover, unlike brick and mortar stores where delivery is immediate, e-commerce firms are still grappling with the challenge of the speed with which the ordered product reaches their customer. Oman’s logistics sector stands to play a key role in overcoming such disadvantages, enabling domestic and international e-tailers to grow, expand and prosper.

Logistics Briefings from Oman

Today, 64% of all travel happens within urban environments and the total amount of urban kilometers travelled is expected to triple by 2050. Freight transport is responsible for 20% of road traffic, 30% of road occupation and 30% of CO2 emissions in cities.

The Final Mile Urban Logistics Urban logistics is essential to the functioning of Oman’s city economies, ensuring the supply of goods in stores and for local firms it forms a vital link with suppliers and customers. As it currently stands, almost all urban freight is delivered by motorised vehicles often transporting very light goods. For example, the average payload

Final Mile – The New Logistics Frontier transported in European cities weighs less than 100kg and has a volume of less than 1m3. Of the 1,900 vans and trucks entering the city of Breda in the Netherlands each day, less than 10% of the cargo being delivered requires a van or truck and 40% of deliveries involve just one box.

Urban Deliveries Like most cities, it’s easy to bring goods into Oman via plane, ship, or truck but it’s much harder to bring what’s been ordered to houses or offices from the central point to which it was delivered. Indeed, the final mile of urban logistics plays a crucial role in Oman’s

supply chain. Get it wrong and you risk alienating consumers, get it right and you may just gain a customer for life. To meet this challenge, we need to reconsider urban delivery solutions that are more effective, customer-centric, sustainable and eco-friendly.

The final piece of the logistics puzzle, the figurative final mile, is the transportation of goods from a delivery depot to a customer’s home or office. This stage can be key in determining a customer’s satisfaction, since it’s often the only direct touchpoint they have with a brand or service. The exponential growth of e-commerce in the GCC is having a profound effect on the region’s logistics industry from the first click to final delivery. Even high-profile international e-tailers, who have succeeded in offering customers inexpensive and rapid delivery options, are struggling to maintain efficient final-mile logistics solutions in a cost-effective and profitable way. Today, there’s a need to offer expanded delivery capabilities, while increasing convenience without passing on price increases to the customer. Whether consumers are researching, evaluating, or purchasing products online or in store, their expectations about product availability, delivery charges and flexibility, return policies and payment options are on the rise.

Fast Delivery According to a Voxware survey, 62% of respondents were less likely to shop with a retailer if an item wasn’t delivered within two days of the date promised. The survey also revealed that 43% of respondents expected delivery within three to four days, while another 40% expected delivery within five to six days.

Instant Gratification The survey suggests that today’s hyper-connected consumers would abandon shopping with a retailer online and in the store with just one error or delay. 59% of respondents stated they’d abandon shopping with a retailer altogether if they received two to three incorrect deliveries. 55% of respondents would discontinue shopping from a retailer after two to three late deliveries. With consumer expectations increasing along with the increase in online shopping, efficient, timely and accurate final mile delivery services are more crucial than ever.

Opportunities The final mile of the supply chain may be the shortest physical stage in a package's journey but it represents about 30% of total logistics costs. And the most uncertainty and opportunity in the final mile lies in the nuts and bolts of how a product/package’s chain of custody is outsourced, moved and delivered. New experimental entrants like grocery delivery service Instacart, crowdsourced, same-day delivery service Deliv and Uber are emerging as key players in this space. However, as traditional logistics firms face stiff new competition, there’s a need to provide better tracking and greater package security to meet customer expectations. Final mile logistics isn’t insignificant. If you’re delivering a spare part or installing a piece of equipment on Rusayl Industrial Estate and it can be organized, delivered and fitted in a two-hour window from the time it was ordered, then it can be sold as a premium logistics service. Indeed, what’s the world’s best-designed supply chain worth if it falls short at delivery?

Logistics Briefings from Oman

Investing in Logistics: A Step-by-Step Guide

Step 1

Logistics

Ithraa

All organizations mentioned below can be contacted via the One-Stop-Shop

Obtain Commercial Registration

• Ithraa • Oman Chamber of Commerce (OCCI) • Local Municipality • Ministry of Manpower (MoM) • Royal Oman Police (ROP)

Timeframe: 2 hours *Required documents: • Copy of partner’s passport • Copy of Omani partner’s ID card • New commercial registration (CR) form signed by all partners • Sample of authorized signatories * In some cases, security approval is required (1-5 weeks) Criminal record clearance is to be attached by Omani Embassy in applicant’s home country

OCCI Collect Membership Card Timeframe: 1 hour Required documents: CR payment receipt

Company Stamp Obtain Company Stamp Timeframe: 1o minutes Required documents: CR

Step 2 Open Bank Account

Step 3 Rental Agreement

Timeframe: Depends on the Bank

Complete Ministry of Commerce & Industry Investor Application Form

*Required documents: • CR • Passport copies • Articles of Association • Sample of authorized signatories

*Required documents: • CR • List of machinery • ID card

*Some banks may require additional documents

*to apply for a rent of land, submit all the documents to MoCI

Step 4 Municipality

Step 5 Ministry of Manpower

Obtain Municipality Permit

Obtain Investor Visa

Timeframe: 1-3 days

Timeframe: 2 – 7 days

*Required documents: • Commercial registration • OCCI membership card • Rental agreement

*Additional documents may be require – depends on the planned activities

Required documents: • Application form • CR + company stamp • OCCI membership card • Passport copies • Rental agreement • Municipality permit • Commitment letter

ROP Obtain Investor Visa Timeframe: 1-2 Weeks Print visa application from: www.rop.gov.om Required documents: • Application form • Medical report • Two passport-style photographs • CR + company stamp • OCCI membership card • Copy of passport • Rental agreement • Municipality approval • MoM approval

License*

ROP Civil Status

Timeframe: 6 months

Obtain Investor ID Card

*Required documents: • Copy of partner’s passport • CR • OCCI certificate • Local municipality permit • Approval form Ministry of Environment & Climate Affairs *This step doesn’t affect other steps. Preliminary approvals from relevant government agencies depend on the requested type of commercial activity.

Timeframe: 1 day Required documents: • Investor Visa • Passport copy • Present for fingerprinting

Local Heroes This directory lists leading Oman-based Logistics businesses and government organizations. If you want to learn more about Logistics in Oman they are ready to help you.

Formed in 1996, Ithraa is Omanâ&#x20AC;&#x2122;s award-winning inward investment and export development agency. We are an ambitious organization committed to promoting the business benefits of Oman to a global audience. Our experience, expertise and global reach helps companies of all sizes realize their potential.

Vision Promoting the Sultanate as the best destination for investment and trade in the world.

Mission Ithraa Directorate General of Investment Promotion PO Box 25, PC 117, Sultanate of Oman. Tel: +968 2462 3300 | invest@ithraa.om

To attract sustainable investment and promote the export of Omani non-oil goods and services that support the Sultanateâ&#x20AC;&#x2122;s ambitions for growth and prosperity.

Ministry of Transport & Communications PO Box 684, PC 100, Sultanate of Oman Tel: +968 2468 5000 | www.motc.gov.om

Talk to Us

Oman Global Logistics Group SAOC

Tel: +968 24 62 33 00 Fax: +968 24 62 33 36 www.ithraa.om Ithraa, PO Box 25, Wadi Kabir 117, Sultanate of Oman.

PO Box 470, PC 115, Sultanate of Oman Tel: +968 2236 4300

Sohar Industrial Port Company & Freezone PO Box 9, PC 327, Sohar, Sultanate of Oman Tel: +968 2685 2700 | www.soharportandfreezone.com

Salalah Port Services Co. (S.A.O.G) PO Box 369, PC 211, Salalah, Sultanate of Oman Tel: +968 2322 0000 | www.salalahport.com

Salalah Free Zone PO Box 87, PC 217, Al-Awqadain, Salalah, Sultanate of Oman Tel: +968 2313 2500 | www.sfzco.com

Special Economic Zone Authority Duqm PO Box 25, PC 103, Bareeq Al Shatti, Sultanate of Oman Tel: +968 2450 7500 | www.duqm.gov.om

Port of Duqm PO Box 2409, PC 111, Sultanate of Oman Tel: +968 2434 2800 | www.portduqm.com

Public Establishment for Industrial Estates PO Box 200, PC 124, Rusayl, Sultanate of Oman Tel: +968 2417 0700 | www.peie.om

Oman Airports Management Company PO Box 1707, PC 111, CPO Seeb, Sultanate of Oman Tel: +968 2434 1000 | www.omanairports.co.om

Oman Logistics Company (S.A.O.C) PO Box 994, PC 116, Mina Al Fahal, Sultanate of Oman Tel: +968 2422 5353 | www.khazaen.om

The Public Authority for Investment Promotion & Export Development