Oman invests in ports with eye to becoming Gulf gateway

“We need to considerably enhance the contribution of logistics into our financial system. … We are literally constructing the sector for the subsequent technology. That’s our duty,” Abdulrahman Al-Hatmi, CEO of Oman’s nationwide logistics group, ASYAD Group, instructed Al-Monitor.

As Oman crude oil reserves dwindle — they might be depleted within the subsequent 25 to 30 years at 2019 manufacturing ranges — the nation targets 5 sectors, together with logistics, to re-energize its financial system and diversify authorities revenue — 40% of which at the moment comes from oil revenues.

Logistics might make use of 300,000 individuals in Oman by 2040 because it leverages its location on the middle of worldwide transport routes to emerge because the Gulf’s gateway. For hundreds of years, Oman reigned over an enormous maritime buying and selling empire encompassing a lot of the Western Indian Ocean.

Right this moment, one in every of Oman’s strategic benefits is its location exterior of the Strait of Hormuz. This slim waterway connects the United Arab Emirates (UAE), the Gulf’s present logistics powerhouse, to the remainder of the world. Iran’s Islamic Revolutionary Guard Corps seized ships within the strategic Strait of Hormuz and had stated it might shut it, pushing up insurance coverage premiums for vessels.

Following the assault off the coast of the UAE of two tankers carrying petrochemicals for Japanese and Taiwanese prospects in June 2019, tanker insurance coverage charges jumped tenfold. 

A cargo container ship heads in direction of Shuwaikh port, Kuwait’s most important business port. (Sebastian Castelier)

“Even when neither overt conflict nor covert assaults have an effect on the UAE, the notion of them would possibly persuade some shippers to more and more make the most of impartial Oman’s ports,” stated Ryan Bohl, a Center East analyst on the US-based geopolitical-risk agency Stratfor. Certainly, Oman maintains cordial relations with the Islamic Republic of Iran, with which it shares the Strait of Hormuz.

“Oman might function a logistic hub for the area, not a market by itself,” stated Mahmood Al-Wahaibi, an city planning skilled who labored for the Oman Nationwide Spatial Technique till September 2021 and was concerned in Oman’s growth plan, Imaginative and prescient 2040. The nation’s gross home product ranks seventieth globally. He instructed Al-Monitor, “Agreements with neighboring international locations are important to make it occur, however at the moment there isn’t a political will from different Gulf states. They don’t want us to dominate the area’s logistics market.”

Hatmi believes ​​Oman is “effectively positioned” relating to its location. “We discuss to our logistics counterparts within the Gulf Cooperation Council (GCC) international locations on how you can leverage that,” he stated, calling on the six GCC states to “work collectively” on enhancing logistics corridors.

Useless-end street, incomplete railway

A couple of 400-kilometer (250-mile) drive from Oman’s capital, Muscat, lies an instance of the challenges forward. The one street that connects the Sultanate to Saudi Arabia ends abruptly on the border. “The Ramlet Khelah border publish is prepared on our facet, however we have no idea when the entry to Saudi Arabia might be formally open,” a Royal Oman Police agent instructed Al-Monitor.

Sovereignty-sensitive Gulf states have made restricted progress in connecting their strategic infrastructures. Distrust between Gulf states was on full show from 2017 to early 2021 when Saudi Arabia, the UAE and Bahrain imposed a blockade on Qatar, slicing air, land and sea routes to the peninsular nation. In response, Doha expanded its container dealing with capability and farming business, thus limiting the necessity to depend on different Gulf states’ ports.

There may be hope, although. The GCC railway, a regional rail community that has but to materialize, is a “pivotal venture” that may “remodel” Omani ports, Wahaibi stated. “It could change the area’s logistics dynamics but additionally the political setting, enhancing mutual belief.”

Apart from financial advantages and easing intra-Gulf mobility, the rail community would additionally minimize carbon dioxide emissions by 70 to 80% in comparison with trucking, Etihad Rail estimated. The UAE, Saudi Arabia and Bahrain pledged to go carbon impartial by 2050 and 2060, respectively.

However Oman’s ambitions to be the Gulf’s entry level rivals the UAE dominance in logistics. Emirati port operator DP World strikes almost one in 10 of the world’s containers. It operates ports, terminals, free zones and logistics hubs throughout six continents, together with its flagship Jebel Ali Port in Dubai, which contributes to a few quarter of the emirate’s GDP.

A bunch of overseas employees on responsibility at Duqm Port, in Oman’s central jap seaboard (Sebastian Castelier)

Oman might flip the nascent Saudi Arabia-UAE financial competitors into a possibility. “For Saudi Arabia, Oman is an alternative choice to the UAE when it comes to ports and logistics — type of a plan B. So if something occurs with the UAE, it doesn’t have an effect on them,” Wahaibi stated.

Saudi Arabia amended its import guidelines in July 2021 to exclude from intra-GCC preferential tariff concessions items made in Gulf free zones — a serious driver of the UAE’s financial system. A month later, a Saudi delegation headed by Funding Minister Khalid al-Falih visited Oman to discover funding alternatives and expressed curiosity in increasing financial relations.

Competitors between Gulf ports which have made its port’s enlargement “all of the a lot tougher” shouldn’t be Dubai’s solely problem, transport newspaper Lloyd’s Record reported. The Center East’s largest port faces intra-UAE stiff competitors with the rise of Abu Dhabi’s port.

‘Oman underutilized its port infrastructures’

Since he succeeded his cousin who dominated the nation for about half a century, Sultan Haitham primarily seemed inward to include spiraling finances deficits in an effort to protect Oman’s impartial and impartial overseas coverage. Oman launched a repeatedly delayed 5% value-added tax (VAT) in mid-April 2021 and began to reorganize authorities corporations.

However intensifying stress on public finance might push the Sultanate to faucet extra aggressively into its unmatched community of diplomatic ties to advertise Omani ports as a aggressive impartial gateway to the Gulf. “This chance is restricted by the truth that the UAE’s ports are extra developed and entry the big inside market of the UAE itself. Some shippers will proceed to threat the potential of disruption,” Stratfor’s Bohl instructed Al-Monitor.

Oman is residence to 3 main ports: Salalah, Duqm and Oman’s major gateway, Sohar. Sohar Port launched a ship-fueling service — a enterprise dominated by Dubai’s Jebel Ali — providing low-sulfur gas oil, heavier bunkers and marine gasoil, and can also be increasing to function a container, meals and chemical compounds entrepot for the Gulf area.

Salalah Port acts primarily as a transshipment hub serving regional markets, together with East Africa and Yemen. Transshipment terminals act as connectors, transferring containers from long-distance strains to short-distance strains heading towards the cargoes’ closing vacation spot. 

Salalah Port’s largest shareholder, Maersk-owned APM Terminals — one of many world’s largest port and terminal operators — views Oman’s southern port as an vital a part of its community within the Center East. “We count on this significance to solely develop additional sooner or later,” an APM Terminals spokesperson instructed Al-Monitor, noting the terminal’s “world-class effectivity.” 

In 2020, the United Nations Convention on Commerce and Growth rated Oman’s ports No. 1 when it comes to pace of container dealing with, barely sooner than in Emirati ports.

About 550 kilometers (340 miles) north of Salalah, the coastal city of Duqm was anticipated to change into a terminal exterior of the Strait of Hormuz for exporting Gulf oil to worldwide markets. However regional cooperation did not materialize, and Duqm is “type of misplaced” between the Sohar and Salalah ports, Wahaibi stated, “not understanding precisely what to place itself for.” 

Hatmi stated Duqm is effectively positioned to serve Oman’s industries like oil and gasoline, fisheries and mineral. “We speak about billions of tons of reserves, so Duqm might be used to export to fast-moving international locations like India and China,” he stated. The US Division of Commerce’s Worldwide Commerce Administration famous Oman’s host mineral assets “nonetheless comparatively untapped, with massive deposits of metals and industrial minerals ready to be unearthed.”

The deep seaport has additionally attracted army curiosity to facilitate deployments to the Indian Ocean, together with Indian and American vessels. The British Royal Navy’s flagship plane provider, HMS Queen Elizabeth, docked at Duqm Port in November 2021 for joint workouts. 

Already in 2009, Oman’s undersecretary for Ports and Maritime Affairs stated Duqm can be a “major port of name for naval vessels,” a cable revealed by Wikileaks revealed.

But Oman struggles to maneuver the needle to draw enterprise homeowners who nonetheless view Jebel Ali because the area’s hub to attach with the world. In accordance with the Nationwide Heart for Statistical Data, the UAE captured 24% of Oman’s non-oil export and re-export in 2017.

Regardless of formidable targets, Oman’s logistic sector stays in its infancy. Whereas Jebel Ali Port ranks because the world’s eleventh, dealing with in 2020 13.5 million 20-foot equal unit (TEU) containers, Oman’s largest port — Salalah — recorded 3 times much less quantity and ranked forty third.

“Economically talking, Oman underutilized its port infrastructures. We’ve got constructed them, however the query mark proper now’s actually what are the financial advantages?” Wahaibi requested.