Oman invests in ports with eye to turning into Gulf gateway

“We want to significantly improve the contribution of logistics into our economy. … We are actually building the sector for the next generation. That is our responsibility,” Abdulrahman Al-Hatmi, CEO of Oman’s nationwide logistics group, ASYAD Group, advised Al-Monitor.

As Oman crude oil reserves dwindle — they may very well 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 economic system and diversify authorities earnings — 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 heart of world delivery routes to emerge because the Gulf’s gateway. For centuries, Oman reigned over an enormous maritime buying and selling empire encompassing a lot of the Western Indian Ocean.

Today, certainly one of Oman’s strategic benefits is its location outdoors of the Strait of Hormuz. This slender 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 mentioned 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 clients in June 2019, tanker insurance coverage charges jumped tenfold

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

“Even if neither overt war nor covert attacks affect the UAE, the perception of them might convince some shippers to increasingly utilize neutral Oman’s ports,” said Ryan Bohl, a Middle East analyst at the US-based geopolitical-risk firm Stratfor. Indeed, Oman maintains cordial relations with the Islamic Republic of Iran, with which it shares the Strait of Hormuz.

“Oman could serve as a logistic hub for the region, not a market on its own,” mentioned Mahmood Al-Wahaibi, an city planning knowledgeable who labored for the Oman National Spatial Strategy till September 2021 and was concerned in Oman’s growth plan, Vision 2040. The nation’s gross home product ranks 70th globally. He advised Al-Monitor, “Agreements with neighboring countries are essential to make it happen, but currently there is no political will from other Gulf states. They do not want us to dominate the region’s logistics market.”

Hatmi believes ​​Oman is “well positioned” concerning its location. “We talk to our logistics counterparts in the Gulf Cooperation Council (GCC) countries on how to leverage that,” he mentioned, calling on the six GCC states to “work together” on bettering logistics corridors.

Dead-end street, incomplete railway

About a 400-kilometer (250-mile) drive from Oman’s capital, Muscat, lies an instance of the challenges forward. The solely street that connects the Sultanate to Saudi Arabia ends abruptly on the border. “The Ramlet Khelah border post is ready on our side, but we do not know when the entry to Saudi Arabia will be officially open,” a Royal Oman Police agent advised Al-Monitor.

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

There is hope, although. The GCC railway, a regional rail community that has but to materialize, is a “pivotal project” that may “transform” Omani ports, Wahaibi mentioned. “It would change the region’s logistics dynamics but also the political environment, enhancing mutual trust.”

Besides financial advantages and easing intra-Gulf mobility, the rail community would additionally lower 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.

But Oman’s ambitions to be the Gulf’s entry level rivals the UAE dominance in logistics. Emirati port operator DP World strikes nearly 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 couple of quarter of the emirate’s GDP.

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

Oman might flip the nascent Saudi Arabia-UAE financial competitors into a chance. “For Saudi Arabia, Oman is an alternative to the UAE in terms of ports and logistics — kind of a plan B. So if anything happens with the UAE, it does not affect them,” Wahaibi mentioned.

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

Competition between Gulf ports which have made its port’s enlargement “all the much harder” isn’t Dubai’s solely problem, delivery newspaper Lloyd’s List reported. The Middle 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.

But intensifying strain 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 opportunity is limited by the reality that the UAE’s ports are more developed and access the large internal market of the UAE itself. Some shippers will continue to risk the potential of disruption,” Stratfor’s Bohl advised Al-Monitor.

Oman is home to 3 main ports: Salalah, Duqm and Oman’s main 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 be increasing to function a container, meals and chemical substances 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’ ultimate 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 Middle East. “We expect this importance to only grow further in the future,” an APM Terminals spokesperson advised Al-Monitor, noting the terminal’s “world-class efficiency.” 

In 2020, the United Nations Conference on Trade and Development rated Oman’s ports No. 1 when it comes to pace of container dealing with, barely quicker than in Emirati ports.

About 550 kilometers (340 miles) north of Salalah, the coastal city of Duqm was anticipated to turn out to be a terminal outdoors of the Strait of Hormuz for exporting Gulf oil to worldwide markets. But regional cooperation didn’t materialize, and Duqm is “kind of lost” between the Sohar and Salalah ports, Wahaibi mentioned, “not knowing exactly what to position itself for.” 

Hatmi mentioned Duqm is nicely positioned to serve Oman’s industries like oil and gasoline, fisheries and mineral. “We talk about billions of tons of reserves, so Duqm could be used to export to fast-moving countries like India and China,” he mentioned. The US Department of Commerce’s International Trade Administration famous Oman’s host mineral sources “still relatively untapped, with large deposits of metals and industrial minerals waiting 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 workout routines. 

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

Yet Oman struggles to move the needle to draw enterprise homeowners who nonetheless view Jebel Ali because the area’s hub to attach with the world. According to the National Center for Statistical Information, the UAE captured 24% of Oman’s non-oil export and re-export in 2017.

Despite bold targets, Oman’s logistic sector stays in its infancy. While Jebel Ali Port ranks because the world’s 11th, dealing with in 2020 13.5 million 20-foot equal unit (TEU) containers, Oman’s largest port — Salalah — recorded thrice much less quantity and ranked 43rd.

“Economically speaking, Oman underutilized its port infrastructures. We have built them, but the question mark right now is really what are the economic benefits?” Wahaibi requested.

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