Duqm to be the main pillar of Oman’s economy
The now sprawling town of Duqm is spearheading the diversification of the Omani economy away from the reliance of oil revenues with new multi-million rial projects. The government is revamping its ports infrastructure from Muscat to Duqm, Suhar and Salalah, to adapt them for tourism but more importantly to increase industrial production and exports, and to exploit the country’s strategic location to create a hub for international shipping. Regional powers such as China and India are interested in establishing commercial and strategic footholds in the free ports, and Oman aims to capitalise on what it hopes will be economic integration into the world markets.
Duqm, located 550 km south of Muscat on a barren stretch of the coastal road, is the centrepiece of these plans. It was initially envisioned as a trade hub that would be connected to new rail networks and pipelines traversing the GCC, and would allow companies and states reliant on energy exports to bypass the Strait of Hormuz, for a quick getaway to the rest of the world.
The Duqm Special Economic Zone (SEZ) is attracting foreign investors in a positive way since the government started the acceleration of the financial reforms. Earlier this week, eight international contracting firms have been prequalified to participate in the tender for the design and construction of the power and water project. This project will be integrated with a seawater intake facility planned at the SEZ.
Its port is expanding capacity from a current 250,000 containers a year to 3.5 million, and it has a new airport, a ship repair yard, a logistics centre, hotels and property in development for the thousands of local and foreign workers officials hope will one day populate the 2,000 square kilometre sprawl making up the free trade zone. Future plans include a railway terminal and a pipeline linking Oman’s Saih Nihayda Gas Field to Duqm — both circumventing the strategic Strait of Hormuz.
State-backed Chinese and Indian companies have already pledged hundreds of millions of dollars in projects. Oman has allocated $10 billion and according to Yahya al Jabri, Chairman of the Duqm Economic Free Zone, the country is seeking another $10 billion in foreign investment by 2022.
The Chinese state-run company Oman Wanfang, has already pledged $370 million for roads, utilities and other infrastructure. Iran and Oman are in the process of establishing a joint auto manufacturing plant. The proposed projects could become “highly sought after”, according to a Middle East Institute report last August.
In a separate joint venture, Chinese investors would also develop an automobile assembly plant and a 1-gigawatt solar power generation facility.
Oman is also now reviving its flagship project for the free trade zone — the 230,000 barrel per day refinery. An agreement is now being finalised for Kuwait Petroleum International to develop the $7 billion refinery jointly with Oman Oil Company.
To power the industries in the free zone, a 300 megawatt power project is being developed by Marafiq, a joint venture firm set up by Takamul Investment Company (wholly owned subsidiary of Oman Oil Company) and Sembcorp Utilities of Singapore.
This gives the projects a strategic sea port location and a competitive advantage being in the path of international shipping lines in the Indian Ocean and the Arabian Sea, thus easing the process of transport in and out of the region. The spin-off of the Duqm projects will also create SMEs opportunities for Omani business people in various industries, from tourism, real estate, manufacturing, services, oil and gas.
The Duqm free zone is well placed to a be catalyst for Oman’s diversification programme. As a finance ministry spokesman put it, “Duqm fits very well with our diversification plans now that we are in the era of cheap oil. For the first time in 15 years, we are really putting Duqm in the fast lane.”