Investments in facilities across the surface, sea and air transport sectors could help realise Oman’s potential to be a major logistics hub in the Middle East
Oman’s logistics industry is going through a transformation to overcome infrastructure bottlenecks, a lack of investment in port-handling capacity and poor land transport connectivity with other GCC countries.
The main drivers behind the transformation are the Oman Logistics Plan 2020, which seeks to ease congestion and enhance capacity, and the Oman Logistics Strategy (SOLS) 2040 Plan to improve the country’s soft infrastructure, particularly the regulatory environment, support mechanisms, and institutions.
Logistics is one of the main non-oil economic sectors and contributed 4.9 per cent to the country’s gross domestic product (GDP) in 2015 (approximately $8.81 billion) and the government is keen on promoting Oman as a leading logistics centre in the region. The services sector will be the growth engine for the sultanate’s economy, driven by government focus on logistics, transportation, and tourism industries.
The logistics industry in Oman is likely to grow at a compound annual growth rate (CAGR) of 6.9 per cent between 2015 and 2020. Key drivers for economic growth are the infrastructure investments associated with national logistics development plans, economic diversification efforts, and trade with the GCC, Asia and Sub-Saharan African countries.
Amongst all freight activities in the sultanate, sea transport is the predominant mode, accounting for more than 80 per cent of total freight with most traffic handled by Sohar and Salalah ports.
As part of the government’s plan, Port Sohar has been promoted to handle sea cargo as an alternative to Muscat since 2015. Following major upgrades of facilities, Sohar handled nearly 50 million tonnes of cargo in 2015. Sea freight is likely to grow by 4.8 per cent in 2016, driven by increasing intra-region GCC trade and by transshipment demand from Asia, Europe, and Africa.
Oman’s National Rail Network is likely to increase capacity as the Logistics Strategy 2020 aims to provide the infrastructure required for the development of major hubs for handling international cargo.
Construction of a 680 km road link between Oman and Saudi Arabia will provide a more direct route between the two countries as well as reducing the number of border crossings, while increasing road transport efficiencies.
As international trade gains momentum with the expansion of cargo-handling capacities in major airports, Oman is likely to see steady upward growth in air freight in 2016.
Gopal R, global vice president, supply chain and logistics transformation practice, Frost & Sullivan, said: “Oman’s logistics Industry has the potential to be one of the key logistics centres in the region.”
“The emphasis on domestic output is creating scope for substantial cargo volume growth to and from Oman. This can trigger enhanced connectivity and network, which would then lead to a path for transforming the logistics industry to support trade for other countries as well,” he added.
However, this growth could be challenged by some major factors, one of which is surging competition, mainly from the UAE and Saudi Arabia but also from other countries with a similar portfolio and investment scenario for logistics service. Other challenging factors are the inefficient logistics infrastructure (especially, in the sub-urban areas) that limits the potential cost and time efficiency of operations, and a shortage of skilled labour relating to logistics services.