The government of the Sultanate intends to turn the Arabian country into a major logistics hub. By doing so it thus follows the path the United Arab Emirates or Qatar have successfully
gone down. It is part of the state’s economic diversification strategy to become less dependent of the dominant oil and gas sector, which shrinks continuously but still accounts for nearly half
of the country’s GDP.
Ahmed bin Muhammed al Fataisi, Oman’s minister of transport and communication, put it straight in his keynote address to the roughly 150 participants of the recent GCC Supply Chain and Logistics
Conference held in Muscat. “In future, transport and logistics will be one of our important economic sectors.” He went on to say: “We will focus on developing a logistics hub and leapfrog our way
into the ranking of the 10 countries figuring on the World Bank’s Logistics Performance Index (LPI) within the next five years.”
Quite a way to go, though.
Oman lags behind
Currently Oman is ranked 59th among 160 countries listed in the LPI. The pole is held by Germany, followed by the Netherlands, Belgium, the United Kingdom, Singapore, Sweden, Luxembourg, the United States and Japan on tenth position.
On the Arabian Peninsula Oman lags behind all other members of the GCC alliance of six Middle Eastern countries as the LPI ranking reveals. Leader of this regional competition are the United Arab Emirates (LPI rank 27), closely followed by Qatar (29th), Saudi Arabia (49th), Bahrain (52nd) and finally Kuwait (56th).
So what has to be done by the Omani government to have their country climb fast up the LPI ladder and develop this emerging industry to become a game-changer for the Sultanate’s economic perspective?
Broad range of tasks
A lot, indeed! But where to begin with in view of the many tasks which must be assigned?
Above all a robust legal framework has to be set up to attract and protect international investors. This has to go hand in hand with reducing bureaucratic hurdles which more than once drove foreign enterprises to despair that intended to get a business license from the authorities. “The biggest challenge we are facing is bureaucracy and people with a lack of ambitions,” frankly admitted Sayyid Faisal bin Turki Al Said, the director general marketing and media of Oman’s Authority for Investment Promotion & Export (ITHRAA) during a panel session at the above mentioned conference. As result, quite a number of enterprises interested in doing business in Oman have turned their back to the country and decided to rather seek their commercial fortune in Dubai or Abu Dhabi.
Things are slowly improving
Also, a pool of qualified young local talents is needed to take on responsibility from an early stage. Says the ITHRAA chief: “Roughly 70 percent of the people working in Oman’s logistics sector have a sub-educational background.” Not a real door-opener for multinational acting forwarders to pick that country for doing business there.
However, things seem to have partially changed for the better lately. While 5 years ago there was no single university or academy offering logistics education to students there are a number of institutions meanwhile doing just this. As a consequence, the logistics industry is seen by a growing number of locals as an attractive sector to work in.
A mirage could turn into reality
Should the existing obstacles be overcome step by step in a joint public-private effort Oman’s transformation into an attractive logistics destination could turn from a mirage into reality.
This all the more since the state is uniquely positioned, lying at the crossroads of two major water bodies – the Indian Ocean and Arabian Sea – through which a sizable chunk of global shipping and trade passes.
Currently, a railroad spanning 6,000 kilometers across the Arabian GCC states is being built, connecting Oman with Saudi Arabia, the UAE, Bahrain or Kuwait. In Duqm, a port city located roughly 500 kilometers south of the capital Muscat, a transshipment and distribution hub is in the making. “We are ideally placed to serve as a gateway for the Middle East, East Africa and the west coast of India,” stated the project’s CEO Reggy Vermeulen at the Muscat-held conference.
Air freight is a key driver within the transformation strategy
However, of paramount importance for Oman’s ambitions to position the Sultanate on the international logistics map is air traffic, namely air cargo. Oman Air’s CEO Paul Gregorowitsch put in a nutshell during the logistics event: “Together with our partner Cargolux we intend to create new flows of goods and combine air and sea shipments, turning Oman into a hub for transshipments.” Of great help is the construction of a new airport near the capital city, located adjacent to the existing one. It will comprise two runways and offer the cargo industry state-of-the-art cooling facilities for processing temperature critical items.
The new airport is slated to go online in 2017. Until then state-aided Oman Air will break even, assures airline chief Paul.