Oman seeks to be a major logistics hub in Middle East

According to Oman’s Minister of transport and Communication, Ahmed bin Mohammed al Futaisi, Salalah City has the potential to emerge as the Eastern gateway to the GCC (Gulf Cooperation Council) countries and to the rest of the Middle East. Indeed, much like the rest of the region, Oman is investing in several infrastructure projects, airports, road and rail and ports, as well as promoting its Salalah Free Zone, located at the Port of Salalah.

For example, Oman’s capital, Muscat, opened its new international airport earlier this year while Salalah’s airport is expected to open at the end of this year or early in 2014. Meanwhile roads and bridges are being expanded while a rail system is underway to link Oman with the UAE that will include connections to the ports of Sohar, Duqm and Salalah.

The ports are a vital part to Oman’s transportation and logistics plan. According to a JOC Group study, the Port of Salalah is the 6th most productive transshipment port globally.  Also, based on World Shipping Council data, it is the 5th largest container port in the Middle East and the 39th largest container port in the world. As a result of its global and regional status, the port is investing and expanding its operations.

In addition at a recent presentation at the Oman Projects Forum, the port’s general manager noted its expanded general cargo terminal and liquid jetty project are due for completion in the first half of 2014. Additional expansion plans for the port also include three new container berths. Originally planned for construction in 2008, the plan for the container berths was put on hold due to the global financial crisis. It is now expected that construction will begin in the 2015-2017 timeframe.

Other projects included in Salalah Port’s master plan and expected for implementation during the 2013-2020 timeframe include a tank farm, warehousing, as well as a cruise terminal.

According to the Port, one of its strategic goals is to encourage companies to add value to imported bulk and break bulk products to generate additional re-export business for the terminals. As such, the Salalah Free Zone, located at the port, announced plans to seek $15bn in investments by 2028.

The Free Zone is focusing on three clusters: Chemical and Material Processing, Manufacturing and Assembly as well as Logistics and Distribution. SAGA (Salalah Apparel, Garments & Accessories Industry, a joint venture company formed in conjunction with local investors in Oman and international partners to manage land development and the leasing of warehouses for apparel, shoes, garments, accessories etc. in the Salalah Free Zone area) in addition to DPDHL have already announced plans to open facilities.  Also, Algeposa, which has registered its entity in Salalah as Arabian Sea Port Services LLC, will build a 12,000 sq m warehouse to distribute grains and other commodities across the region.

As Oman looks to expand its logistics and transportation presence, what effects will these projects have on the overall region? Will the country’s projects help to reduce risks in moving oil, petroleum and other goods through the Straits of Hormuz? While its infrastructure projects are probably welcomed by shippers as an alternative hub to larger ones such as Jebel Ali and Jeddah, whether it will help reduce supply chain risks in such a volatile region is still questionable.