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Oman - Building & Construction

Oman is among the few countries in the world that are considered ideal for long-term investments. It is marked by modern infrastructure; a strong industrial base; a liberal investment environment; an export-oriented economy; a stable government with transparent corporate governance; the presence of institutions that protect investors and ensure their access to the market; attractive corporate tax and tax holidays; and laws and regulations that encourage enterprise.

Business Infrastructure and Services

Oman has the necessary infrastructure and facilities in place to cater to companies looking for the proper environment to place their investments.

Hotels

A large number of new hotel projects are being implemented and in the pipeline, which cater to the business and tourist sectors alike.

The Royal Opera House

The 80,000-square-meter Royal Opera House, comprising a commercial souq, five-star restaurants, coffee shops, high-end boutiques, lifestyle retail outlets, and an art exhibition gallery, will pave the way toward making Oman be known as a cultural destination that strongly supports and recognizes the importance of tradition, heritage and the arts.

Oman Convention & Exhibition Centre

The new exhibition centre, which will include a five-star convention hotel, exhibition halls, car parks, and an energy centre, will be an important landmark that will attract investors. It will also enhance the potential investors’ confidence as it will complement their commercial, industrial, and tourism activities.

Free Zones

The growth of the industrial sector is strengthened by a network of industrial estates, parks and free zones. The presence of free zones has led to the development of industries as the foundation for expansion of downstream activity.

Transport

The scale of investment across Oman’s transport sector is resulting in a high-quality internal transport network allied to strong external links, enhancing access to national and international markets. Presently, Oman boasts of excellent roads, a fully equipped international airport with other airport expansion and renovation and building projects in the pipeline, a number of domestic air terminals and ultra-modern port facilities.

Telecommunications Services

Oman has an efficient state-of-the-art telecommunications system that is constantly upgraded with new technology. OMAN’S ECONOMY is based primarily on petroleum and natural gas, which are expected to account for 78% of the government's revenue. Consistently high oil prices mean that Oman’s economy, like the rest of the Gulf, is very strong and continues to grow year on year. Record budget surpluses are adding impetus to Oman’s ongoing infrastructure and industrial development programme. Oman's proven recoverable oil reserves are estimated at 4.8 billion barrels, though the Ministry of Oil and Gas estimates that there are potentially 38 billion barrels of recoverable oil.

Oman has developed its natural gas industry to the point where liquefied natural gas (LNG) will account for an estimated 11% of government yearly revenues.

Oil and gas exports provide the backbone of Oman’s economy but the key strand of current economic policy is to gradually decrease the country’s reliance on oil income through downstream oil industry development (petrochemicals/metals), port development, IT start-ups, fisheries, and a modern and expanded tourism industry.

Market Report

Overview

Oman is one of the most stable countries in the region and enjoys farsighted leadership that has maintained pragmatic and creditable growth over the last 40 years.

In a move to diversify and expand its economy, while reducing its reliance on hydrocarbon resources the Government has been developing tourism and industrial sectors and investing heavily in infrastructure development particularly in the areas of ports, airports, roads and utilities.

These initiatives make Oman an attractive investment destination and an emerging market with tremendous potential. Oman emulates the successful business model of multi-use developments widely found across the whole Gulf region. These are small, integrated cities complete with hotels, residential units, retail and commercial space and entertainment and leisure facilities.

UK companies can proudly point to several prime examples of achievements in the areas of design, engineering and execution. The UK has a long tradition of supplying an extensive range of construction equipment, materials and finishing products.

The UK can expect, even in the face of increasing competition, particularly from Asian countries, to continue to do good business in:

• Construction related machinery and equipment,
• Building materials, accessories and services
• Large contracts put out by the Government (which provides most of the work for international firms).
• New ports, industrial and free trade zones, roads, retail developments, educational and training facilities, power, water and tourism projects are all either on the drawing board or in the process of being built.
• Local contractors are well placed to take on the work of buildings, small infrastructure projects and housing.

The long-term 'Oman Vision 2020' development plan highlighted the need for the Omani economy to diversify through a process of Omanization, industrialization and privatization. Oman is developing its light manufacturing sector through industrial estates managed by the Public Establishment for Industrial Estates (PEIE). More than 333 projects operate in the industrial estates, with a total investment of over $6 billion.

In addition to industrialization efforts, Oman is actively marketing itself as an upscale, environmentally conscious tourist destination. Through aggressive marketing campaigns and improved infrastructure, Oman hopes to triple the industry's contribution to GDP and eventually create over 114,000 tourism-related jobs. International investors are taking advantage of significant improvements in local infrastructure to develop ambitious new tourist projects. Investors hope to lure 3 million visitors annually with multi-faceted resort complexes located in Muscat, Sawadi, Yiti, Sifah, and Salalah.

New Investments

The sustained levels of economic growth and influx of foreign workers and companies into Oman has spurred an upsurge in the real estate market. Substantial investment in infrastructure, increased land distribution and more investor friendly ownership regulations provide further impetus to the property market. A number of major projects at an estimated investment of over $30 billion are underway or proposed in key sectors. The market is buoyant with opportunities in all areas of work such as design, supply, execution and management, both in short and medium terms.

Construction Sector

The construction sector represented a growth of nearly 20% over the last years. The private sector investment in the tourism sector alone reached approximately RO 958 million. Further RO 2.8 billion is envisaged to be invested in gas-based industries and RO 355 million in metal, petrochemicals, fertiliser and cement based industries. In conventional areas private sector investment will be around RO 2.5 billion. Private sector investment is driven largely by increasing demand for leisure properties and second homes from Omani and GCC citizens as well as from abroad. Although shortage of material and resources across all sectors against sustained levels of demand continue to influence current costs.

The Sultanate of Oman is currently witnessing an unprecedented surge in construction activities with the implementation of prestigious residential projects, the building of large-scale industrial plants, and the setting up of additional facilities for tourists.

Oman’s five-year spending plan for the period 2011 to 2015 has an estimated budget of $77.9bn, representing a 113% increase. Of this total figure, $15.58bn will be allocated to the oil industry and $7.79bn will be allocated to property development

Specific projects include new resort villas, conference facilities, leisure resorts, golf courses and hotels as well as the refurbishment of some of the major existing international hotels. Multi-hotel complexes are planned for Muscat’s new convention centre, as well as in Salalah, Yiti, Sifah, and Duqm. The Wave, which represents the first opportunity for non-Gulf Cooperation Council (GCC) residents to purchase freehold property, is under construction, with units soon to be ready for occupancy.

Blue City recently initiated construction in Sawadi, approximately 60 miles northwest of Muscat, and a feasibility study has been initiated for an approximately $1 billion Healthcare City adjacent to Blue City.

Major Hotel Projects in Oman

• Al Madina A’Zarqa (Blue City) – $15-20 billion;
• Mirbat Beach Project – $2.5 billion;
• The Wave, Muscat – $2.4 billion;
• Integrated Tourist Resort Complex – $2 billion;
• Salam Yiti project - $2 billion;
• Omagine Project - $1.6 billion;
• Barka Resort - $1.1 billion;
• Salalah Beach - $850 million;
• Intercontinental Muscat - $800 million;
• Khasab Resort - $780 million.

Airports

The construction of the two airports is organised in four packages labelled as Main Contract (MC) 1/2/3 and 5. MC1/2/3 pertain to Muscat and MC5 to Salalah (3m passengers a year). MC1 covers airside facilities including a new 4.3km 60m Code F wide runway and landside connectivity. MC6 covers IT systems for Muscat and Salalah. In addition work on six more airports is progressing at Sohar, Duqum, Ras Al Hadd, Adam, Haima, Shaleem and Musandam

Ports

The largest single industrial investment target is the port city of Sohar, near the UAE border. It has witnessed approximately $14 billion in government investment alone in the financing of several industrial projects.

Oman's primary seaport Mina Qaboos in Muscat is being re-developed as a cruise terminal and tourist port at a cost of $150million. This includes a brand new passenger terminal with modern tourism amenities as well as an additional 650-metre-long berth.

A Dry Dock Complex, including a ship repair yard and naval and commercial docking facilities at Duqm in the Gulf of Masirah is also currently underway. Planned around this development is a brand new city for over 60,000inhabitants eventually. A full complement of roads, airport, utilities and other amenities are also part of this development.

National Railway

Oman is planning to build its first railway system running between the Oman/UAE border in the north and Salalah in south, spanning a length of almost 2000 km.

The Oman National Railway as it is currently known will be a network of five main sections with a total of over 30 passenger and nearly 10 cargo stations.

Apart from key components such as tracks, civils, electrification, rolling stock etc, opportunities can be expected to arise throughout the life of the project in the following areas:

• Topographic Survey, including aerial survey;
• Geotechnical Investigation;
• Hydrological studies and Hydraulic Analysis;
• Integration of logistical and commercial infrastructure.

Road Building

In addition to extensive highway rehabilitation work and major new roads, flyovers and interchanges in the capital area, several major road-building projects are proposed or underway in the interior regions aimed at connecting the many outlying areas to the main trunk routes.

A new coastal road linking Barka, just north of Muscat and Shinas near Buraimi, the Duqm road network, Ruwi Wadi Kabir Link Road, the Azaiba Interchange Wadi Adai-Al Amerat Road Dualisation, Dhofar-Wusta single carriage way, which is an alternative land route from Muscat to Salalah are some of these.

The total spend on this count alone is likely to be nearly $2 billion.

Retail and Commercial Space

Approximately 68,000 sqm of new gross leasable area (GLA) that has been planned for commercial and retail space in 2007 are beginning to come on stream now. Another 75,000 sqm is in the pipeline to be completed by 2011 (Retail International figures). Total GLA available will go up to 343,000 sqm, by 2012 (200,000 sqm in 2006).

Construction of a new $300m business park in Azaiba is scheduled to break ground in 2010 and is due for completion by 2013. Two other developers are developing 35,000 sqm and 13,000 sqm of office space respectively in Qurum. In addition a number of mix-use developments planned around the country provide for retail spaces.

Clusters

Encouraged by the success of Knowledge Oasis Muscat (KOM), an IT sector cluster initiative, other sectors are also moving towards cluster development. Taking into consideration Sultanate’s long-term development plans, the major focus areas in the coming years, apart from tourism is likely to be manufacturing and services. In this context the country is gearing up to develop more clusters. A few examples are: International Trading Houses in Muscat, Exhibition Centre in Seeb, Value Park in Sohar and Metal City in Salalah. Industry data sources predict a 10% expansion in cement usage through 2010-2011.

A total of 44 different road projects linking major urban centres and interior regions are targeted for development. Oman emulates the successful business model of multi-use developments widely found across the whole Gulf region. These are small, integrated cities complete with hotels, residential units, retail and commercial space and entertainment and leisure facilities.

Environment Impact Assessment

The application of international environmental standards is instrumental in enhancing the Omani environmental regulations, eco-tourism and eco-design, marine ecology and tourist developments. The Environmental Impact Assessment is imperative to ensure that decision-makers consider environmental and social impacts before deciding whether to proceed with new projects. The goal is to identify innovative solutions for the planning and implementation of suitable systems and procedures.

The ways and means to reduce adverse impacts and shape projects to suit the local environment are to be found by predicting environmental impacts at an early stage in project planning and design.

Both environmental and economic benefits can be achieved through the use of Environment Impact Assessment such as reduced cost and time of project implementation and design, avoided treatment costs and impacts of laws and regulations.

Market Entry

Partnership Strategy

• A company should visit Oman in order to appreciate its distinctive culture.
• Personal relationships are key to finding and retaining a partner.
• Agents are commonly used, but not always required.
• Agreements generally require significant lead time and follow-up before finalization.
• Importers must be registered with the Ministry of Commerce and be members of the Oman Chamber of Commerce and Industry.