The Oman Convention and Exhibition Centre ... MICE focus.
Geared for growth
In a decisive move to put the country on a path of growth, Oman’s government has earmarked a third of its budget for infrastructure development. This year alone will see the sultanate spend $10 billion on various projects, says Dhushyanthi RAVI.
01 February 2012
OMAN’S government is steering the construction sector ahead this year with about a third of the country’s budget earmarked for development projects. This strategy is in line with the sultanate’s efforts to enhance standards of living and its eighth five-year plan, which sets aside 37.7 per cent of its total budget for infrastructure development.
The country’s 2012 financial plan – its largest ever – envisages a spending of RO10 billion ($26 billion), which according to Finance Minister Darwish bin Ismail Al Balushi, would focus on macro-economic stability and economic diversification, with “special emphasis on the social dimension of development, allocating more funds for education and training, employment, housing, water and improving living standards of citizens”.
Ratified last month, the budget marks the second year of the Eighth Five-Year Development Plan ending 2015, and sees the country boosting the outlay for the plan by 26 per cent to RO54 billion ($140 billion) from the RO42.7 billion ($111 billion) originally allocated. The increased government spending goes towards addressing social housing requirements, development projects and economic diversification.
Oman has grappled with public protests over the past year demanding more jobs and better living standards, and its growth plans will be further boosted by the $10-billion GCC fund allocated last year for its development over the next 10 years.
The International Monetary Fund (IMF), sees this huge investment driving the country’s economy in the medium term with new infrastructure projects, including a rail network, airports and sea ports. However, it warns that the biggest risk is a lasting drop in oil prices. “Higher government spending is raising the oil price that would be needed to balance the budget,” it said.
Oil sales account for 81 per cent of the total expected revenues of RO8.8 billion ($22.9 billion), which is 21 per cent more than the figures for 2011.
Abdullah bin Rashid Al Kiyumi, director-general of projects at Oman’s Ministry of Housing, said the government will spend $10 billion on construction, an increase of 23 per cent over the corresponding figure for 2011.
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The administrative headquarters at Salalah Free Zone. |
Speaking at the Oman Construction Summit in Muscat last month, Al Kiyumi said: “The construction industry is one of the mainstays of our economic growth and prosperity. This is strongly evident in the substantial outlays announced by the Omani government towards construction projects and infrastructure schemes in the 2012 state budget, as well as the revised Eighth Five Year Development Plan.
“Spending will continue apace on a wide array of infrastructure projects, notably roads, ports, airports, water supply schemes, sewage treatment plants, real estate projects and dozens of schools and hospitals. Construction of the RO1 billion ($2.6 billion) Batinah Expressway project will get under way as well, while private sector investment in tourism and leisure-related ventures is envisaged in a major way.”
Oman is building three new airports and plans to upgrade its main airports in Muscat and Salalah, its second-largest city. It is also increasing power generation capacity by about seven per cent.
Al Kiyumi said allocations towards the housing sector have surged 21.5 per cent from RO266 million ($690.9 million) in 2011 to RO323 million ($839.1 million) this year. This includes a government commitment to earmark RO120 million ($311.7 million) for the construction of 2,500 housing units for low income citizens.
Apart from infrastructure, the oil and gas sector too is expected to offer opportunities for the construction sector with projects worth RO386 million ($1 billion) in the pipeline. And with the sultanate making concerted efforts to diversify its economy, industrial expansion is a major focus area as can be seen from the expansion of the various industrial zones.
Among the landmark projects opened last year is the Royal Opera House Muscat, a much-awaited project that continues to see expansion on site with the construction of a shopping mall (see separate article). Another striking development under construction is the $1-billion Oman Convention and Exhibition Centre (OCEC) in Muscat. OCEC will feature an elaborate tiered auditorium to seat 3,200 and exhibition halls with 22,000 sq m of column-free space. Site preparation works have been completed, for the centre which will have a two-stage opening schedule with the exhibition halls coming online in 2014, and the auditorium, banquet halls and meeting rooms in late 2015.
Among other developments, the Apex Medical Group (AMG) has signed a 500,000-sq-m land acquisition agreement for a major integrated medical tourism project in Salalah, highlighting the investor confidence the sultanate enjoys in the market.
Airports & ports
Oman embarked on a series of airport construction and expansion plans in late 2010, which included the extension of Muscat and Salalah airports and the construction of a new airport in Duqm.
The Duqm airport is one of the four regional airports being built to link interior regions with Muscat, the other three being Sohar, Ras Al Hadd and Adam.
Work has started on the redevelopment at Muscat International Airport, which will include an iconic air traffic control (ATC) tower, an air transport management complex, a contingency and training centre, plus fire and sea rescue facilities.
The project, which includes 11 new buildings along with associated external works, is part of a wider redevelopment scheduled for completion in 2014, which will allow the airport to handle 12 million visitors per year.
Meanwhile, Strabag Oman, a subsidiary of the Austrian construction group Strabag, is working on a new port in Duqm under a $200-million contract awarded by the Ministry of Transport and Communications. It entails the construction of warehouses, shipyard access, docks, and expressways, as well as ancillary facilities.
Among other developments, Sohar Industrial Port Company (SIPC) has revealed plans to establish a new port city at the Sohar Port in order to offer a safe and comfortable environment of work for the industrial and services organisations and visitors to the port. The construction of the port city is expected to start shortly, to be carried out in three main phases.
Power & water
A total of RO390 million ($1 billion) has been earmarked for the electricity and water sector this year.
Mohammed bin Abdullah Al Mahrouqi, chairman of the Public Authority for Electricity and Water (PAEW), said the government is currently considering the construction of new power plants in Salalah and Duqm and that work is under way to complete the construction of four power plants in different governorates.
He added that the first power and desalination plant in Salalah will produce 450 MW and 15 million gallons of water. The plant is expected to begin commercial operations in April this year.
The second project comprises Phase Two of the Sohar power plant, while the third project is Barka power plant (third stage), each of which will produce 750 MW and will start commercial operations in 2013. The first stage of the two plants is expected to start in the second quarter of 2012.
The fourth project – a plant at Sur which will produce 2,000 MW – is expected to start commercial operations by mid-2014, he said.
According to Al Mahrouqi, tenders will soon be issued for the construction of a 40-million-gallons-per-day (gpd) water desalination plant in Al Ghubra, which is expected to be completed by 2015. The authority is also preparing designs for the construction of a water treatment plant in Wadi Daiqah to supply potable water to the wilayats in Muscat Governorate.
He pointed out that PAEW – formerly the Ministry of Housing Electricity and Water – plans to construct new plants in the governorates of northern Al Batinah and Muscat, in Quriyat, each with 44 million gpd capacity.
Roads & railway
The Ministry of Transport and Communications is currently preparing an expert panel to steer the railway project in the sultanate, according to Dr Ahmed bin Mohammed Al Futaisi, transport and communications minister.
The financial and technical offers from pre-qualified consultancies for design and supervision were recently opened. The total length of the railway in the sultanate would be about 1,061 km (see Regional News).
In the roads sector, Dr Al Futaisi said the ministry is currently constructing several projects as well as repairing and dualising existing roads. One such project that is due to start this year is the Al Batinah Expressway which extends Barka to Khatmat Malaha in the wilayat of Shinas, with a total length of 256 km. This project has acquired additional significance following the conversion of Port Sultan Qaboos to a fully-fledged tourism port.
Other major projects due to start this year are the 750 km Adam-Thamrait dualisation project which aims to ease the traffic in the northern governorates and links them with the Al Wosta and Dhofar governorates; and the Marfah-Daris road in the Wilayat of Nizwa.
Meanwhile, Larsen & Toubro’s subsidiary L&T (Oman) has recently secured two orders worth $177 million for the construction of the Wadikabir-Darsait Road and the Mahlah-Ghubbrat Al Tam-Ismaiyah Road.
Commercial & residential
Despite the downtrend in the real estate sector, a number of projects have recently been announced including the Qurm Hills being developed by Alargan, a Kuwait-based real estate developer.
The RO51-million ($132.43 million) development, covering an area of 165,000 sq m, will feature 109 plots, including road networks, service facilities and landscaped park area. It will comprise a variety of residential units and retail, commercial and office space. Aargan has appointed Parsons as the project’s design and construction consultant. Infrastructure development work has begun on the project, which is located in Muscat behind Al Harthy Complex and the Sultan Centre.
Other new projects include Orascom Development’s Sifawy Boutique Hotel in Jebel Sifah and Alfardan Properties’ Meydan Alathaibah.
The four-star Sifawy Boutique Hotel in Jebel Sifah has 55 rooms and suites. Jebel Sifah – one of three destinations the real estate and hotels firm is developing with local partners – is 45 km outside Muscat and will cover an area of more than 6.2 million sq m. It will include four-star and five-star hotels, shopping centres, restaurants, a marina and a golf course.
Meydan Alathaibah, one of the largest mixed-use developments in Oman, is Alfardan Properties’ first project outside Qatar. Strategically located in the Al Athaiba district of Muscat, it integrates four residential blocks with a five-storey office building in a luxurious mini-community development concept.
Another significant development is the Sur Gate project, which is expected to be completed in four years. Located in Sur Industrial Estate, the estimated RO120-million ($311.8 million) project covers an area of more than 200,000 sq m and will be launched before the end of this year.
Sur Gate will comprise a hypermarket, shopping mall, hotel and business centre, commercial area, town houses, and an accommodation complex for the industrial estate employees. Al Sharqiya Real Estate Developers is developing the integrated commercial project.
Industry
In a major initiative to develop its industrial infrastructure, Oman has earmarked more than RO70 million ($181.8 million) to be invested in large extensions at industrial zones in the sultanate, where investment growth last year stood at $9.4 billion.
Three free zones – in Sohar, Salalah and Al Mazyouna – are being expanded, with the first stage of a multiphase project to develop about 3.5 million sq m of land now under way, Commerce and Industry Minister Shaikh Saad bin Mohamed Al Saadi said.
The General Establishment for Industrial Zones has charted out a long-term strategy for 2011-2025, under which about 133 million sq m of land will be developed.
The Salalah Free Zone is being built in multiple phases, with Phase One comprising 2 sq km of distribution, logistics, freight forwarding and manufacturing facilities over a 6 sq km land area. Phase Two, which is currently under construction, will provide around 8 sq km of additional facilities, with a focus on light and medium industrial units while the final phase due to start in a few years. The Salalah Free Zone Company (SFZC) has recently approved the design of its new state-of-the-art administrative headquarters and investor offices building at the zone, construction work on which is expected to start this year.
In the energy sector, Oman plans to boost capacity at its Sohar refinery by up to 50 per cent by 2016 at a cost of $1.5 billion to satisfy its own rapidly rising fuel demand, the Oman Oil Refineries and Petroleum Industries Company (Orpic) said. State-owned Orpic is conducting the front-end engineering design (Feed) work and plans to tender for the engineering, procurement and construction (EPC) phase later this year, with construction to start before the end of the year.
In another development, private investment funds Terra Nex of Switzerland and Germany’s Middle East Best Select (Mebs) plan to build 400 MW of solar power generating capacity in Oman, the European investors said. Terra Nex and MEBS plan a $2-billion integrated project to develop solar technology, including facilities to manufacture solar panels for the sultanate and for export.
According to Terra NexDavid Heimhofer, the government aims to produce 10 per cent of its energy needs from renewable energy resources by 2020. The project would be financed largely by investors from Germany, with MEBS mainly funded by a group of German institutional and individual investors.
