Oman reorganises infrastructure development priorities

With a multi-billion-dollar pipeline of public sector contracts and significant private sector developments planned for the remainder of the decade, the construction sector remains a highly significant and growing sector of the Omani economy. In the face of substantial headwinds driven by lower oil prices since the middle of 2014, the government is steering towards a diversified economy, even as it is trimming expenditures in the short term and delaying some schemes created in the years when GCC states were enjoying windfalls from higher hydrocarbons revenues.

Private sector home builders, shopping mall developers and building materials suppliers see room for optimism in a country that, according to the World Bank, experienced one of the fastest average annual population growth rates of any nation between 2011 and 2015, at 8.5%. “Demand for construction supplies is stable and expected to grow further,” Mahmood Al Rawahi, chairman of Mahmood Al Rawahi Group, told OBG. “This is due in part to the huge demand expected for low- and medium-income housing over during the next five-to 10-year period, owing to the country’s demographics: a burgeoning youth population and growing expatriate community.”

This view is echoed by Hisham Moussa, CEO of development firm Alargan Towell. “Given the demographic realities of the country, including a growing youth population, we expect demand for affordable housing to continue to grow unabated,” he told OBG. Similarly, Varinder Arora, vice-president of Oman Shapoorji, a local construction firm, summed up the sentiment thus: “Our expectations are high for new projects in the hospitality, logistics and industry sectors,” he said. “The growth in these sectors will offset a softening residential market in the sultanate.”

Labour

The construction sector is the largest employer in Oman, providing jobs for 39% of expatriate workers and 25%, or 52,571, of all Omani private sector staff, according to National Centre for Statistics and Information (NCSI) data published in July 2016. The 661,735 foreign construction workers in the sultanate account for 37% of all expatriates in the country and close to 14% of the entire population. Although the sector employs a significant number of Omanis, some construction companies struggle to find citizens with the skills and experience necessary to help them meet 30% Omanisation quotas. “Across the board, the biggest issue for the construction sector is manpower,” Dharmendra Sharma, CEO of Al Arkan Construction, told OBG. “Firms in the industry are always in a balancing act of recruiting the correct proportion of Omanis and expats, and it is not easy.”

Contribution

In 2015 the construction sector contributed OR2.1bn ($5.5bn) to GDP at constant prices, a 10% increase over the OR1.79bn ($4.6bn) generated in 2014, as per NCSI figures. At current prices, construction output was OR2.06bn ($5.4bn) in 2015, accounting for 10.9% of non-petroleum activity, making it the third most productive non-oil sector behind wholesale and retail, valued at OR2.29bn ($6bn), and manufacturing (excluding refined petroleum products), which generated around OR2.41bn ($6.2bn).

Between 2014 and 2015 the economic contribution of the hydrocarbons sector in Oman fell from 44.5% to 33.1%. Through this reshaping of economic output, construction saw its contribution to overall GDP increase from 5.9% to 7.5% over the same period. In its World Economic Outlook 2016, the IMF forecast GDP growth in Oman would reach 1.8% in 2016 and 2.6% in 2017, and in March 2016 it welcomed measures to cut government expenditure and reliance on public sector spending to fuel growth. “The decline in the oil price has underscored the need to accelerate economic diversification and to increase the role of the private sector,” the report said. “Enhancing the business environment, improving government efficiency and passage of the Foreign Investment Law will facilitate increased private sector investment.”

Wait & See

Many construction firms adopted a cautious approach in the first half of 2016, with companies anticipating much firmer commitments on future public sector contracts in the latter half of the year. The decree promulgating Oman’s 2016 budget reflected this circumspection, requiring the Ministries of Finance and Energy to reassess spending plans after the first half of the year in response to potential changes in the macroeconomic climate. The 2016 budget included an 18% cut in development expenditure, from OR1.65bn ($4.3bn) in 2015 to OR1.35bn ($3.5bn). When compared to actual development outlays of OR1.8bn ($4.7bn) in 2015, this equated to a reduction of 25%.

The 2016 spending programme was based on an average price of $45 for one barrel of oil. As of December 2016, Brent crude was trading at $56 per barrel while Oman crude, which is usually sold at a lower price than Brent, was priced at $50.

Five-Year Plan

In tandem with its 2016 budget, Oman launched its ninth five-year plan (FYP) to cover the 2016-20 period, the final component of its Vision 2020 development programme. The fiscal forecasts in the document are based on oil prices between $45 and $60 per barrel, with planned investments over the period totalling OR41bn ($106.5bn) and an average annual spend of OR8.2bn ($22.6bn).

In addition, the FYP projects an annual average investment growth rate of 5% and a 3% average GDP growth rate per year. According to calculations by Oman News Agency, the sultanate spent OR67.1bn ($174.3bn) on 1100 projects during the previous five-year plan, indicating that spending has been reduced under the FYP. The new strategy outlines areas where opportunities for construction are likely to be created and maintained, with an emphasis on diversification into manufacturing, transport and logistics, tourism, fisheries and mining. In an analysis of the FYP, consultancy firm KPMG said that if the government is successful in enhancing the role of private enterprise in all sectors, following the lead established by public-private partnerships (PPPs) in the power and water industry, Oman may be able to navigate the near-term challenges caused by the current economic climate.

Prudent Measures

The government of Oman is adopting a prudent approach to investment on a case-by-case basis in response to wider developments across the GCC region. Predictions about the size of the project pipeline are therefore difficult to make. In a report released in mid-2015, UAE investment bank Alpen Capital valued ongoing construction projects in Oman among the top-100 contracts in the GCC in 2014 at $29.6bn, and predicted a compound annual growth rate of 7.6% for the country’s construction sector between 2014 and 2019.

According to Middle East business intelligence company MEED, the total value of new contract awards in the GCC will reach $140bn in 2016, a 17% decline on 2015, though the company expects the value of contracts in Oman to remain stable at $13bn. Since these predictions were made, however, progress has stalled on construction of the Oman national railway, designed to connect the sultanate’s major ports and cities with a pan-GCC rail network.

Rail Delay

These setbacks are likely to delay the scheduled completion of the regional network, which had been set for 2018 at a cost of $15.4bn. When finished, the railway would allow passengers and freight to travel 2177 km from Kuwait’s border with Iraq through Saudi Arabia – with connections to Bahrain and Qatar – and across the UAE to Oman’s ports at Sohar, Duqm and Salalah.

Progress in most countries had been slow even before the oil price declined in mid-2014, though Etihad Rail completed the 264-km first phase of its planned 1200-km UAE network in October 2015. Two months later the UAE’s Federal Transport Authority granted approval for commercial operations on this first stage, and by April 2016 Etihad Rail reported that 5.8m tonnes of granulated sulphur had been transported along the line stretching from gas fields in Shah and Habshan to the sulphur export terminal at the port of Ruwais. The 628-km second stage was set to connect to the ports of Musaffah and Khalifa in Abu Dhabi and Jebel Ali Port in Dubai, and extend the line west to the Saudi Arabian border and east to the border with Oman; however, on January 26, 2016 the UAE announced that it was suspending tendering for the proposed second stage, which is worth a total of $11bn.

In early May 2016 Oman’s MoTC issued a statement in which it insisted it was not abandoning plans for its part of the network, but that it had cancelled a management contract for the first 207-km stage of its railway, which would have linked the Sohar Port and Freezone in the north of the country with Etihad Rail’s line at the UAE border crossing near Al Ain in Abu Dhabi, approximately 100 km away. A consortium led by the Spanish company Técnicas Reunidas had been awarded the $149m project management consultancy for this first stage in February 2015.

The MoTC has described the national rail network as a major strategic project that will contribute to the sustainable development of the sultanate. The project, which is expected to comprise a 2135-km double-track network that will carry 120-km-per-hour (km/h) freight trains and 220-km/h passenger trains, will connect Muscat with a number of other Omani cities, new mining areas across the sultanate and the ports of Duqm, Sohar and Salalah. As well as stretching to the UAE border, a line will run to the Omani city of Al Mazunyah near the Yemeni border.

Before the announcement of the suspension of work on the first section of track, an Oman Rail executive disclosed in March 2016 that separate business cases were being made for each part of the network, with exploitation of new mining areas suggesting there could be demand for transportation of 100m tonnes per year of freight from mines to the ports. According to media reports, authorities are exploring the feasibility of domestic routes, such as a link between the Port of Duqm and Shuwaymiyah, Nimr and Thumrait, where substantial mineral deposits are located.

In the introduction to its “GCC Powers of Construction Report 2016”, Deloitte highlights the centrality of rail development to the future of the construction sector. “In Oman, over the past years the focus has been on the expansion of Muscat International Airport and the Batinah Expressway, whilst for the coming years the focus is planned to shift to rail.”

Airport Expansion

Another significant plank of Oman’s expansion to its transport infrastructure is the redevelopment and improvement of its international airports. Construction work on the new international terminal at Muscat International Airport is scheduled for completion by the end of 2016, with flights expected to commence in 2017. However, the project has faced delays and complications. For example, UK firm Ultra Electronics reported it lost £46.9m when its contract to provide IT and security systems at the Salalah and Muscat international airports was terminated on February 9, 2015, an action that led to the liquidation of Ithra – Ultra Electronics’ 70:30 joint venture (JV) with Oman Investment Corporation – on March 4, 2015. The MoTC subsequently awarded the contract to French group Thales.

In June 2015 Salalah International Airport’s new 65,638-sq-metre terminal opened with the capacity to handle 2m passengers a year and with a blueprint for further expansion to 6m passengers in four stages of construction. When Muscat International Airport’s new 580,000-sq-metre terminal launches it will be able to handle 12m passengers a year. There are also plans to progressively increase capacity to 24m, 36m and 48m passengers per annum in three stages so as to respond to anticipated increases in passenger numbers. NCSI data shows that around 5.2m passengers arrived at Muscat International Airport in 2015, while there were 5.1m visitor departures, representing increases of 20% and 17.5%, respectively, on the previous year. At Salalah, 496,000 passengers arrived and 526,000 departed in 2015, representing growth of 20% and 22%, respectively.

Road Building

Oman’s roads have seen significant development over the last decade. With 6591 km of roadways in 1996, the national network totalled more than 64,000 km by the end of 2013. Key stages of a number of major road projects are due to be completed between 2016 and 2018, improving the flow of goods and people around the sultanate.

The 265-km Batinah Expressway – the biggest of these projects – is being completed in 11 phases and will extend the Muscat Expressway to Sohar Port and Freezone and the UAE border. In a February 2016 report Gulf Construction magazine estimated that the total cost of constructing the new route was $6.7bn.

Another major project, the 65-km second section of the Diba-Lima-Khasab road in Musandam Governorate, is expected to cost $1bn and will involve the construction and operation of 18 bridges and a number of tunnels over a 20-year period. The Adam-Thumrait road dualisation project, meanwhile, involves upgrading the existing single carriageway into a four-lane dual carriageway. The road, which will run for 715-km, has been divided into segments, and contracts for the first two sections were awarded in early 2015 for a total value of OR201m ($522m). Construction on both sections is on schedule for completion in 2018, while the remaining 475 km has been divided into four segments for tendering at a later stage.

In addition, the MoTC is overseeing the implementation of a 247-km upgrade of the Bidbid-Sur dual carriageway, which links the Muscat Governorate with major provinces in the Al Sharqiyah North and South governorates. Contracts for phase 2A and 2B of the 132-km second section of the project were awarded to Larsen & Toubro Oman and Khalid bin Ahmed and Sons Construction in February 2014 at a combined value of OR189.8m ($492.9m). In February 2011 a JV between Italy’s Astaldi and Turkey’s Ozkar Insaat was awarded the OR125.23m ($325.2m) phase 1A, while a JV of UAE’s Habtoor Leighton and Turkey’s STFA was awarded the OR117m ($303.9m) phase 1B. The road officially opened in late 2016.

Oman’s mountainous terrain means many of these projects require feats of civil engineering. “We have faced many challenges and have built four high bridges, including the highest segmental bridges in the Middle East,” Ali Irvali, regional manager at Ozkar Insaat, told OBG. “It is the fifth year of the project, which started as a dual carriageway but was subsequently revised to three lanes in each direction.”

Ports

Oman has a long history of sea trade, and a key part of its diversification strategy is the development and expansion of its seaports, the largest of which is in the south of the country, in Salalah. The port is managed by Netherlands-based APM Terminals and was opened in 1998 in a deal between Maersk, SeaLand and the government of Oman. A $260m design phase tender has been floated for the third phase of the Port of Salalah’s development, which would include dredging and reclamation works, and the expansion of its southern breakwater to enable capacity to grow from 5m twenty-foot equivalent units (TEUs) to 7m per year.

The Port of Duqm is the country’s newest – a JV between Consortium Antwerp Port and the Omani government – and the site of several projects. The port lies in the remit of the Special Economic Zone Authority Duqm (SEZAD), which manages, regulates and develops economic activity in Duqm. With the fisheries industry earmarked as one of five sectors with the potential to drive economic diversification in the ninth FYP, early 2016 saw SEZAD award the construction contract for a fishery harbour in Duqm to domestic company Galfar Engineering and Contracting. The OR60.69m ($157.6m) contract was for dredging, breakwater and quay wall construction, and reclamation works to serve an industrial fisheries cluster.

A liquid storage terminal is also in the pipeline at Duqm. Phase one of the project will be financed by SEZAD, while Duqm Terminal – a unit of Oman Oil – will fund phase two. In August 2016 local media reported that seven international firms had submitted final bids for phase one of the development of the bulk liquid terminal. The winning company will carry out design, dredging, reclamation and quay construction work. Bidders are currently being pre-qualified for phase two, which includes topside infrastructure. In October 2016 the Turkish firm Serka Taahhut Insaat was awarded the contract to build the infrastructure of the port’s commercial quay. The project, which will cost approximately OR107m ($277.9m), will include the construction of two container terminals with a combined length of 1600 metres, with the capacity to handle 3.5m TEUs per year.

Sohar Port and Freezone lies to the north of Muscat, and the port has seen a stark increase in commercial traffic following the government’s decision to move all commercial shipping from Port Sultan Qaboos in Muscat by August 2014. As a result, the Oman International Container Terminal (OICT) – a JV between Hutchison Port, the government of Oman, the Netherlands firm C Steinweg, and a number of Omani Investors – was relocated to Sohar. June 2016 saw the official completion of the OICT’s Terminal C, which is capable of handling the latest class of 20,000 TEU container ships. Construction of a 5m-TEU Terminal D is planned to get under way in 2018 or 2019 and will increase the port’s capacity to around 6m TEUs.

Tourism

Port Sultan Qaboos is now being reworked into a tourist destination, with berths giving cruise ships and yachts access to the historic heart of Muscat’s centuries-old Muttrah harbour. Omran, the government’s tourism investment arm, first mooted its OR500m ($1.3bn) waterfront destination in January 2015, and as of July 2016 four tender packages had been floated. Local media reports state that construction work is due to start in the second quarter of 2017. The project is to be developed over a 64-ha site with zones for retail, business and residential development, along with six hotels ranging from three to five stars, waterfront promenades and recreation facilities. The project will be 51% owned by Omran, with the remaining backers made up of pension and investment funds, as well as private investors.

Integrated Complexes

Royal decrees issued in 2007 permitted the construction of integrated tourism complexes (ITCs), developments that allow non-GCC citizens to acquire freehold land and properties in the sultanate. When the first plans for these ITCs were unveiled a year later, they included communities of villas, apartments, hotels, retail and leisure facilities, featuring attractions such as a marina or a golf course. Although many of these plans were shelved with the onset of the 2008-09 global financial crisis and the subsequent slump in property speculation in the GCC, work began on six ITC projects.

One of these developments, Al Mouj Muscat, is a JV between Dubai-based Majid Al Futtaim and the Omani government, and has already been under construction for several years. In April 2016 the ITC awarded two construction contracts with a combined value of OR31.7m ($82.3m) to Omani firm Al Turki Enterprises for the building of 474 homes at two new residential developments on the site; four blocks of homes adjacent to the marina; and three apartment blocks.

A five-star beach-side Kempinski Hotel, which will comprise of 309 bedrooms and 68 serviced apartments, is also set for completion at Al Mouj by the end of 2016. Al Mouj is expected to provide a stream of construction work for contractors, with expansions predicted to continue for some time to come. “We would anticipate completing the development between 2025 and 2030, as we respond to demand and market conditions both here and abroad,” Nasser Al Sheibani, acting CEO of Al Mouj, told OBG.

Muscat Hills is another important ITC, and in August 2016 work began on the 250-room Muscat Hills Intercontinental Hotel Resort and Spa, which is due for completion by December 2018. The Ministry of Tourism announced construction could begin on a $2.5bn coastal ITC in 2017, pending the completion of international financing agreements. Featuring a harbour and marina, Omagine has been designed around seven pearl-shaped buildings and will include 2000 homes, leisure amenities and three hotels on more than 92,000 sq metres of land in Seeb, north-west of Muscat International Airport. The Omagine project is 60% owned by US-based real estate developer Omagine, and is slated for completion in 2024.

Shopping Malls

A study conducted by NCSI predicted that the sultanate’s population, which was 4.53m in October 2016, would increase by 2.4m by 2040. This forecast growth, combined with Oman’s track record as a peaceful and stable country, has fuelled investment in the retail sector. In 2015 alone more than 100,000 sq metres of gross leasable area (GLA) was constructed in Muscat, including Panorama Mall and Oman Avenues Mall. Larger still is the 137,000-sq-metre Mall of Oman, which is being built by Majid Al Futtaim at a cost of OR275m ($714.2m). With construction starting in 2017 and completion anticipated in 2020, the mall will have 350 retail outlets and a snow park, giving shoppers an experience similar to Ski Dubai at Majid Al Futtaim’s 255,489-sq-metre Mall of the Emirates. The UAE-based company already has two malls under its City Centre brand in Oman serving Muscat and Qurum, and it plans to open another of these in Sohar with a total GLA of 40,000 sq metres, as well as a community mall spanning a total of 16,500-sq-metres in the city of Sur.

The shopping centres springing up in Oman provide food and leisure outlets that cater to the country’s youth, with 57% of the population under the age of 25 as of the end of 2015. Mall of Oman will also have a 19-screen multiplex Vox cinema, with a further 61 Vox screens opening at the company’s other malls around the country by 2020, while Al Jarwani Group’s Palm Mall Muscat, set to open in the third quarter of 2017, will be built to include a 14-screen multiplex Vox cinema, a snow village and an aquarium. Oman’s demographics and projected population growth also offer retail opportunities beyond shopping malls. “Population growth is an important driver, so on the retail side we see strong demand for the construction of car showrooms, and there is also potential in the health and education sectors for private school buildings and small specialist hospitals,” Kevin Ellis, general manager at Majan Engineering Consultants, told OBG.

Residential

The rental market has started to appear strained in some areas during the first half of 2016, and market observers do not expect a recovery in the near term. “There has been a significant fall in demand for residential rental properties over the past two years,” Mehdi Borhani, chairman of Gulf Muscat United, told OBG. “The main driver has been low oil prices and the decreasing number of expats in the country. This trend is expected to continue for the next three to five years.”

Nonetheless, companies building villas and smaller apartment buildings still have reasonably full order books, with some even looking to expand. Local firm Al Arkan Construction, which is registered with the Tender Board Oman, has completed nine projects in Muscat, including a 45-villa affordable housing scheme, four residential building projects in Amerat, eight-storey residential and commercial buildings at various locations, a luxury villa development in Bausher, and two developments in Qurum and the Madinat Sultan Qaboos area with 14 and five villas, respectively. At the end of 2016 the firm was awarded four new projects, including several residential and commercial buildings, two strip malls and a multi-storey car park.

Demand continues to rise. “People are not worried about spending on real estate and other amenities, even though oil prices are down,” Al Arkan Construction’s Sharma told OBG. “Rent has gone down in old residential buildings, but new projects with full amenities are not reducing rental prices.”

Other building companies see a significant amount of potential for improvement work in older suburbs, some of which have been poorly served by utilities in the past. “There is a push in terms of urban renewal and infrastructure,” Ellis told OBG. “For instance, many areas are not served by sewers, so there is a demand for those to be built in many neighbourhoods, as well as for the installation of fibre-optic cables.”

Oil & Gas

Although the contribution of hydrocarbons to the country’s nominal GDP has fallen in recent years, from 45.6% in 2013 to 34.1% in 2015, there are still opportunities for construction firms in the sector. In February 2016 BP and Oman Oil signed an exploration and production-sharing agreement with the government of Oman for the second phase of the Khazzan gas field in Al Dhahirah Governorate, with final approval expected in 2017. The first phase, which was sanctioned in 2013, is expected to produce its first gas in 2017. BP says the two phases will involve the construction of a three-train central processing facility and the drilling of 325 wells over a 15-year period. Gas from the second phase is set to come on-stream in 2020. The company estimates the cost of developing both phases of the Khazzan field will reach about $16bn. At the time of publication, 80% of the first phase was complete.

By the end of 2016 Oman was also expecting to invite engineering, procurement and construction tenders for the construction of a subsea gas pipeline from Iran to the sultanate, to be financed on a 50:50 basis by Iran and Oman. However, Oman’s minister of oil and gas, Mohammed bin Hamad Al Ruhmy, told Reuters news agency that the construction would not be funded by his government’s existing revenues. “Oman has started talking to Japanese, South Korean and Chinese parties in order to raise finance, and this option has been received very well,” he said. “We are looking to receive finance for liquefied natural gas as per the initial understanding.”

According to Gulf Construction’s February 2016 overview of construction projects in Oman, two oil companies were in varying stages of commissioning $900m worth of contracts to develop solar power in the Oman oil industry. In both cases the projects being developed by Petroleum Development Oman (PDO) and Occidental Petroleum will use concentrated solar power (CSP) in enhanced oil recovery techniques, whereby solar energy is used to produce steam, which is in turn injected into wells to heat heavy oil and reduce its viscosity. The CSP system would replace the use of natural gas in generating steam. Domestic solar steam generator manufacturer GlassPoint was awarded the engineering and procurement tender for PDO’s Miraah solar thermal power plant, worth $600m, which is due to be completed by the end of 2017, and a feasibility study for Occidental’s solar power plant was valued at around $300m.

Water & Power

In 1996 Oman awarded the construction of its first independent power project, Manah power plant, on a build-own-operate-transfer basis. The facility was the first privately developed and owned power plant in the Middle East. Twenty years later a number of utility projects are at varying stages of completion. In March 2016 Oman Power and Water Procurement (OPWP) chose the Barka Desalination Company, a consortium comprising French multinational Engie, Japanese firm Itochu and Oman’s WJ Towell to finance, build and operate what will be Oman’s largest desalination plant in Barka, 60 km north of Muscat. The facility is scheduled to start supplying drinking water by April 2018 and will have a capacity of 281,000 cu metres per day.

The Salalah-2 independent power plant (IPP) is another facility currently under development. The project involves the acquisition of an existing 273-MW facility and the construction of a 445-MW gas-fired plant. Japan’s Mitsui, Saudi Arabian firm ACWA Power and Oman-based Dhofar International Development and Investment Holding Company (DIDIC) held a groundbreaking ceremony at the project site in the Salalah Industrial Area in October 2015. Completion of the project is expected in mid-2017.

In October 2016 a consortium led by Mitsui and comprising ACWA Power and DIDIC reached financial close on the largest single-tendered IPP in Oman. The Ibri and Sohar-3 power plants will have a total capacity of 3219 MW and will supply the sultanate with 30% of its electricity demand as of early 2019. The rapid development of so many plants to satisfy Oman’s growing demand for electricity and desalinated water are a lucrative source of business for contractors in the sultanate. “We are commencing work now on a significant independent water and power production plant in Salalah, and we are having to bring in one of the largest cranes in the world from Europe to complete the project,” Andrew Taylor, country manager of Bahraini-Belgian JV Sarens Nass Middle East WLL, told OBG. “Power and water is an important part of the picture for us now.” In terms of renewable energy, OPWP is also expected to sign a power purchase agreement with Rural Area Electricity Company for a 50-MW wind farm in Dhofar, which is due to start operations in 2017.

PPP Funding

The utility projects that have been built in Oman over the past two decades have also pioneered the use of public-private partnership (PPP) funding models in the country, an approach that many observers believe could allow Oman to meet the demands of its growing population and fulfil the need to diversify the economy away from a reliance on oil and gas revenues. In its “GCC Powers of Construction Report 2016”, Deloitte weighs the strengths and weaknesses of the PPP funding model for countries in the Gulf, concluding that, because of the high levels of experience and knowledge required to mange the various stakeholders in PPP-funded projects, PPPs should only be used for 20% of schemes in any given jurisdiction.

In Oman’s construction sector there are mixed views on the use of the PPP model. “It is in the national economy’s interest to implement more creative means of growth, such as further tapping private sector investment. I believe that the private sector should play a larger role because it is efficient by nature,” Ghassan Shammas, general manager of Omani engineering company Target, told OBG. “The PPP model is a source of investment that is already present in the power and desalination sectors, and I envisage more success.” However, from the perspective of other companies, the model will only work if both the public and private sector can reap benefits from it, and if there is a clear and transparent legal and contractual framework. “PPP projects may be coming, but I am not sure the demand will be there from all parties in the private sector for non-power and/or water schemes,” Ellis told OBG.

Outlook

Oman’s agenda for growth and diversification comprises many large construction projects, which offer lucrative opportunities for both domestic and foreign businesses. However, budgetary constraints may force those who control the government’s purse strings to make some difficult decisions, resulting in the curtailment, postponement or cancellation of a number of these schemes. Redressing the balance between public and private sector investment in the country’s infrastructure will go some way towards facilitating growth, even as the government’s revenue intake continues to be affected by low oil prices.