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Briefings from Logistics Logistics 2 Briefings from Oman

Briefings from Oman

Published by Ithraa, the Sultanate of Oman’s inward investment and export development agency, Briefings from Oman is a series of ten sector-specific documents that explore waste management, logistics, tourism, health, manufacturing, agriculture and fisheries, and more.

Designed to connect the world with contemporary Oman and its dynamic business community, each Briefing provides a snapshot of one sector in the sultanate and the ambitious projects and innovative business ideas currently driving that space.

Informative, realistic and easily digestible, the Briefings are intended to inspire business, investors and our partners at large to consider the significant opportunities these sectors present.

Distribution Briefings from Oman are offered free-of-charge and distributed to Omani embassies, ministries, foreign trade missions, at international trade shows, B2B meetings, as well as to schools, colleges and companies across Oman.

If you would like to share Briefings from Oman in a hotel or at a business event, please send an email to [email protected] for further information.

Disclaimer Although every effort has been made to ensure the accuracy of the material contained in this document, complete accuracy cannot be guaranteed. Ithraa will not accept any responsibility whatsoever for loss or damage occasional or claimed to have been occasioned, in part or in full, as a consequence of any person acting, or refraining from acting, as a result of a matter contained within this document. All or part of this document may be reproduced without further permission, provided the source is fully acknowledged.

Published December 2016

Editorial: Taleb Al Makhmari Editor-in-Chief Dave Pender Advisor Sajda Al Ghaithy Senior Editor Nadia Al Lamki Editor Lubna Al Harthy Production Manager Walyam Al Said Production Associate Design: Lamahat www.studiolamahat.com

Photography courtesy of Ithraa & PEIE 3

Oman Logistics A Snapshot

The logistics sector plays a vital role in Oman’s modern and ambitious economy and is key to increasing inward investment, non-oil exports and the nation’s competitiveness.

Logistics isn’t only an important sector in its own right but also a critical enabler for businesses of all sizes operating across the sultanate - from the gypsum quarry in Thumrait, hypermarkets in Seeb, battery manufacturer on Rusayl Industrial Estate, the pelletizing plant in Sohar to the plastics exporter on Free Zone. A well-oiled logistics sector provides Omani businesses and manufacturers with ways to increase efficiency, go greener and drive profits.

Earning revenues of US$7.87bn in 2013 that are forecast to reach US$12.02bn in 2017, Oman’s logistics sector is already competitive, contributing 4.9% to the sultanate’s GDP in 2015. The industry is led by multinationals offering a comprehensive range of sophisticated logistics services, down to smaller national freight forwarders offering the simple storage and shipping of merchandise.

Oman’s logistics industry is expected to grow at a CAGR of 7% between 2015 and 2020. The key drivers for economic growth are the infrastructure investments in ports, free zones, industrial estates, roads, airports and rail network, economic diversification efforts and trade with GCC states, Asia and Sub-Saharan Africa. Logistics 4 Briefings from Oman

A

BIGInvestment Following an announcement in October 2013, Oman will spend over US$50bn in infrastructure projects over the next 15 years, US$20bn of which is earmarked for the transport sector. This sizeable investment in infrastructure offers widespread and attractive opportunities for logistics providers, particularly those with a significant presence in the global freight forwarding business. Investment in infrastructure is also expected to create 80,000 jobs in logistics by 2020, rising to 300,000 by 2040. 5

Network

Sea Road Air

Serving the emerging markets of the The recently opened 680km road Recent investment in , Salalah, GCC, Asia, Africa and Iran are the between Oman and Saudi Arabia which Sohar and Duqm airports, the growing deep-water ports of Salalah, Sohar and runs through Rub Al-Khali will increase number of Oman Air destinations and Duqm and their respective free zones. road freight by providing a more direct the launch of Salam Air, the sultanate's Oman’s three key terminals offer route between the two countries as first low-cost carrier will all help further businesses an attractive alternative well as reducing the number of border facilitate international trade and the to more costly ports of call in the Gulf, crossings. The highway on the Oman development of Oman’s logistics sector. saving time and fuel and providing side is about 160km long, starting from access to other modes of transport. Tanam in Ibri and ending at the Saudi border. From Saudi Arabia, it stretches Sea transport accounts for more than 247km from the Omani border to the 80% of freight which is expected to grow Shaybah Oil Field and 319km from by 4.8% in 2016, this growth is being Shaybah to the Batha-Haradh road, driven by increasing intra-region GCC which leads to Riyadh. trade as well as demand from Europe and the emerging markets of Asia and Africa.

Rail

Oman continues to develop a national rail network: a modern, mixed traffic railway for the movement of freight and The Project is one of Oman’s passenger services. This new railway system will connect largest infrastructure projects, the centres of population and growth drivers of Oman and will form part of the wider GCC Railway Network. To achieve with a capital investment this, Oman Rail will link the Sultanate’s three main deep water ports, free zones, logistics hubs, mineral resource and expected to be up to US$20bn. petroleum development areas with the population centres of the country and with the GCC. It will provide customers with an efficient domestic and international rail-based logistics solution for intermodal containers, bulk minerals and liquids, break bulk and industrial freight, bulk minerals/liquids and passengers. The railway network will be a major step in Oman’s journey to become a key logistics hub for the region and the gateway to the GCC.

The Oman Rail Project offers a unique opportunity for the country to enhance local capacity - people and industry - whilst substantially contributing to the overall wealth of the country through In Country Value (ICV) and wider socio-economic benefits. Once completed, the estimated total length of the railway network will be 2,135km. The Project is one of Oman’s largest infrastructure projects, with a capital investment expected to be up to US$20bn. Logistics 6 Briefings from Oman

Key Trends Driving Oman's logistic Sector

Oman’s location Direct on two major Deep-water ports international shipping routes trade routes to which are within two weeks of some of the world's GCC major ports. India in Salalah, Duqm and Sohar. Africa

Publication of the Sultanate of Oman’s Strategically located Logistics Strategy 2040 (SOLS 2040). free zones in Sohar, A blueprint designed to transform Oman into Duqm, Salalah and a world top 10 logistics location by 2040. Al Mazunah.

Major re-development Sophisticated road of Muscat and Salalah network linking ports, Airports and the free zones, airports Construction of a national railway construction of regional and industrial estates. network and its connection to the airports in Sohar, Duqm GCC rail network, improving efficiency and reducing logistics costs. and Ras Al Hadd. 7

Oman’s logistics industry currently employs 30,000 people and handles over 3 million TEU. However, by 2020 the logistics sector is targeted to employ 80,000 people and handle over 10 million TEU.

Leveraging free trade agreements with the US and Oman’s strategic location in the Arabian Gulf makes it a major trans-shipment hub on the East-West trade route. As a member of the GCC, Oman benefits from Singapore, the GCC customs regional trade policies, customs regulations and the integration of national and union and the General Arab regional transport corridors. Free Trade Agreement.

Investment in infrastructure Launch of Oman Global and technology to upgrade Logistics Group SAOC, ports and free zones in Investment of over US$180 million a government holding Sohar, Salalah, Duqm and in large-scale extensions of PEIE’s company, to synchronize Al Mazunah. industrial estates. and leverage government investments in the sultanate’s ports, free zones, logistics centres Completing 49 road and rail, maritime and projects at a cost of land transport companies The introduction and US$5.4 billion covering and to achieve strategic roll-out of a National 1,650 kilometres. development objectives. Broadband Strategy. Logistics 8 Briefings from Oman

Potential

Oman lies at the crossroads of two important waters – the Arabian GCC markets - land based transport with rail could be up to 36 hours Sea and Indian Ocean – through which a sizable chunk of global faster than shipping with feeders. More reliable access into and out shipping and trade passes. Suitably leveraged, Oman’s strategic of the GCC markets, avoiding the politically sensitive Strait of Hormuz geographical location offers comparative advantages to industries and the congested ports of other GCC countries. Cheaper access into and investors targeting markets in the GCC, Asia and East Africa. and out of the GCC markets up to US$250,000 savings on fuel Indeed, the sultanate’s location offers faster access into and out of the charges per vessel.

Cost Savings For Oman’s ports the logistics opportunity is there for the taking. Ministry of Transport & Communications commissioned research Suez Canal on consolidation in the container shipping industry estimates that on a benchmark voyage direct from Singapore to Suez, a weekly call at Salalah for an ultra-large container vessel would represent an Jebel Ali (UAE) annual cost of US$4.47m, at Duqm US$8.69m and at Sohar US$17.09m. ’s Jebel Ali, by contrast, would cost an estimated Sohar US$24.62m. Duqm

Salalah

Singapore

Jebel Ali (UAE) Sohar Salalah Duqm $US $US $US $US 24.62m 17.09m 4.47m 8.69m

Estimated annual costs for a weekly call for ultra-large container vessels

Ambitions Top Spots

Oman jumped 11 places in the World Bank ranking of global With regards fastest-growing emerging market sea freight logistics performance, reflecting major improvements in trade lanes to the US and EU, Oman occupies the top two logistics quality, customs, infrastructure and competence. spots - up 56.7% to the US. Sea exports from Oman to the According to the World Bank's latest Logistics Performance US have increased following the 2009 free trade agreement Index Report, Oman is ranked 48th globally as against 59th between the countries. in 2014. For Oman-EU freight, growth of 56.7% is predicated on chemical-related exports, with organic chemicals and fertilizers sparking most of the growth. EU-Oman sea freight was up 59.4% in 2015. 9

SOHAR Port Sohar

SOHAR Port received its first vessel in 2004 and today welcomes well In 2014, all commercial traffic from over 2,500 vessels a year and handles over one million tonnes of Port Sultan Qaboos was redirected to cargo every week. With investments exceeding US$25 billion, Sohar is Sohar to make way for new tourism one of the world’s fastest growing port and free zone developments. facilities and a modern cruise ship Located outside the congested Strait of Hormuz and with a draft of up terminal at the old city port in Muscat. to 25 meters, it is the deepest port in the Gulf and South Asia region. This increased container traffic at Set-up as a 50:50 joint venture with Port of Rotterdam in 2001. Sohar by over 60% in the following The adjacent Freezone was added in 2010. year, that also saw a 46% rise in break bulk cargo. Container throughput continues to grow steadily, The Port and Freezone operate on a landlord-tenant basis. increasing over 18% in the first half of 2016. The new container Leading global partners were on board from the outset to operate Terminal C boasts remote controlled quay cranes that are ready for the port’s main terminals: Oiltanking Odfjell for bulk liquid and gas next generation 20,000 TEU vessels. Terminal C is equipped for 1.5 storage; C. Steinweg for general cargo and stevedoring; Hutchison million TEU and planning work for a fully automated Terminal D, that Whampoa for containers; Vale for dry bulk; and Svitzer for marine will boost capacity at Sohar to 6 million TEU, is also well underway. services, among others. Massive investments in infrastructure are creating modern and The port was established around three main industrial clusters: uncongested highway links that will connect Sohar across the metals, logistics and petrochemicals. Recently a fourth, food cluster region and reduce onward transportation times. These include was added. Work is progressing fast on the construction of a US$170 a new direct highway to Saudi Arabia that will avoid the UAE million state-of-the-art Food Zone, combining the region’s first borders altogether and will cut the journey from Sohar to Riyadh dedicated agro terminal with rice, flour, and sugar mills, as well as by around 800 kilometers. the infrastructure for downstream food manufacturing and processing industries. The recent opening of Sohar Airport comes after Middle East cargo carriers reported a 7.8% growth in demand for airfreight services. Located just a few kilometers outside the city, the new airport underpins plans for the transformation of the regional economy along the North Batinah coast. With a planned capacity of 50,000 tonnes of cargo and 500,000 passengers a year, the new facilities Metals Plastics bode well for Sohar’s long-term growth strategy.

Sohar not only offers easy access to Saudi Arabia, the UAE and Iran, Petrochemicals it is also within easy reach of a market of more than two billion Food consumers across Asia, India and Africa. As one of the driving forces behind Oman’s US$2 billion plus trade surplus, the planned Rail Terminal in Sohar will be an important junction along the Sultanate’s Once completed, the new Food Zone will be able to handle 700,000 2,135 kilometer leg of the new GCC railway network. tons of grain and 1.5 million tons of raw sugar imports every year, largely eliminating the need for the sultanate to import refined sugar. With the advent of rail connectivity and modern rail-to-port material handling logistics technologies, it is estimated that SOHAR Port’s Improvement work is nearly completed at Orpic, to reduce commodity handling capacity could be increased by tens of millions environmental impact and increase capacity at their Sohar refinery of tonnes per annum. to over 198,000 barrels/day. Furthermore, the recent US$6 billion investment in Liwa Plastics Project at SOHAR Port supports Oman’s ambitions to become a global leader in the plastics industry. The project will give Orpic a total of 1.4 million tons of polyethylene and polypropylene production by around 2020, and will create one of the best-integrated refinery and petrochemical facility combinations in the world, creating many opportunities for new, downstream businesses in the Port and Freezone. Logistics 10 Briefings from Oman

Port of Salalah

Ideally located to service the lucrative East-West shipping lanes, The container liner services that call at the Port of Salalah, part of the APM Terminals Global Terminal the port link all major ports in Europe, Network, reached 1.584 million TEU in the first half of 2016. the Mediterranean, the US East Coast, This represents a 29% increase over volume handled during East Africa, the Indian Sub-continent, the same period the year prior. the Red Sea and the Arabian Gulf. Salalah The Port of Salalah, on the Arabian Sea, is one of the largest container The port’s efficiency and ports in the Middle East Region with a 2015 volume of 2.56 million record-breaking productivity is second TEUs. Its general cargo terminal (GCT) handled 12.543 million tons to none. The Port of Salalah prides itself on customer service levels, in 2015 as compared with 10.314 million tons in 2014. which have helped attract major shipping lines as well as the world’s naval fleets and increasing numbers of cruise ships. The completion of a new deep-water General Cargo and Liquid Bulk The Port of Salalah is increasingly turning to a new model to drive Terminal in December 2015 has enabled significant growth, with the growth in the logistics sector. In addition to its trans-shipment facility handling approximately more than one million metric tons and other historically successful port activities, improved trade monthly. This mainly reflects increases in shipments of limestone facilitation and better access to onward land and air routes are and gypsum as well as methanol and bagged cement. The new berths seen as keys to future success. are used for discharging grain, loading bagged cement, berthing of the multi-national navies engaged in anti-piracy operation, and for cruise vessels. With the advent of rail connectivity and modern rail-to-port material handling logistics technologies, it is estimated that the Port of Salalah’s bulk mineral capacity could be increased to 50-60 million tonnes per annum.

Port of Duqm

From a geographical and geopolitical standpoint, overlooking the Consolidation & Distribution Hub Arabian Sea and Indian Ocean, and its proximity to some of the A key par to Duqm’s appeal lies in its world’s busiest shipping lanes, the Port of Duqm is one of the potential to become a consolidation Duqm GCC’s most promising mega ports. A 50:50 joint venture between and distribution hub serving the Consortium Antwerp Port and the government of Oman, the Port wider region. With the massive area of Duqm Company SAOC was set up in 2010 to develop the new available around the port, maritime gateway via a 28-year concession, which formally started multinational manufacturing in July 2015. Duqm’s operations were launched in May 2012, companies could set-up consolidation and ever since, the port’s activities have grown at steady pace. and distribution centres in Duqm to supply markets in the Indian The current focus is on the handling of general, break bulk and heavy Sub-continent, East Africa and the Middle East. lift cargo, primarily for the oil and gas industry. The port has also started with bulk exports of mineral products, produced in quarries in The Port of Duqm’s appeal will be further accentuated when it is its direct vicinity. The Port of Duqm is already capable of handling connected to Oman’s National Rail Network and the newly-opened containers in an early operations container terminal. In the next 680-kilometre road cutting through the Rub Al-Khali at Ibri linking phase, the Port of Duqm is preparing for the commissioning of state Oman to Saudi Arabia. The new road will reduce the travel distance of the art container handling terminals which will have access to 1,600 between Oman and Saudi Arabia by 800 kms, as previously, the only meters of quay and a handling capacity of 3.5 million TEU per annum. route was via the UAE. Air connectivity between Duqm Airport and As a green-field port surrounded by an abundance of available land, other international and domestic airports within Oman will also fuel the Port of Duqm enjoys a location that places virtually no limits on sea-air freight growth. its potential for growth in the long-term. Location, Location, Location With the advent of rail connectivity and modern rail-to-port Moreover, the location of Duqm involves minimal deviation from the material handling logistics technologies, it is estimated that the Asia-Europe trade lane. Dubai is located 2,092kms from the route Port of Duqm’s bulk mineral capacity could be increased to between Suez and Singapore, whereas Salalah and Duqm are only 50-60 million tonnes per annum. 209kms and 644kms away, respectively, added to which Duqm is much closer to the GCC, enabling it to better double up as a gateway port and trans-shipment hub. 11

Oman Drydock Company

Oman Drydock Company (ODC) is one of the largest and most modern bridges and buildings; and fabrication ship repair yards in the Middle East. Located in the Port of Duqm, of structures and components for ODC is strategically located on the southeast corner of the Arabian other industrial uses. ODC’s strategic Duqm Peninsula outside the Strait of Hormuz and is in close proximity to location, climate, world-class yard the busy regional trade routes traversing Oman’s coastal area. facilities, experienced technical team In addition to its ship repair activities, ODC’s capabilities include: and integrated services provide the engineering, procurement, fabrication, erection, installation, tests, significant benefits to its international and trials for offshore projects; fabrication of steel structures for steel and domestic customers.

Oman Shipping Company S.A.O.C.

As Oman’s preeminent maritime transportation services provider, OSC has established a feeder line linking SOHAR Port, Port of OSC is key to the government’s logistics plans. It is a closed joint Duqm, Port of Salalah and Dubai’s Jebl Ali Port. The feeder line stock company, incorporated in 2003 and owned by the government is a multi-purpose vessel with a capacity of 650 containers, through the Ministry of Finance (80%) and Oman Oil Company (20%). or 8,874 tonnes.

OSC’s customers have included: Shell, Mitsubishi Corporation, OSC has a total of 50 vessels under operations. This will increase Itochu Corporation, Oman LNG, Qalhat LNG, VALE, Sohar Aluminum, to 52 by the end of 2016 for a total load carrying capacity of over Oman Trading International, Petronet, Qatar Gas and Oman Refinery 8 million dead weight tonnage. With OSC’s future expansion plans, & Petrochemical Company. the fleet is expected to swell to a formidable 60 vessels in the next five years.

South Al Batinah Logistics Area (Khazaen) Barka

The South Al Batinah Logistics Area (Khazaen) promises to further to include textile production, drive the Sultanate’s ambitions to become a logistics gateway for electronics manufacturing, the wider region. A project site spread over 95 million square meters food processing, commercial has been identified at the intersection of the Barka - Nakhal Road bakeries, automobile and equipment and the Muscat - Al Batinah Expressway route, as well as the planned machinery repair and processing. National Rail link between Sohar and Muscat. Khazaen’s strategic location, coupled with the abundance of land earmarked for the In addition, Khazaen’s commercial project, will help underpin its long-term growth. and residential area will attract and support investment in real estate, retail outlets for consumer-based Activities and facilities at Khazaen will include a customs bonded products, wholesale facilities, office space, restaurants, inland port (dry port), an intermodal rail terminal, warehouse and car showrooms, a convention centre, hotels and other distribution facilities, light industry, cold storage facilities, community facilities. open area storage yards, truck parking and service centres. Business activities in Khazaen’s light industrial area are expected Logistics 12 Briefings from Oman

Oman’s Economic Free Zones

Oman has four economic Free Zones. Three are located adjacent to industrial developments as well as unoccupied space to accommodate the deep water ports in Sohar, Duqm and Salalah, each comprising an future expansion and development. The Free Zones are supported by efficient port-free zone industrial and commercial cluster. The fourth modern road networks, telecommunications infrastructure and other is located in Mazyounah, providing investors with efficient access to necessary utilities and services. Their strategic location and framework the Yemen market border gateway located only 4 km from the Free of incentives provide investors with attractive investment opportunities. Zone. All four comprise large land areas with existing commercial and

Oman Rail: Connectivity

Rail connectivity promises to be a transformative force for Oman’s logistics industry – a game-changer. Divided into nine segments, Khasab the 2,135 km network will run the length of the sultanate from Buraimi and Khatmat Malaha in the north to Duqm in the southwest and Salalah and Mazyounah in the south and southwest.

Linkages with industrial estates, special economic zones – current and Sohar future, mining and logistics clusters, as well as major urban centres Buraimi will help fuel growth in all parts of the sultanate. Muscat

The railway will be double track, non-electrified and designed to serve mixed freight and passenger traffic. It has been designed based on Ibra international standards and best practices to achieve interoperability with the GCC railway network. Ramlet Khelah

When completed and brought into operation, Segment 1 will connect SOHAR Port with the GCC rail network at Oman’s border with the UAE at Buraimi and Khatmat Milahha. It will also serve as a logistics corridor for rail-based freight to and from SOHAR Port to markets deep in the Arabian Peninsula. Haima Four intercity passenger stations are planned along Duqm the 207 km route of the Sohar-Buraimi corridor, representing Segment 1 of the 2,135 km National Oil Field Rail Network. These are Hafeet (medium GCC intercity type), Sohar City (medium GCC intercity), Gas Field Mazyounah Zurub (commuter) and Buraimi (small/medium Minerals GCC intercity). Thumrait Cities/Towns Ports Once operational, the railway will provide the most cost effective and reliable international logistics Salalah Free Zones/Logistics Areas corridor into and out of the GCC. 13

The establishment of the rail network will help Oman capitalize on its geographically advantageous location, increase the sultanate’s competitive advantage and boost international trade.

Oman Rail – Value Proposition

The establishment of the rail network will help Oman capitalize on Currently, a 60,000-tonne bulk commodity ship can take its geographically advantageous location, increase the sultanate’s approximately 3 – 5 days, or more to load using traditional competitive advantage and boost international trade. transportation, material handling and loading methods. Once operational, the railway will provide the most cost effective Integrated mine, rail and port bulk commodity logistics solutions and reliable international logistics corridor into and out of the GCC. employing modern high capacity material handling equipment and infrastructure can improve that significantly to achieve a 60,000 Containers tonne ship turn-around within less than a day, thereby improving It’s expected the railway will attract a significant increase in marine transport efficiency and increasing port capacity. international container traffic to Oman’s ports within the first year of operations, to be distributed into and out of the wider GCC by Automotive rail. Given the sultanate’s strategic geographic position, the rail By 2020, over 3 million new cars are forecast to be sold annually network will enable Oman to capture a disproportionate volume in the GCC. Currently, new vehicles are distributed by car of GCC cargo growth (current growth rate of 8% p.a.). manufacturers to each GCC country. There’s clear potential to consolidate distribution in one country, with Oman being able to offer Industrial Goods, Bulk Commodities and a highly attractive value proposition once the railway is developed. Consumer Products It’s expected that the railway will attract numerous shippers of Rail & Mineral Exports industrial goods, bulk commodities and consumer products to Oman has a substantial mineral resource base, predominantly found import/export their goods through Oman ports to avoid the in the mountains which span 700 kilometres by 150 kilometres – politically sensitive Strait of Hormuz. containing chromite, dolomite, zinc, limestone, gypsum, silica, copper, gold, cobalt, iron and other resources. The sultanate has vast Inward Investment non-metallic mineral wealth that is proving to be highly popular Oman’s rail network will drive growth in attracting inward investment. internationally. For example, approximately 70% of the marble mined As more customers distribute their GCC destined cargo through the in Oman is exported, all of which is in processed “finished” form. sultanate, the opportunity for Oman’s free zones and logistics centres to offer value added services such as warehousing, packaging and Exports of Omani gypsum and limestone, among other minerals, assembly will increase. In addition, as the establishment of the rail are projected to grow exponentially with the launch of Oman’s network enables a more efficient and reliable value chain, Oman will ambitious rail network which will connect the country’s mining areas become more attractive to international companies looking for a safe to the sultanate’s world-class, deep-water gateway ports at Sohar, and secure GCC business base. Duqm and Salalah. Such an increase provides Oman the opportunity to meet the rising mineral needs of India, Japan, Taiwan, Indonesia, Competitiveness Vietnam, Bangladesh, East Africa and beyond. Exports of processed The rail network will provide Omani companies with a more efficient finished marble are also expected to grow with improved value chain solution, enabling them to become more cost competitive transportation and terminal logistics solutions. domestically and internationally. In addition, the railway will enable Oman to exploit its significant natural resources such as Finally, the railway will reduce congestion on Oman’s roads, gypsum, limestone, dolomite, chromite, gabbro and marble due improve road traffic safety and provide a more environmentally to improved capacity and logistics solution economics. sustainable logistics solution for the country and the GCC region. It’s estimated that the transformative nature of the railway can be used to transport many tens of millions of tonnes of commodities per annum to each of the three major ports following the implementation of rail-to-port connectivity. Logistics 14 Briefings from Oman

Airports

Integral to Oman’s logistics ambitions is a modern air transport control tower, cargo terminal of 100,000tpa capacity (expandable system comprising a network of international and domestic to 200,000tpa) a wide body hangar and maintenance, repair and airports connected by a world class fleet of aircraft. The new US$1.8bn overhaul facility. Salalah has the capacity to handle 1 million annual facility at Muscat International Airport will have a net floor area of passengers. Further expansions to 2 and 6 million annual passengers 334,995m², capacity of 12 million annual passengers in the first are planned when the demand arises. phase, 24 million in the second, 36 million in the third and 48 million in the final phase. In addition, a cargo terminal with a capacity of New airports in Duqm and Sohar opened in July and November 2014, 260,000t of cargo per year will be part of the terminal. each with a terminal capacity of 250,000 passengers per annum and passenger terminal floor area of 6,000m2. Runways are 4,000 x 60 The airport’s runways are being extended to a length of 4,000m and metres capable of serving the Airbus A380. The Ras Al Hadd Airport width of 60m. Both runways will be able to accommodate the Airbus will have 500,000 passenger terminal covering over 8,000m2 as well 380 aircraft, the world’s largest aircraft, after the expansion. The first as a 4,000 x 60 metre runway. All boast sizable air cargo terminals runway expansion was completed in December 2014. The expanded helping airfreight logistics grow exponentially in the coming years. airport is due to open Q2 2017. With the current development of Oman’s ports, linked by the National The upgraded US$777m Salalah International Airport opened in Rail Network to GCC countries, coupled with the development of June 2015. The improved airport includes a new runway, terminal, airports, Oman is in a strong position to develop its logistics sector.

Air Freight

Air freight is a key driver within the SOLS 2040 strategy and in 2015 It’s anticipated the Oman Air – Cargolux partnership will build on the Oman Air partnered with Luxembourg-based Cargolux, one of success of its high-quality air cargo service to Chennai and Mumbai Europe’s largest scheduled all-cargo airlines. The joint venture and in the future expand airfreight services from Oman to destinations agreement provides Cargolux with access to the belly capacity of in China, Europe, Africa and the United States. Oman Air’s passenger fleet, which operates to 11 destinations in India, as well as destinations in East Africa. This gives Cargolux opportunities to carry livestock, cargo aircraft-only freight, odd size cargo, vehicles and aircraft engines from Oman to India and a number of other large emerging markets.

Ground-handling & Warehousing

Oman Air has also partnered with Singapore-based ground-handling, The new company is expected to begin operations in 2016 and will warehousing and freight specialist SATS to create a new joint become the single source provider of cargo-handling services firstly venture company for cargo handling at the airline's Muscat hub. at Muscat International Airport's existing cargo facility and then at its new, state-of-the-art cargo terminal. The strategic partnership is The arrangement will see Oman Air transfer its cargo-handling expected to enhance connectivity for Oman Air’s cargo customers business and related assets to its subsidiary Oman Air Cargo. across Asia and strengthen the sultanate’s position as a transit hub. SATS will acquire a 33% equity stake in the business which will be renamed Oman SATS Cargo. This strategic partnership will enhance connectivity for cargo customers across Asia and strengthen Oman’s position as a transit hub. 15

Soft Infrastructure MENA E-commerce

A key component of the ‘soft infrastructure’ necessary to underpin According to research, 60% of consumers in the MENA region are Oman’s logistics industry is pervasive Internet connectivity under the age of 25. These are current and future online buyers. and high-speed broadband access. Towards this end a National In the GCC, 43% of Internet users buy online at least once a Broadband Strategy was adopted in 2013. The aim is to provide month, and the average value of e-commerce orders is US$102 for efficient and affordable broadband infrastructure connecting domestic purchases, compared to US$139 for overseas purchases. all residents and businesses in Oman. A key outcome of the plan was the establishment of the Oman Broadband Company E-commerce in the MENA region is expected to grow from (OBC), a government start-up mandated to implement a national US$95 billion in 2013 to US$200 billion in 2020. broadband network. The National Broadband Strategy centres on B2C e-commerce will represent 30% of the total value followed a plan for the rollout of high-speed and large capacity broadband by government-to-business or customer (G2B/C) at 25% and infrastructure across the length and breadth of the country over B2B e-commerce at 20%. a 10-year timeframe and at a potential cost of around US$1.3bn. The strategy calls for, among other things, providing key Omani As B2C e-commerce grows, so do home deliveries. For the postal cities with fibre-to-the-home, fibre-to-the-building, especially services, the volume of letters is falling, while package government buildings – improving 4G and LTE mobile Internet deliveries are rising. This affects the supply chain, requiring access for most of Oman. For remote areas, Internet access via logistics companies to provide warehousing, inventory, satellite services is envisaged. delivery, invoicing, handling cash-on-delivery and product-returns support. In brief, the role of logistics in B2C e-commerce is to reduce the risk that arises from the virtual relations.

Cross-border B2C e-Commerce Additionally, e-commerce logistics needs to reduce the risk in the relationship between the vendor and the buyer by ensuring that Currently, around 2.7 billion people - 39% of the world’s the right product is delivered to the right customer, at the right population - have Internet access. Increasingly, those 2.7 billion place and at the right time. Moreover, unlike brick and mortar people are making online purchases. According to Accenture, stores where delivery is immediate, e-commerce firms are still the global B2C cross-border e-commerce market will balloon in grappling with the challenge of the speed with which the ordered size to US$1 trillion in 2020 from US$230 billion in 2014. product reaches their customer. Oman’s logistics sector stands to play a key role in overcoming such disadvantages, enabling domestic and international e-tailers to grow, expand and prosper. 230 1 billion trillion USD USD

2014 2020

Today, the supply chain has now been extended as a result of changes in consumer buying patterns. As people turn to the Internet to purchase lighter-weight, less-expensive goods and do so more frequently, the supply chain extends right to the customer’s mailbox. Logistics 16 Briefings from Oman

Urban Logistics

Urban logistics is essential to the functioning of Oman’s city transported in European cities weighs less than 100kg and has a economies, ensuring the supply of goods in stores and for local firms volume of less than 1m3. Of the 1,900 vans and trucks entering the it forms a vital link with suppliers and customers. As it currently city of Breda in the Netherlands each day, less than 10% of the stands, almost all urban freight is delivered by motorised vehicles cargo being delivered requires a van or truck and 40% of deliveries often transporting very light goods. For example, the average payload involve just one box.

Urban Deliveries

Like most cities, it’s easy to bring goods into Oman via plane, ship, supply chain. Get it wrong and you risk alienating consumers, get it or truck but it’s much harder to bring what’s been ordered to houses right and you may just gain a customer for life. To meet this challenge, or offices from the central point to which it was delivered. we need to reconsider urban delivery solutions that are more effective, Indeed, the final mile of urban logistics plays a crucial role in Oman’s customer-centric, sustainable and eco-friendly. 17

Today, 64% of all travel happens within urban environments and the total amount of urban kilometers travelled is expected to triple by 2050. Freight transport is responsible for 20% of road traffic, 30% of road occupation and 30% of CO2 emissions in cities. The Final Mile

Final Mile – The New Logistics Frontier The final piece of the logistics puzzle, the figurative final mile, is the Instant Gratification transportation of goods from a delivery depot to a customer’s home or The survey suggests that today’s hyper-connected consumers would office. This stage can be key in determining a customer’s satisfaction, abandon shopping with a retailer online and in the store with just one since it’s often the only direct touchpoint they have with a brand or error or delay. 59% of respondents stated they’d abandon shopping service. The exponential growth of e-commerce in the GCC is having a with a retailer altogether if they received two to three incorrect profound effect on the region’s logistics industry from the first click to deliveries. 55% of respondents would discontinue shopping from a final delivery. retailer after two to three late deliveries. With consumer expectations increasing along with the increase in online shopping, efficient, timely Even high-profile international e-tailers, who have succeeded in and accurate final mile delivery services are more crucial than ever. offering customers inexpensive and rapid delivery options, are struggling to maintain efficient final-mile logistics solutions in Opportunities a cost-effective and profitable way. Today, there’s a need to offer The final mile of the supply chain may be the shortest physical stage expanded delivery capabilities, while increasing convenience without in a package's journey but it represents about 30% of total logistics passing on price increases to the customer. Whether consumers are costs. And the most uncertainty and opportunity in the final mile lies researching, evaluating, or purchasing products online or in store, in the nuts and bolts of how a product/package’s chain of custody is their expectations about product availability, delivery charges and outsourced, moved and delivered. New experimental entrants like flexibility, return policies and payment options are on the rise. grocery delivery service Instacart, crowdsourced, same-day delivery service Deliv and Uber are emerging as key players in this space. Fast Delivery However, as traditional logistics firms face stiff new competition, According to a Voxware survey, 62% of respondents were less likely there’s a need to provide better tracking and greater package security to shop with a retailer if an item wasn’t delivered within two days to meet customer expectations. of the date promised. The survey also revealed that 43% of respondents expected delivery within three to four days, Final mile logistics isn’t insignificant. If you’re delivering a spare part while another 40% expected delivery within five to six days. or installing a piece of equipment on Rusayl Industrial Estate and it can be organized, delivered and fitted in a two-hour window from the time it was ordered, then it can be sold as a premium logistics service. Indeed, what’s the world’s best-designed supply chain worth if it falls short at delivery? Logistics 18 Briefings from Oman

Investing in Logistics: A Step-by-Step Guide

Step 1 Step 2

Logistics Ithraa Open Bank Account

All organizations mentioned below can be Obtain Commercial Registration Timeframe: contacted via the One-Stop-Shop Depends on the Bank Timeframe: • Ithraa 2 hours *Required documents: • Oman Chamber of Commerce (OCCI) • CR *Required documents: • Passport copies • Local Municipality • Copy of partner’s passport • Ministry of Manpower (MoM) • Articles of Association • Copy of Omani partner’s ID card • Sample of authorized signatories • Royal Oman Police (ROP) • New commercial registration (CR) form signed by all partners *Some banks may require additional documents • Sample of authorized signatories

* In some cases, security approval is required (1-5 weeks)

Criminal record clearance is to be attached by Omani Embassy in applicant’s home country

OCCI

Collect Membership Card

Timeframe: 1 hour

Required documents: CR payment receipt

Company Stamp

Obtain Company Stamp

Timeframe: 1o minutes

Required documents: CR

License*

Timeframe: 6 months

*Required documents: • Copy of partner’s passport • CR • OCCI certificate • Local municipality permit • Approval form Ministry of Environment & Climate Affairs

*This step doesn’t affect other steps. Preliminary approvals from relevant government agencies depend on the requested type of commercial activity. 19

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Step 3 Step 4 Step 5

Rental Agreement Municipality Ministry of Manpower

Complete Ministry of Commerce & Industry Obtain Municipality Permit Obtain Investor Visa Investor Application Form Timeframe: Timeframe: *Required documents: 1-3 days 2 – 7 days • CR • List of machinery *Required documents: Register company on: • ID card • Commercial registration www.manpower.gov.om • OCCI membership card and print application form *to apply for a rent of land, submit all the • Rental agreement documents to MoCI Required documents: *Additional documents may be require – • Application form depends on the planned activities • CR + company stamp • OCCI membership card • Passport copies • Rental agreement • Municipality permit • Commitment letter

ROP

Obtain Investor Visa

Timeframe: 1-2 Weeks

Print visa application from: www.rop.gov.om

Required documents: • Application form • Medical report • Two passport-style photographs • CR + company stamp • OCCI membership card • Copy of passport • Rental agreement • Municipality approval • MoM approval

ROP Civil Status

Obtain Investor ID Card

Timeframe: 1 day

Required documents: • Investor Visa • Passport copy • Present for fingerprinting Formed in 1996, Ithraa is Oman’s award-winning inward investment Local and export development agency. We are an ambitious organization committed to promoting the business benefits of Oman to a global audience. Our experience, expertise and global reach helps companies of all sizes realize Heroes their potential. This directory lists leading Oman-based Vision Logistics businesses and government organizations. If you want to learn more Promoting the Sultanate as the best destination for investment and trade in the world. about Logistics in Oman they are ready to help you. Mission

Ithraa To attract sustainable investment and promote the export of Directorate General of Investment Promotion Omani non-oil goods and services that support the Sultanate’s PO Box 25, PC 117, Sultanate of Oman. ambitions for growth and prosperity. Tel: +968 2462 3300 | [email protected] Ministry of Transport & Communications PO Box 684, PC 100, Sultanate of Oman Tel: +968 2468 5000 | www.motc.gov.om Talk to Us Oman Global Logistics Group SAOC PO Box 470, PC 115, Sultanate of Oman Tel: +968 24 62 33 00 Tel: +968 2236 4300 Fax: +968 24 62 33 36 www.ithraa.om Sohar Industrial Port Company & Freezone Ithraa, PO Box 25, Wadi Kabir 117, Sultanate of Oman. PO Box 9, PC 327, Sohar, Sultanate of Oman Tel: +968 2685 2700 | www.soharportandfreezone.com

Salalah Port Services Co. (S.A.O.G) PO Box 369, PC 211, Salalah, Sultanate of Oman Tel: +968 2322 0000 | www.salalahport.com

Salalah Free Zone PO Box 87, PC 217, Al-Awqadain, Salalah, Sultanate of Oman Tel: +968 2313 2500 | www.sfzco.com

Special Economic Zone Authority Duqm PO Box 25, PC 103, Bareeq Al Shatti, Sultanate of Oman Tel: +968 2450 7500 | www.duqm.gov.om

Port of Duqm PO Box 2409, PC 111, Sultanate of Oman Tel: +968 2434 2800 | www.portduqm.com

Public Establishment for Industrial Estates PO Box 200, PC 124, Rusayl, Sultanate of Oman Tel: +968 2417 0700 | www.peie.om

Oman Airports Management Company PO Box 1707, PC 111, CPO Seeb, Sultanate of Oman Tel: +968 2434 1000 | www.omanairports.co.om Oman Logistics Company (S.A.O.C) PO Box 994, PC 116, Mina Al Fahal, Sultanate of Oman Tel: +968 2422 5353 | www.khazaen.om Oman Air Head Office, PO Box 58, PC 111, Muscat International Airport Sultanate of Oman. Tel: + 968 2453 1111 | www.omanair.com

The Public Authority for Investment Promotion & Export Development