Oman tourism driving $56bn in projects
A number of recent milestones have propelled Oman’s tourism industry – from moving the weekend to building new international airports. In turn, this is spurring unprecedented private sector opportunities in related development and infrastructure projects, with an estimated value of $56bn to 2017. Melanie Mingas reports
In the GCC, the road away from hydro-carbons is well worn. From diversifying energy sources to introducing entirely new industries, all six member nations realise the finite nature of their economic authority and are working hard to spread their interests.
Saudi Arabia boasts a network of manufacturing and educational cities; Qatar is preparing for 2022; and the UAE is growing at such a pace it is now diversifying from its original diversification strategy, graduating from a global tourism hub to a regional business and finance centre.
In Oman, final preparations are underway for the launch of a 25 year tourism strategy – the result of months of collaboration between industry stakeholders, which is set to increase job creation, private investment and, as a result, GDP through community participation, growth of the SME sector and the development of human capital.
Launching next month, the tourism strategy will run in tandem with the Oman2020 ambitions, drawing unprecedented private sector input in the country’s physical and economic development.
As yet, the scheme’s goals are not quantified, but the present picture shows a clear road map of where the Ministry of Tourism wants to be heading. Currently, travel and tourism contributes 3% to GDP, with arrivals in the range of 1.7m. Direct contributions were predicted to rise to 10.2% in 2014, ranking Oman in the top three of all 184 countries monitored by the World Travel and Tourism Council.
Forecasts predict tourism arrivals will increase a staggering 10% compared to 2014 and there are now solid plans to establish the country’s own low-cost carrier to add to the 30 airlines which currently hold landing rights.
The quantum leap in progress is supported by a number of factors; the alignment of weekends with GCC neighbours, the rise in economy airlines and the boom in mid-market hotels.
But the sleepy Sultanate will require much more to achieve its ambitions; first and foremost a robust and confident private sector-led construction industry. International Quality and Procurement Center (IQPC) reports a total project value of $56bn between now and 2017, inclusive of the highly anticipated railway and Al Batinah Expressway. Direct tourism infrastructure projects alone are currently valued at $3.3bn, inclusive of two new international airports and more than 5,000 hotel rooms to be operated by local and international brands.
Expansion plans for Muscat International and Salalah International Airport will increase capacity to 12m and 1m passengers a year, respectively. In Muscat, further expansions planned in three subsequent phases will ultimately boost the airport’s capacity to 24, 36 and 48 million passengers as demand permits.
David Sobey, managing director at PPMC, explains: “The Sultanate is witnessing economic growth in light of government plans for diversification, industrialisation and privatisation and a growing economy is expected to translate into a higher GDP per capita, in turn strengthening the spending power of the population. The construction market’s key drivers are population growth, economic growth, increased focus on the tourism sector and infrastructure development.”
Reinventing a classic
The construction sector has already enjoyed strong growth with BMI Research reporting increases of 8.5% in 2014 and forecasts of 6.7% for 2015.
Much of the country’s development to date has been public sector initiated and government bankrolled to secure the necessary infrastructure such a sparsely populated country with difficult terrain requires.
But there is one company leading the way when it comes to tourism investment. Omagine LLC is an entertainment, leisure and hospitality company headquartered in New York City with a subsidiary office in Muscat. Its Omagine project will create a $2.5bn mixed-use tourism and real-estate project and has investors falling over themselves for a piece of the 245 acre prime beachfront development.
Located only six miles from Muscat International Airport, it sounds like the ambitious glitz seen in such projects as Ras Al Khaimah’s $1bn Al Marjan “party island” project, or Dubai’s latest shoreline development, Blue Waters.
But that doesn’t mean Oman’s sleepy historical charm is being wiped out; Oman isn’t planning to become “another Dubai”. Omagine promises to be different with the developer assuring “traditionally designed residential and commercial components”.
“The tourism components are thematically imbued with culturally aware and scientifically accurate entertainment experiences. All of our developments are historically faithful to their surroundings. The tourism elements tend to emphasise the great art, music, culture, science and philosophy of the world – the great ideas – while simultaneously being hip, stylish, trendy and very 21st century,” a statement reads.
It’s a theme present in many of Oman’s plans. So keen is the country to build on its past, rather than over it, the Ministry of Heritage has even established itself as a best practice leader, imparting restoration and heritage advice to other Middle Eastern countries and as a result providing opportunity for niche sectors of the construction industry.
New Oman
In light of falling oil prices, not to mention’s Oman’s original ambition to stabilise its economy, measured development and sustainable growth are key.
Fahad al Ismaili, executive director, Tibiaan Properties, advises: “The government dependency on oil income is a major concern for the near future. Therefore, making the necessary arrangements to boost global trade, manufacturing, exports and tourism should be made immediately, before it is too late.
“Creating proper free zones to allow 100% ownership of an enterprise, 100% repatriation of capital and profits, no minimum capital investment, no corporate or personal tax and no need for a local partner will be a great first step towards income diversity.”
Echoing Ismaili’s observations, Sobey agrees that tourism is only a small part of the equation with pre-cast housing, port development and liquidity in the banking sector all playing a part (see graphic).
“Rapid urbanisation, increased disposable incomes, ease of availability of housing loans, and low interest rates are driving construction activity in Oman with an increase of capital investment, as a percentage of the GDP, in the construction industry. The increase is expected to be channeled towards meeting the high construction demand across the region,” he says.
Against this backdrop, Oman is dependent upon the private sector to execute its ambitions as BMI Research predicts the country’s budget will fall into deficit this year. On the plus side, Oman has one of the most robust PPP models in the region, almost guaranteed help from its neighbours and sovereign wealth funds to fall back on, meaning that the combination of long term economic development strategies and reduced oil prices – far from sounding a warning alarm – could in fact create the perfect storm.
