The port is an integral part of an ambitious project that seeks to diversify Oman’s economy and reduce its dependence on oil and gas. Stretching over an area of 2,000 square kilometers, it encompasses everything from a dry dock and oil refinery to an industrial zone and logistics center. For the Omani government, it represents a safe and business-friendly haven for industrial and economic investment, complete with tourist developments and a newly created city.
“This is a very strategic location and we have utilized it to benefit the economy,” says Saleh Al Hashmi, general manager of the Public Authority for Special Economic Zones and Free Zones (OPAZ), the entity charged with overseeing the development of a new economic hub on the shores of the Arabian Sea. “There are major projects already under construction or finished,” he said, referring to the new Duqm Special Economic Zone, one of which is the Port of Duqm. “We are targeting all types of industries. You can say this is considered a main economic business district, which is expected to contribute to Oman’s economy.”
A critical component of the Duqm port is the commercial terminal and operational zone development financed by the Asian Infrastructure Investment Bank (AIIB). Viewed as a primary generator of economic activity, the commercial terminal is central to the strategy of positioning the port as a transportation and logistics hub. All these plans are coming to fruition with the assistance and expertise of AIIB.
AIIB is working with OPAZ (previously, the Special Economic Zone Authority of Duqm [SEZAD]] to achieve the potential economic benefits from Duqm port development through improved transport efficiency, strengthened logistics, facilitated mineral exports, and reduced supply chain delivery time and costs for the wide spectrum of industries in the new Duqm Special Economic Zone and its broader hinterland. AIIB approved a USD265-million sovereign-backed loan to enable the client to start developing the greenfield projects. The loan’s 35-year tenure also provided stable long-term financing that was otherwise unavailable in the market.
Another reason why AIIB financed the project was to help Oman diversify its economy. Although Oman is a high-income country, it is dependent on oil and gas. Thus, from an economic structural perspective, Oman is quite vulnerable. This conclusion is based on careful observation of the history of the country’s sovereign credit rating. Although Oman is a high-income country, by definition, it is facing what is called “second-generation development challenges.” This means that development has reached a certain level and there are challenges for Oman to progress further from a development perspective. The port will promote Oman’s economic viability by opening up opportunities for trade and services.
Given its location in the corner of the Arabian Peninsula, it makes sense for Oman to develop an economic zone rather than a free trade zone. There is enormous potential for Oman to strengthen its logistics services and transform the country into a global strategic logistics hub. The Duqm port project can help speed up this development.
The loan was AIIB’s first project in the Arabian Peninsula and only the second stand-alone financing deal approved by the Bank during the first year of its operations.
The impact of the port on the local economy and its community is expected to be substantial. The population of Al Wusta Governorate, of which Duqm is a part, is predicted to reach 250,000 by 2040. To put that in perspective, the region had a population of just over 42,000 in 2010. The workforce alone in Duqm—once a small port town of about 5,000 people—is predicted to reach 188,000 within the same timeframe. Of those employees, a substantial number will be Omanis.
In addition to the benefits to the people of Oman, the Duqm port will also promote connectivity and regional cooperation by facilitating the movement of people and goods, leading to economic development. This project reflects AIIB’s focus on its thematic priorities, specifically connectivity and regional cooperation, and its commitment to finance Infrastructure for Tomorrow.