New desert highway to energize Oman-Saudi economic relations

New desert highway to energize Oman-Saudi economic relations - Oman Observer

CONRAD PRABHU

PUBLISHED: 6:48 PM, JUL 10, 2021

Spanning the impenetrable Empty Quarter straddling the land borders between Sultanate of Oman and the Kingdom Saudi Arabia is a new 800 km highway that promises to serve as a new lifeline in spurring trade and economic relations between the two countries.

Excitement is building over the anticipated completion of Oman’s first — and shortest — overland link with Saudi Arabia, a roughly 800 km carriageway that when formally inaugurated perhaps later this year will provide strong new impetus to trade, commercial and economic ties between the two countries.

For one, the carriageway — traversing the treacherous dunes of the Rub Al Khali (The Empty Quarter) — will enable trade flows between the Sultanate and the Saudi heartland. All manner of local manufacturers, distributors and logistics operators are eyeing a bonanza of opportunities to freight goods from as far afield as Salalah and Duqm, among other areas, to sustain the growth needs of the Gulf’s biggest economy. Overland transportation from, say, Duqm or Salalah, into Riyadh will be far cheaper and speedier than, say, a ship carrying the same goods making its way into the Upper Gulf via the Strait of Hormuz.

Aside from the immense trade and transportation spinoffs, the new carriageway will also provide a safer, shorter and more convenient alternative to the existing 1,640km route that motorists must navigate to reach Saudi Arabia. Traversing the territory of the United Arab Emirates (UAE) en route, the latter route is reputed to take between 16 – 18 hours to cover.

Years in the making, the new Oman-Saudi desert highway is expected to cut travel time by around 12 hours and the journey by around 800 kilometres. The strategically important carriageway starts at Tanam in Ibri Wilayat and ends at the Omani border, about 160km away. On the Saudi side, it runs for a further 550 km before linking up with the key Batha-Haradh highway leading to Riyadh.

Dubbed by experts as a marvel of road engineering, the new road attempts to conquer The Empty Quarter’s constantly shifting and soaring sand-dunes.

Not surprisingly, its completion — initially targeted by around 2014 — has been thwarted by all kinds of technical challenges. Officials on both sides are now confident that the road will be substantially complete before the end of this year to allow for limited operations soon thereafter. Indeed, for pilgrims and tourists, among others, the new road will be a blessing.

Trade and logistics will be among the biggest beneficiaries when the new highway is thrown open to traffic. Seeking to strengthen Oman’s role as a global trade hub in line with the Sultanate of Oman Logistics Strategy (SOLS 2040), local authorities have been introducing internationally accepted trade facilitation to support speedy and cost-competitive trade flows between Oman and its neighbours.

As part of this objective, Oman piloted the first overland trade shipment with Saudi Arabia under the ‘TIR System’ of the International Road Transport Union (IRU) — a key mechanism for facilitating cross-border trade.

The maiden TIR-tagged shipment — a consignment of dairy products — swiftly and safely passed through border crossings (via the UAE) in a reflection of the readiness of Oman Customs to apply TIR Convention guidelines. Assisting in the facilitating of the shipment were Directorate General of Customs of the Royal Oman Police, as well as the IRU member in Oman — Asyad Group — and TIR issuing and guaranteeing association Sinyar.

TIR allows a smooth pre-clearance process through the Electronic Pre-Declaration System (TIR-EPD), enhances risk targeting systems, optimizes time and costs, and avoids the need for depositing a guarantee to cover duties and taxes at transit borders.

Boding well for a strong uptick in economic relations, Saudi Arabia announced last month that it is considering the feasibility of establishing an industrial zone in the Sultanate.

It follows intensive talks by officials of the two countries to explore "prospects for cooperation and integration opportunities in the special economic zones in the kingdom and the Sultanate”, the Saudi Press Agency (SPA) revealed in a statement.

"The meeting also discussed studying the possibility of establishing a Saudi industrial zone in Oman, where the Saudi side would develop, operate and manage the zone, and build logistical routes to transport goods between Saudi and Omani special economic zones," the agency noted. The Kingdom is currently in the midst of an ambitious economic development plan, dubbed Vision 2030, aimed at weaning the domestic economy off its longstanding dependence on hydrocarbons.

The announcement came at newly revitalized talks between the two countries last month attended by the Omani side by Asila al Samsamiya, Under-Secretary of the Ministry of Commerce, Industry and Investment Promotion. During the meeting, organized by the Council of Saudi Chambers, the visiting Omani delegation presented a large number of investment opportunities in the sectors of real estate development, industry, tourism, fisheries, renewable energy and petrochemicals.

BURGEONING INVESTMENT INFLOWS

While Saudi Arabia does not count among the top sources of Foreign Direct Investment (FDI) into the Sultanate, Saudi owned businesses and enterprises have, of late, been increasingly eyeing opportunities to set up operations in Oman. This build-up in interest from the Saudi side has been sparked by a flurry of landmark reforms adopted by the Sultanate to enhance the country’s overall investment appeal.

The Observer looks at some of the key investments and developments involving Saudi players preparing to establish a presence in the Sultanate:

Ibri II Solar IPP

Shams Al-Dhahirah Generating Company, representing a multinational consortium led by ACWA Power — a leading developer, owner, and operator of power generation and water desalination plants based in Saudi Arabia — is preparing to bring its utility scale solar PV Independent Power Project (IPP) into operation at Ibri in Al Dhahirah Governorate before the end of this year.

The 500 MW project, billed as Oman’s largest renewable energy based scheme to date, features an estimated 1.4 million solar panels covering an area of 13 million sq metres. At peak generation capacity, the plant output will be enough to supply an estimated 33,000 homes with electricity and will offset 340,000 tonnes of carbon dioxide emissions a year.

Omani-Saudi JV to set up 7 plants in Khazaen

Khazaen Economic City signed last November three new tenancy agreements valued at nearly RO 3 million with United Vision for Investment and Development and Al Maha Food Industries LLC, an Omani-Saudi joint venture to establish several manufacturing units in the economic city.

Under the three agreements, Khazaen will lease about 27,000 m2 to United Vision for Investment and Development, and to Al Maha Food Industries LLC, to build seven manufacturing units for bottling drinking water, ice production, manufacturing of water bottles, sweets factory, production of tomato ketchup, baby related products in addition to a factory for plastic related products.

Logistics hub in Port of Duqm

Earlier in January 2020, Saudi-based Rezayat Logistics Group has signed an agreement for the establishment of a logistics hub at the Port of Duqm with an initial investment of $15 million. Under the agreement, the company has leased four hectares of prime land within the port’s Logistics Zone to set up Rezayat Logistics Oman (Duqm Branch). A shipment of modern and premium brand mobile cranes that was recently discharged at the port will be used to serve ongoing projects in Duqm. The initial $15 million investment will cover services that include temperature-controlled, chilled, frozen and general warehousing, heavy transportation, equipment rental, crane rental, and general transport which will expand its extensive GCC network and fleet.

$500m Saudi-led steel plant in Salalah

Construction work is progressing on steel industries plant with a 150,000 tonnes production capacity per annum at Salalah Free Zone. It follows an agreement signed by the free zone with the National Company Complex of Saudi Arabia in September 2019. The plant will fabricate various steel products that are used in the manufacture of refrigerators, generators, panels, steel roofs, heavy structures for large commercial and residential buildings, bridges, commercial complexes, factories and gas stations. Two-thirds of this total output will be exported to regional markets.