Oct. 7, 2020
Investments in world-class infrastructure have generated huge rewards for Oman. The goal now is to leverage technology as a disruptive enabler, build human capacity across the public and private logistics sectors, and drive operational efficiencies to build an integrated logistics business environment that is benchmarked against the world's best.
Oman's 2,092-km coastline and strategic location have made it a key destination and transit point for trade for centuries. Situated on the eastern edge of the Arabian Peninsula, Muscat has historically been the the first point of contact for traders travelling between Asia, the Indian subcontinent, and the Arab world. And with the passage of time, this strategic advantage has only increased. By becoming a member of the GCC in 1981, the Sultanate created ties to a market that is now worth north of USD1.2 trillion in global trade. Equally significant, Oman has territorial rights to the Strait of Hormuz, through which around 30% of the world's oil shipments pass.
The Sultanate has continued to maintain its positions as a logistics hub and looks to further expand and modernize in order to become one of the top-10 global logistics hubs. It is currently ranked 43rd in the World Bank's Logistics Performance Index (LPI), up from 62nd in 2012. Meanwhile, Oman's score in the UN Conference on Trade and Development's liner shipping connectivity index rose to 53 in 2018, up from 34 in 2010.
With its ninth five-year plan for 2016-20 coming to an end, the country is beginning to reap the rewards of investments and efforts made over the decades to restructure and expand its transport and logistics sector. According to the Central Bank of Oman's latest report, the logistics sector is one of the biggest contributors to the economy, representing around 4% of GDP in 2018. The same year, Oman's logistics sector clocked a growth rate of 33%, the highest among all GCC countries.
Although the government's role has been crucial in boosting port capacity, the current expansion is being driven by private investment, with the public sector having steadily decreased its development expenditure every year since 2014. This bodes well for the sector's future as private players are better positioned to harness the potential of Industry 4.0 technologies, such as the IoT, automation, blockchain, AI, and real-time analytics, and boost flexibility, transparency, and agility in the supply chain and perform logistics tasks in the most optimal manner.
The improvements in Oman's logistics industry are due to a combination of infrastructure development, private-sector facilitation, and integrated policymaking that can be traced back to 2013, when the government committed to spending USD20 billion on transport infrastructure by 2030 and introduced the Sultanate of Oman Logistics Strategy 2040 (SOLS 2040). Developed in consultation with 65 specialists from various industries, SOLS 2040 was published in February 2015. It defined key targets for the logistics sector, including a top-10 position in the LPI, 300,000 jobs in logistics services, and a GDP contribution of USD36.4 billion.
In 2015, the Ministry of Transport and Communications (MoTC) set up the Oman Logistics Centre (OLC) as an agency to oversee the execution of SOLS 2040 and simplify government logistics processes under the four pillars of trade facilitation, human capital, markets, and technology applications. As noted by the World Bank in its 2018 LPI report, the establishment of the OLC has helped raise the profile of Oman's logistics sector domestically and internationally.
In order to build the innovation capacity of the logistics sector, in July 2019, the OLC signed an agreement with the Industrial Innovation Centre (IIC), Oman's national organization for industrial innovation tasked with developing the Sultanate's industrial innovation ecosystem and enabling the industry to capitalize on techno-entrepreneurship, innovation, technology transfer, and the knowledge economy.
Both organizations are fundamental to the government's plan to introduce blockchain in shipping operations to ensure faster clearances and transparency, use big data to develop new transport solutions, promote active collaboration and seamless business transactions among all stakeholders, and offer a plethora of opportunities for innovative industries in the logistics sector.
Oman's logistics sector's high growth rates are evidence of the effectiveness of organizations like OLC and IIC and strategies such as SOLS 2040. And as if that were not enough, the government introduced the new PPP authority and FDI law in January 2020 to catalyze the investments needed to realize the sector's full potential and maximize returns on investment in ports and free zones, hoping to make Oman a global logistics hub sooner than initially planned.