Real Estate & Construction

State at the Fore


Government infrastructure spending has kept the construction industry moving at a fast pace, though the strength of the private sector should not be underestimated.

Oman’s construction industry is supported both by increasing infrastructure investments and the government’s expansionary fiscal policy. Political stability and a government committed to diversifying the economy from oil and gas are helping drive Oman’s construction sector to solid growth.

Under the Sultanate of Oman’s current five-year economic plan, running from 2011 to 2015, the government is investing $10.7 billion in the construction of transport infrastructure and other projects. The ambitious infrastructure spending program totals about $78 billion, according to Deloitte’s 2013 review of the construction sector in GCC countries. The report forecasts Oman construction industry value in fiscal year 2013 at approximately $4.3 billion, representing annual growth of 5.5%. MEED puts the value of all planned projects in Oman at $116 billion.

Youssef G. Shammas, Managing Partner of Target construction company, told TBY, “Almost all of Target’s contracts are with the public sector and governmental entities. They are the main, and most reliable, drivers of demand. Oman is a large country and there will be lots of projects in the future, especially in water. The government, with the leadership of His Majesty, is sensible and takes a pragmatic and long-term approach to developmental projects.”

Oman is building six new airports and expanding the existing airports at Muscat and Salalah. One of the largest road projects is the second phase construction of the 240-kilometer al-Batinah coastal road. Transport construction accounts for 66% of total construction spending.

In turn, infrastructure spending accounts for nearly 10% of Oman’s total budget, with $6.2 billion allocated for airports and $3.2 billion to roads under the five-year plan. The Sultanate is devoting an additional $1.3 billion to water projects, including the construction of dams, reservoirs, and pipelines. The immense dry dock at the Port of Duqm alone cost an estimated $1.5 billion.

According to Oman’s National Centre for Statistics and Information (NCSI), the construction sector employs 44%, or nearly 600,000, expatriates working in the private sector. The NCSI records 1.68 million expatriates in total. Contractors complain that the domestic hiring requirements—30% of all workers—are an obstacle to efficiency and raise costs unnecessarily. The government’s aim to create jobs, improve living standards, and meet the country’s need for affordable housing are additional elements on the positive side.

Tough times in other parts of the world lead contractors to seek the steady work environment of Oman. Hans Erlings, CEO of Galfar, told TBY, “The downturns in the UAE, Spain, and Italy mean that contractors from those countries are now looking to Oman. Competition is extremely high, meaning jobs are taken at a very low profit margin. You need to be very efficient with excellent engineering, equipment, and maintenance, as well as competitive working hours.”

In 2013, more than 30 firms competed in a tender to build the $1 billion Diba-Lima-Khasab road project. The Oman Construction Summit is an important forum for government officials and industry professionals to discuss such mega projects and the next summit will take place at the Grand Hyatt Muscat, Oman from January 26-29, 2014.

The development of Oman’s rail network is a key need as the Sultanate has become over-reliant on roads. The whole rail development process will cost over $40 billion. Transport Minister Ahmed al-Futaisi said construction will begin in 4Q2014 and trains will start running at the beginning of 2018. The 2,244-kilometer railway is part of a regional rail network proposed in 2004 to link the six GCC member countries. Oman’s Gulf neighbors have pledged $10 billion to help fund the Omani section of the railway.

Other notable large projects include development of Muscat International Airport ($1.8 billion), Salalah Airport ($765 million), and the Port of Sohar project, which at $12 billion will be one of the most ambitious port development projects in the world. In a nod to the goal of reducing the oil share of GDP to 9% by 2020, the government also has slated $2 billion to renewable energy projects, including a solar panel manufacturing plant.


Growth in construction demand is leading cement manufacturers and rebar producers to expand their capacities. Oman is well situated for a domestic cement industry, with large reserves of limestone, a key ingredient in manufacturing cement. Oman Cement has increased its capacity in recent years and now boasts annual production capacity of 2.4 million tons per year, with the potential to go to 2.6 million tons per year. Oman Cement is also moving downstream with plans to open a ready-mix plant.

According to the Arab Iron and Steel Union, Oman consumes more than 60,000 tons/month of rebar, around one-third of which is met by imports. One domestic producer, Hadid Majan, has a factory in Rusayl Industrial Estate and began production in 2003 at 60,000 tons per year. To meet the growing demand for high-quality rebar products, the total production capacity has now been expanded to 210,000 tons per year. Oman Cement CEO Jamal Shamis Al Hooti told TBY, “We don’t see many ups and downs in Oman and there is a steady growth in the construction sector, and also in the private sector. Now there is a proposed project for a railway system in the Sultanate and that will necessitate large quantities of cement for concrete. Hence, the demand will further increase to the point where we’re going to need a new production line in Oman.”

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