China’s investment in $10.7bn city in Oman to provide building boost

Projects such as the Sino-Oman Industrial City will help to underpin growth for construction in Oman, which it expects to accelerate from a growth rate of 2.4 per cent this year to 4.9 per cent by 2019.

Oman is expected to run an average fiscal deficit of 11 per cent of GDP over the next five years, according to BMI Research. Bildagentur-online / UIG via Getty Images

An agreement between Oman’s government and Chinese investors to develop a new US$10.7 billion industrial city near the port of Duqm will help Oman’s flagging construction sector, which is expected to this year post its slowest growth since 2000, according to BMI Research.

BMI said that projects such as the Sino-Oman Industrial City will help to underpin growth for construction in Oman, which it expects to accelerate from a growth rate of 2.4 per cent this year o 4.9 per cent by 2019.

The firm said that inter­national investors, in particular from China, will fill a funding gap in Oman’s industrial sector that has been caused by the oil price plunge and the government’s inability to directly fin­ance work. Oman is expected to run an average fiscal deficit of 11 per cent of GDP over the next five years, according to BMI.

“Although Oman possesses a degree of private investment in its construction sector, the state still plays a pre-eminent role in funding infrastructure projects, and as oil accounts for approximately 85 per cent of government revenue, the collapse in price has had a negative impact on its ability to finance projects,” said David Lee, an infrastructure analyst covering Oman for BMI Research.

The 50-year deal signed in late May was “promising” as it would also help with Oman’s economic diversification, he added. The project involves Chinese investors developing about 11.7 square kilometres of land within the Special Economic Zone next to Duqm’s port (Sezad).

The consortium putting in the money, led by Ningxia China-Arab Wanfang, is planning three separate zones – heavy manufacturing, light manufacturing and a mixed-use area.

In total, some 35 projects will be undertaken, including construction of an oil refinery capable of processing 235,000 barrels per day, a petrochemicals complex, a concrete plant, a steel smelter, a glass factory, an aluminium plant and a solar factory producing panels and batteries.

Ningxia China-Arab Wanfang, which is made up of six private companies backed by the regional government from the Ningxia autonomous region of northern China, has committed to developing at least 30 per cent of the site by 2022. By this time, it is expected to have facilities capable of housing a population of 25,000, including schools, offices, a hospital and a sports centre. Another section of the site has been reserved for a tourism project with a five-star hotel. Construction will be carried out by consortium member Duqm Ningxia Construction Company, and infrastructure work is already under way.

The construction of the city would be financed by Chinese banks, but each industrial fac­ility would be financed by the companies building them, Ali Shah, the chairman of local subsidiary Oman Wanfang, told Duqm Economist, a newsletter published by the Duqm Special Economic Zone Authority. Mr Lee said the investment was in line with the Chinese government's One Belt, One Road initiative of boosting Chinese investment abroad, which has already involved Chinese entities backing infrastructure projects in Egypt and Saudi Arabia.

“Given Oman’s strategic loca­tion on the Gulf, we believe the country is next in line to see large-scale Chinese investment,” said Mr Lee.

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