Oman counts on Chinese billions to build desert boomtown

DUQM (Oman) • In the remote desert along Oman's southern coast, construction machines hired by a Chinese consortium are levelling an expanse of pale orange sand - a first step towards billions of dollars of investment.

Over the past year, the Chinese have become key to Oman's effort to transform Duqm, a fishing village 550km south of the capital Muscat, into an industrial centre that will help the country diversify its economy beyond oil and gas exports.

In a pattern seen across much of the Middle East, the economic interests of the Omani and Chinese governments are coinciding in ways that promise a surge in Chinese capital into the region over the next few years.

Oman's state finances have been hit hard by low oil prices, so it is scrambling to attract foreign money for new industrial zones that will create jobs for Omanis whom the government can no longer afford to employ. Duqm is its biggest such project.

For China, the project is a potential success in its Belt and Road Initiative, a government-backed drive to win trade and investment deals along routes linking China to Europe.

Duqm, which lies on the Arabian Sea, is a potential operating base for Chinese businesses near export markets they want to develop in the Gulf, the Indian subcontinent and East Africa. Duqm is also close to some of the raw materials which Chinese companies will need for that purpose: the oil and gas resources of the Gulf.

Eventually, Chinese firms aim to invest up to US$10.7 billion (S$14.5 billion) in Duqm, said Mr Ali Shah, chief executive of Oman Wanfang, the Chinese consortium. If that figure materialises... it will be equivalent to more than half of Oman's current stock of foreign direct investment.

The result could be a bonanza for Duqm. Eventually, Chinese firms aim to invest up to US$10.7 billion (S$14.5 billion) there, said Mr Ali Shah, chief executive of Oman Wanfang, the Chinese consortium.

If that figure materialises - which is by no means definite, given the multi-year time frame and the many pressures on Chinese companies - it will be equivalent to more than half of Oman's current stock of foreign direct investment.

As recently as 2009, China accounted for less than 1 per cent of the stock of foreign direct investment in the Middle East, according to ChinaMed, a research operation at Italy's Torino World Affairs Institute. Partly because of the Belt and Road initiative, that is changing fast; the ratio rose above 5 per cent in 2015.

China was the top foreign investor in the Arab world in 2016, pledging US$29.5 billion of new money, according to Kuwait's Arab Investment and Export Credit Guarantee Corp. The United States, the second biggest investor, accounted for US$7 billion. The zone around Duqm already features a port and a dry dock, and is to include an oil refinery, built partly with Kuwaiti money, and petrochemical plants.

Oman Wanfang plans to develop over 11 sq km, making the Chinese Duqm's largest prospective foreign tenants by far. Their first facility, a US$138 million complex to store building materials and distribute them around the region, is to be completed within 18 months.

Plans for a further nine Chinese investments, including a US$2.8 billion methanol plant, pipe factories, an US$84 million vehicle assembly plant and a US$203 million hotel, have been agreed in principle and are to be completed within five years.

REUTERS

A version of this article appeared in the print edition of The Straits Times on September 07, 2017, with the headline 'Oman counts on Chinese billions to build desert boomtown'. Print Edition | Subscribe