Oman Infrastructure Report Q2 2012

Business Monitor International
March 20, 2012
66 Pages - SKU: BMI3816801
Countries covered: Oman

BMI View: Despite continuing political turmoil, Oman’s construction sector shows positive trends forthe rest of 2012. Construction industry value is forecast to rise to US$5.4bn by 2016 from just US$3.8bnin 2012. Year-on-year (y-o-y) growth of 5.4% is expected for 2012, with annual average growth of 5.7%forecast between 2012 and the end of our forecast period in 2021. The main driving force fordevelopment remains the energy and utilities sector as strong demand is fuelling growth in the country.

Key highlights include:

.. The Omani government announced plans to invest OMR314.9mn (US$817.9mn) in roadinfrastructure projects during 2012. OMR60mn (US$155.8mn) will go towards the OMR250mn(US$649mn) Sur-Bidbid dual carriageway, OMR62.5mn (US$162.3mn) towards theOMR62.5mn (US$162.3mn) Al Batinah Expressway and OMR10mn (US$25.9mn) towards theOMR40m (US$103.8mn) Mahdha-Al Rawda dual carriageway. The Omani government hasannounced that 681 infrastructure development projects, worth a total of OMR1.5bn (US$3.9bn),will begin during 2012.

.. The Omani Public Authority for Electricity and Water (PAEW) announced that it has allocatedOMR390mn (US$1.01bn) for electricity and water infrastructure development in 2012, reportsameinfo.com. The PAEW is undertaking the construction of four new power plants in differentgovernorates and is also considering building further new facilities in both Duqm and Salalah. A450MW power and desalination power plant will open in Salalah in April 2012.

.. State-owned Oman Oil Company was granted a mandate to develop an Independent PowerProject (IPP) in the governorate of Musandam, following a 'closed' procurement process. Thegas-fired project will have a power generation capacity of nearly 120MW in its initial stages, andwill be developed alongside the US$600mn Musandam Gas Plant project. The plant is scheduledto become operational in early 2014.

Oman's Consultative Council, which was elected for the first time on October 15 2011, will not bringmajor changes to the country's political system, which is dominated by Sultan Qaboos bin Said al-Said.While Qaboos's decision to change the Council from a purely advisory, appointed body to an elected onethat participates in the legislative process has brought about minor changes thus far, we do not expectsignificant concessions to be made. As a result, we do not see an end to political tension in the country.Our short-term political risk rating remains at 79.6 out of 100.

Oman's economy is set to hit a cyclical peak in 2012, and we have raised our real GDP growth forecaststo 5.4% and 4.0% y-o-y in 2012 and 2013 respectively, from 4.5% and 3.4% previously. Elevated oilreceipts will drive this expansion, which will feed through to government consumption and fixedinvestment. Oman's fiscal situation is set to worsen over the medium-term. Expenditure, mainly gearedtowards current consumption, will rise by 11.0% y-o-y in 2012, owing to governmental efforts to creategreater public sector employment opportunities. These commitments will be difficult to pull back in thefuture. At the same time, oil revenues are set to decrease on the back of falling prices and export volumes.



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