Automobile sector Poised to Play Crucial Role in Oman Economy

Oman is positioning itself as an attractive destination for automotive investment in view of its strategic position in the Middle East. Sizeable investments by both Qatari and Iranian firms in the recent past indicate that in the long run, the automotive sector will play a crucial role in the Omani economy

Qatari firm, Karwa Automobiles recently finalized a deal with Oman Investment Fund (OIF), Oman’s sovereign wealth fund to set up a factory for auto assembly plant at the Duqm Special Economic Zone (SEZ) with an outlay of USD 160 million. The investment will cover the construction of a lant that will produce at least 2,000 vehicles on an annual basis including trucks, buses, cars and other vehicles.

Earlier in 2016, the only auto manufacturer in the Middle East, the Iran Khodro Industrial Group, signed a similar agreement with OIF for establishing a factory for assembly of vehicles from CKD kits at Duqm with an initial capacity to produce 10,000 units every year. Another deal in alignment with this strategy was OIF’s acquisition of a 40 per cent stake in the Italian firm Sigit Spa which manufactures auto thermoplastics and be a major driver for growth of automotive industry in Oman in the long run. With the OIF being involved in all three deals, it is clear that the Omani government’s strategy is to jumpstart the development of the domestic auto industry.

Dr Fabio Scacciavillani, Chief Economist at Oman Investment Fund (OIF) stated in an interview to the Observer that the emergence of an auto industry is meant to play a key role in Oman’s economic persification strategy as this will attract investments in a wide array of manufacturing and support industries extending across the auto manufacturing supply chain ranging from equipment and parts manufacturing and automation to services. He added, “Clustered around a vehicle assembly plant are typically hundreds of manufacturing units producing everything from iron and steel, aluminum, glass, plastics, electronics, rubber products, and so on. So we can anticipate a major influx of players looking to invest in products and services that are integral to the success of an auto industry.”

The Duqm SEZ is highly attractive as an investment destination due to its proximity to export markets, ample space, strategic geographical location, excellent infrastructure and connectivity to transport networks. Once the auto factories commence production, the plan is to export the bulk of their production to other GCC countries as well as the wider Arab region. The auto industry being a labor-intensive one, its development is expected to create a large number of direct and indirect jobs and thus reduce unemployment levels in addition to having a positive impact on the economy.