Enter the dragon

China is investing heavily in Duqm, as it plans to develop the port city into a hub for its activities in the region which will become an integral part of its ambitious revival of the ancient Silk Route

In the remote desert alongside the port of Duqm in south-central Oman, one can see an unusual scene: A large contingent of Chinese workers dressed in bright yellow and blue jumpsuits driving large construction vehicles to level the pale orange sand – a first step towards building a whole new city with billions of dollars of investment.

Until few months ago, no one could have imagined the port town of Duqm with a population of around 100,000 could attract billions of dollars investments that too from the Asian economic giant, which is trying to revive the glory of the ancient Silk Route through the Belt and the Road (also known as One belt-one road or OBOR) initiative.

ali

“Duqm lies on the Arabian Sea, and it could be a potential operating base for Chinese businesses near export markets which we want to develop in the Gulf, the Indian subcontinent and East Africa. Duqm is also close to some of the raw materials – the oil and gas resources of the Gulf – which Chinese companies will need for that purpose,” says Ali Shah, chairman of Oman Wanfang, a consortium of eight companies from China.

The foundation stone for the park was laid in April this year for ten projects worth US$3.2bn

According to company officials, things began moving in early 2015 when a consortium of Chinese companies started talking to the Duqm authority for setting up a hub of heavy and ppetrochemical industries. Oman, suffering from the prolonged softness in global crude prices, was exploring avenues to diversify the economy. The government was looking for foreign direct investment to expand the Duqm refinery and port, along with an LNG export hub.

“Talks didn't go for too long, and soon we made a decision. And in the end of 2015, we signed an MoU. And after that we stated working on all the details. Last year in May, we signed agreement for commencing work. Out deputy premier was there to sign agreement as it involves two countries. After that for almost one year we were working on designs and plans for the whole land,” says Shah.

China's choice of Oman for setting up a industrial hub comes naturally as the Asian country is biggest buyer of Omani crude. It is also the biggest supplier of finished products to the country.

fulong

“Oman has become an important partner in the region for China's OBOR. China continues to remain the largest trading partner of the sultanate in terms of volume and value. China-Oman industrial park foundation was laid this year. More than ten Chinese companies have signed investment agreements for building around ten projects include building highways,” says the Chinese ambassador to Oman H E Yu Fulong, while speaking at event to commemorate 70th year of its foundation.

He says, “We expect an increase in the number of Chinese businessmen and tourists visiting this beautiful country in the near future. We are happy to see that under the wise leadership of His Majesty Sultan Qaboos bin Said, Oman maintains national stability, economic development, and social harmony.”

The cordial relationship enjoyed by Oman with all its neighbouring counties was also an added attraction for Chinese companies. Shah says, “We visited all countries in the region, and found that Oman has many advantages. Firstly the location is a very unique, secondly it is very stable politically and finally they have special economic zones with very investor friendly policies. It is a business choice we made after comparing all parameters.”

The first stage of the China-Oman Industrial Park in Duqm comprises 10 projects

  • Building materials market,
  • Methanol production project for olefin project,
  • Electricity production plant,
  • Desalination and bromine plant,
  • Solar panels and equipment factory,
  • Oil and gas fields,
  • A plant for the production of non-metallic composite pipes used in oilfields,
  • A factory for producing steel pipes, wire and steel reinforced PE type and spare parts,
  • A factory to produce high-mobility SUVs
  • A five-star hotel.
  • One-belt-one-road

Announced in 2013, the Belt and Road project designed by China is aimed at building a modern-day Silk Road, connecting China by land and sea to Southeast Asia, Pakistan and Central Asia, and beyond to the Middle East, Europe and Africa.

Chinese companies following the direction of their government are pouring billions of dollars in purchasing assets and building infrastructure that could support and complement OBOR.

fabio

According to Fabio Scaccivialani, chief economist at Oman investment Fund, “OBOR initiative hinges on a series of key infrastructure ranging from high-speed rail links to gas pipeline, from port installations to highways. This network will constitute the cardiovascular system of a colossal integrated cross border economy that, once completed, will reshape the entire barycenter of global economic power.”

“Oman's geographical position makes it a natural pivotal post in this gigantic infrastructural project. Furthermore, thanks to Oman’s favourable business climate, open economy and cosmopolitan workforce it is an ideal location for Chinese companies targeting global expansion.”

cafierom

Agreeing to this Giorgio Cafierom, CEO Gulf State Analytics, a Washington based think-tank, says “Of China’s multiple goals in the Middle East, securing access to energy supplies is most important. Oman plays a pivotal, albeit frequently overlooked, role in Beijing’s grander foreign policy vis-à-vis the Arabian Peninsula and the greater Arab world.”

“Not only is Oman a major source of China’s oil imports, the country is also a leading natural gas producer. In terms of security and Beijing’s counter-piracy operations, Oman’s geographic position, situated along the Strait of Hormuz and the southeastern corner of the Arabian Peninsula, makes it a vital strategic partner of China which has sent People’s Liberation Army Navy on port calls to Salalah during anti-piracy operations in the region.”

“Unquestionably, the expansion of infrastructure that could deepen Oman’s trade with the rest of the Gulf Cooperation Council (GCC), and by extension other Arab and Western countries, would benefit China’s economic and geopolitical interests in the Middle East to a significant degree.

“A deepening Chinese footprint in Oman would enable the sultanate to advance its own interests in terms of becoming an established regional and global hub in the transportation and logistics sectors.”

Eye on the future

The zone around Duqm already features a port, a dry dock and an oil refinery – built partly with Kuwaiti money – and petrochemical plants. However with an investment of around US$3.5bn, Wanfang plans to build a desalination plant, a power project, a hotel and a heavy industrial complex project along with highways and residential projects.

“We have already finalised some designs. But as the standards and regulatory frameworks here are little different from China, we are doing some redesigns after which work will again start,” says Shah, who added that work on phase 1 has begun.

According to industry experts, Duqm's proximity to the African continent, particularly the eastern part where it has made significant investments. Industry captains are maintaining that Africa is at a stage of development comparable to that of China 30 years ago, and Duqm potentially could benefit from likely surge in demand from a rapidly growing continent.

Scaccivialani says Duqm is a huge development hinging on a host of diverse activities from manufacturing to services. It could become the magnet for large-scale projects such as the solar panel factory with a 1GW capacity under or energy transport and storing facilities. Africa is at a stage of development comparable to that of China 30 years ago. If Oman plays its cards well, it could become a combination of Singapore and Hong Kong for this new frontier of global growth.

Experts also believe that a deepening Chinese footprint in Oman would enable the sultanate to advance its own interests in terms of becoming an established regional and global hub in the transportation and logistics sectors. And Duqm will be the centre of all such activities.

“Duqm could serve as a focal point for future developments. Its proximity to the African coast means it could act as a nodal point for exporting goods to the continent also. Volume in Oman's local market wouldn't be enough to sustain such big projects, so access to other markets will be very important,” says Shah. 

Enter the dragon
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