Analysis Infrastructure Oman’s infrastructure push is vital for economic turnaround By Valentina Pasquali February 4, 2025, 8:58 AM Robert Haandrikman via Flickr The 'wilderness-rich' Musandam governorate, where construction of a new road has recently begun IMF tips public-private tie-ups Progress with airport expansion More roads and rail to follow Oman has made strides in enhancing its infrastructure over the past few years, but more is needed. Authorities seem keenly aware of this as they juggle costs and the health of public finances alongside broader efforts to grow the non-oil economy. Historically, the sultanate has been less open than its UAE neighbours to glitzy development of the type that attracts wealthy foreign tourists and residents. However, it seems to have turned a corner in recent years, expanding the international airport in Muscat, launching the construction of a new road in the wilderness-rich Musandam governorate and moving forward with a rail link to the Emirates, among other projects. “The expansion of Muscat International Airport and the development of luxury resorts have enhanced Oman’s accessibility and appeal to tourists,” the International Monetary Fund says in its latest assessment of the Omani economy, which was released last month. Urban renewal, residential and hospitality upgrades, and even industrial build-out are indeed following: from the planned Sultan Haitham City in the capital’s outskirts, to the Aida development, with its Trump-branded villas, also near Muscat, to the continued expansion of the Duqm special economic zone in eastern Oman. Mansoor Ahmed, a veteran of the region’s real estate and infrastructure industries, says: “Oman has been actively enhancing its transportation infrastructure, focusing on both road networks and airport facilities to support economic growth and diversification.” Muscat International AirportThe expansion of Muscat International Airport has made the sultanate more accessible for tourism, and six more airports are planned Now, more roads are on the cards, as well as up to six new airports, slated to open before the end of the decade. Most recently, in early January, Oman’s minister of housing and urban planning, Khalfan Al-Shueili, said plans were being finalised to launch the construction of a metro in Muscat, with a timeline of completion in less than a decade. Rail has been the toughest nut to crack, according to Ahmed. Plans for a nationwide freight and passenger network, for instance, were slow to get off the ground until the UAE’s Etihad Rail joined up with Omani partners in the Hafeet Rail development, which will connect Sohar Port in Oman to Al Ain in Abu Dhabi. The Muscat metro is going to be no less complicated. On the plus side, it will have to serve fewer than two million people, against the more than three million residents of Dubai and the seven million in Riyadh, Ahmed says. However, he says, the metropolitan area of Muscat spans approximately 3,800 square kilometres, while Dubai covers about 1,300 square kilometres and Riyadh less than 1,975 square kilometres. “So connecting vast areas of Muscat with a relatively small population will be a costly proposition and may take years to complete.” Oman makes key changes to draft income tax law Gulf still struggling to attract private cash for public projects $54bn private investment sought for Abu Dhabi infrastructure The other challenge in Oman’s race for more and better infrastructure will arise from securing funds without denting the improved fiscal position the country has gained through various reforms in the past few years, and which has returned it to investment-grade rating. Oman’s latest budget, for fiscal year 2025, allocates OMR900 million ($2.34 billion) to “development” spending, inclusive of “critical” infrastructure, housing and employment. On the face of it, that is unchanged from the 2024 budget. However, a recent analysis by KPMG found that it represents a nearly 30 percent drop from the OMR1.2 billion ultimately spent last year, according to early estimates. Since at least 2023, Oman has also deployed sovereign wealth toward infrastructure development. The nation’s infrastructure investor, known as Rakiza, has a mandate to support infrastructure in the energy, utility, telecom, transport and logistics, and social domains in Oman and Saudi Arabia. Rakiza functions as a private equity company, manages overseas investments from the Saudi Public Investment Fund, and is co-managed by Oman Infrastructure Investment Management (OIM) and the UK-based company Equitix. In March 2024, the Oman Investment Authority separately established the more than $5 billion Future Fund Oman to invest in “commercially and economically-viable new or existing large-scale projects located in Oman,” though not exclusively in the infrastructure space. Ultimately, boosting infrastructure is an important pillar of Oman’s aim to raise its profile as a destination for tourists from around the world, the IMF says. The key to get there, the IMF says in its newly published Article IV Consultation, is more public-private partnerships (PPPs). “Collaborative projects can lead to innovative solutions for sustainable tourism development and enhance the overall competitiveness of the sector,” the IMF says. Ahmed agrees that PPPs are the way forward. “Oman’s financing strategy reflects a balanced approach, integrating traditional government funding with innovative financial instruments and private sector participation,” he says. “This ensures sustainable growth and diversification of the economy.”