Oman's subsidy cuts have a silver lining

Oman's subsidy cuts have a silver lining
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Published January 19th, 2016 - 14:00 GMT via SyndiGate.info

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Large-scale projects such as Port Sultan Qaboos Waterfront could open the market for foreign investors to gain a foothold in the Omani market. (Travel Muse)
Large-scale projects such as Port Sultan Qaboos Waterfront could open the market for foreign investors to gain a foothold in the Omani market. (Travel Muse)
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Oman’s real estate market could see an increase in public-private partnership deals following the removal of fuel subsidies and the government’s austerity measures, consultancy Cluttons said in a report.

The sultanate became the latest Gulf state to announce the removal of fuel subsidies last week, as oil prices continue to plummet.

Oman’s 2016 budget also includes measures to reduce government spending and boost non-oil revenues by raising corporate taxes and increasing charges on some public services.

Head of research at Cluttons Faisal Durrani said: “For a country as reliant on hydrocarbon income as Oman, the continuing slide in crude prices is driving the need for additional income streams.”

Such measures could entice additional foreign investment into the sultanate, especially in projects such as the $1.3bn Sultan Qaboos Waterfront project, the report said.

Spread across 451,000 square metres, the mixed-use development will include seven hotels, entertainment destinations, boutique shopping units, restaurants and cafes, a marine heritage visitor centre and residential apartments around the marina.

Work on the four-phase project is slated to begin this year with final completion expected in 2027.

The development will be 51 per cent state-owned through the Oman Tourism Development Company while the remaining 49 per cent will be held by pension and investment funds along with private investors.

Head of Cluttons Oman Philip Paul said: “The redevelopment of Port Sultan Qaboos is an ideal example of a project that would benefit from international best practices and ‘place-making’ expertise to create a thriving waterfront destination in heart of Muscat that will attract both visitors and residents.

“Urban regeneration is something that is only just starting to appear in cities across the Gulf and will provide tremendous opportunities to create more value from established and desirable parts of central business districts. These districts often benefit from well-established communities, transport infrastructure and pedestrian footfall; something that developers and investors will find hugely attractive, particularly in the case of PSQ.”

There have been limited PPPs in Oman’s real estate sector as the size of the market is still fairly small compared to some neighbouring countries.

“International interest in Oman’s real estate development has mainly come from a handful of Gulf developers, however, large scale projects such as Port Sultan Qaboos Waterfront could open the market for foreign investors to gain a foothold in a highly attractive market that has a good track record,” Paul added.

In Oman, the property market has been supported by the “relative stability” in job creation levels and continued infrastructure spending, the report said.

Fuel subsidies will further help the industrial sector, opined Durrani.

“We have already seen the successful implementation of fuel subsidies in the United Arab Emirates, where energy subsidies formed a sizeable proportion of gross domestic product. Bahrain has also announced similar plans and so it was only a matter of time before other Gulf States including Oman followed suit by dropping fuel and energy subsidies as they try to rebalance their economies in this era of cheap oil,” he said.

“Over the past six months, the price of diesel in the UAE has fallen by 30 per cent to 40 per cent, which has a clear upside for the industrial sector, with lower manufacturing and transport costs likely to be passed on to consumers gradually,” he added.

By Aarti Nagraj

 

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