Major investments in agri-businesses this year look set to help Oman improve food security and develop an export capacity in processed foods from its new hub in the northern port city of Sohar. The expansion will also produce spin-off benefits for the freight and packaging sectors.
The development of Sohar as a major food-processing center will see the construction of an OR15.5m ($40.3m) flourmill with a daily capacity of 500 tons when production begins in late 2017. Oman Flour Mills, the country’s largest flour producer with a daily output of 850 tons, said in a statement in January that the new mill had an eventual capacity of up to 2000 tons.
The agri-industrial hub will also feature Oman’s first sugar refinery, which will eliminate the need to import the more than 120,000 tons of refined sugar consumed annually.
Like other countries in the Gulf region, the Sultanate has to import most of its foodstuffs due to climatic conditions and land-use restrictions. It is working to enhance food security by increasing cultivation and buffer food grain stocks, with extensive storage facilities being developed at Sohar and elsewhere.
The $200m facility, commissioned by the Oman Sugar Refinery Company (OSRC), is expected to come on line later this year or early 2016. With a planned capacity of 700,000 tons in its initial stage, and 1m tons in the second phase of the project, the refinery will supply the local market and support the growth of the processed foods sector.
In addition to private sector investment, the government is also offering support to the industry via funding announced in its January budget. Plans to develop a OR100m ($260m) plant in a joint venture with poultry products firm A'Saffa Foods is part of a major initiative to give Oman near self-sufficiency in poultry products. Oman Food Investment Holding – a new state enterprise overseeing agri-business investments – will lead the project, in which A’Saffa has agreed to take a 20% stake. Works on the mega facility are set to begin later this year, although a decision has yet to be made on its location.
Spin-offs for packaging sector
Underpinning the expansion of Oman’s food processing sector will be the construction of a $170m agricultural handling terminal at Sohar. Work on the terminal is scheduled to begin in March, and when completed it will be able to handle 700,000 tons of grain and 1.5m tons of raw sugar imports annually.
Packaging is another sector lined up to benefit from the expansion of food processing industries. “Our aim is to attract new investment in food and food processing industries and create a cluster than can feed the region,” said Edwin Lammers, Sohar Port & Freezone’s executive commercial manager. “Grain silos and a sugar refinery are already in the pipeline, and as this sector grows, the opportunities for packaging companies to serve multinational businesses will grow,” he added.
Investments are already in the pipeline to meet the extra demand for packaging following the planned addition of food processing projects in and around Sohar. Among those, Ompet, a joint venture between the Oman Oil Company and LG International, plans to open a $600m beverage packaging factory in the Sohar Port & Freezone in 2016, turning out 250,000 tons of plastic bottles a year at full capacity.
One of the major aims behind the project is to reduce the import requirements of Polyethylene terephthalate (PET) products in Oman and the region more generally. It will also leverage Oman’s low-cost energy resources to reduce the cost of pre-packaged food imports. Other developments utilizing the output from the petrochemical plants in the region will see packaging materials capacity rise to 1.5m tons annually, according to port data.
Investing in logistics support
The focus on agri-industry is expected to have positive knock-on effect for other industries, including the domestic transport and logistics sector, which will benefit from increased freight traffic between Sohar and processing centers to other markets.
The planned construction of a national rail network, scheduled to be completed before the end of the decade, will alleviate the pressure on road transport facilities. Work is set to begin later this year to build the first stage of the multi-billion-dollar network, a 207km line between Sohar and Buraimi on the border with the UAE.
The line will link to the wider regional network, facilitating imports of materials and exports of processed foodstuffs and other goods between the GCC members. Further sections of the 2235km rail grid will eventually span the length of the Sultanate, connecting Oman’s most populated areas, the ports and industrial centers.
Oxford Business Group
13 February
