The Oman Investment Authority (OIA) is increasingly central to the Gulf state’s economic development as the government seeks to improve the business climate and bolster infrastructure.
Ports and Rail: OIA Partners for Infrastructure Growth
The US$41.5 billion sovereign wealth fund leads a consortium that has taken control of a multi-purpose fishing port in the OMR3.7 billion (US$9.6 billion) Special Economic Zone Duqm, which is one of five economic and free zones being established in the Sultanate with total investment of OMR14.3 billion (US$37.1 billion).
Meanwhile, the Oman and Etihad Rail Company (OERC), a joint venture established last September by Oman Rail, an OIA portfolio company, and Etihad Rail, the developer and operator of the UAE’s National Rail Network, has won the support of sovereign investor Mubadala. The Abu Dhabi investor has this week signed a cooperation agreement with the OERC to support the development of the 303km railway network, which connects Oman and the UAE, with an overall investment value of US$3 billion. Passenger trains will run up to 200km per hour along the route, reducing the time of the journey between Sohar on the Gulf of Oman coast and Abu Dhabi to 100 minutes
The cooperation agreement sets out the terms of joint bodies to share expertise and develop feasibility studies, in addition to joint investments in the development of the UAE-Oman railway network and cooperation to enhance the project’s added value.
Ahmed Al Musawa Al Hashemi, CEO of Oman and Etihad Rail Company said, “The rail network between Oman and UAE is of strategic importance as it is a valuable addition to the logistics service sector in both countries, and contribute to increasing their competitiveness in the market by reducing the total cost of the supply chain. This is in line with both countries’ goals of achieving sustainable development by improving the transport and infrastructure sectors. The agreement with Mubadala reaffirms the strategic position of the joint rail network project to achieve its objectives and ambitions.”
The OERC was one of a number of partnerships mooted last September when Abu Dhabi’s US$157 billion state-owned investor ADQ announced it was looking at opportunities in Oman worth over US$8 billion and bolstering bilateral economic and political relations, in partnership with OIA. Joint investment collaboration in low carbon electricity generation, utilities, and metal production were all sited as target areas by officials of both organizations during visit of Abu Dhabi leader and UAE President Sheikh Mohamed Bin Zayed to Oman. The Abu Dhabi fund signed an agreement with OIA subsidiary the Oman Information, Communication and Technology Group (ITHCA) to establish a US$160 million venture capital fund to invest in high-growth tech startups in Oman.
Other Gulf states are also focusing on forging stronger economic links with Oman, to cement the ties that bind the Gulf Cooperation Council (GCC). In August, Saudi Arabia’s Public Investment Fund (PIF) invested US$300 million in Oman’s private equity infrastructure fund Rakiza. Rakiza is co-managed by OIA subsidiary Oman Infrastructure Investment Management and Equitix, and focuses on the renewables, power and water, social infrastructure, telecommunications, and transport and logistics sectors.
Divesting to Invest: Recycling Capital for Diversification
The OIA is planning US$5 billion of investments in 2023, funded in part from divestment of eight assets. It is predicting returns exceeding US$1.3 billion this year and is also looking to raise debt and co-invest with local and foreign private partners.
One of the key goals in its 2022-26 strategy is privatizing and/or floating 30 of the 160 government companies it currently holds. This is in line with its efforts to attract expertise, technology, and foreign investment to the country’s strategic sectors, and mimics strategies in the UAE and Saudi Arabia where funds from divestment have been recycled into economic diversification and infrastructure.
This month, the government launched a program to privatize government enterprises. Brazilian mining company Vale announced the purchase of OIA portfolio company OQ’s stake in their joint venture, Vale Oman. Vale Oman produces nine million tonnes of iron ore per year and has a distribution centre with a capacity of 40 million tonnes.
The deal forms part of a medium-term strategy to target strategic economic diversification at home and yield-generating investment abroad. In November, the OIA announced the inauguration of 10 strategic projects across the country with a total value of more than OMR750 million (US$1.95 billion), in partnership with domestic and foreign investors. The projects are part of OIA’s National Development Portfolio, which manages more than 160 local assets and companies and represents more than two thirds of the total value according to Global SWF’s estimates. The other part of the fund’s portfolio is the Generational Portfolio, which consists of mostly foreign assets and will focus on “achieving the greatest returns for future generations” and is invested in public markets (69%) and private markets (31%) overseas.
The first project will be Sanvira Carbon, a joint venture between TANMIA, Sanvira Industries, and United Business Trading which targets the establishment of a petroleum coke calcining facility in the Sohar Freezone. The OMR60 million plant’s output will be used in the manufacturing of aluminium with more than 70% exported.
