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Muscat - Back-to-back investments by Iranian and Qatari firms in first-ever automotive ventures in the Sultanate bode well for the advent of a new economic industry that over time has the potential to emerge as a new engine of growth for Oman, say experts. Last week, Qatari-owned Karwa Automobiles signed a deal with Oman Investment Fund (OIF), a sovereign wealth fund of the Sultanate, for the establishment of an auto assembly plant at Duqm Special Economic Zone (SEZ) with an investment of around $160 million. It entails the construction of a facility with a capacity to produce annually around 2,000 units of an assortment of buses, trucks, cars and other vehicles.
Earlier this year, the region's only car-maker, Iran Khodro Industrial Group, struck a similar deal with OIF for the setting up a car assembly line at Duqm with an initial capacity of around 10,000 units annually. Both deals, coupled with OIF's successful acquisition of a 40 per cent stake in Italian auto thermoplastic manufacturer Sigit Spa last year, have the potential to underpin the growth of a major auto industry in the Sultanate with hugely beneficially socioeconomic ramifications for the country over the longer-term.
"From the standpoint of Oman's economic diversification strategy, the emergence of an auto industry will be one of the most important drivers to achieve such a national goal," said Dr Fabio Scacciavillani, Chief Economist at Oman Investment Fund (OIF). "It has the potential to attract investments in a wide array of manufacturing and support industries extending across the auto manufacturing supply chain," he added in comments to the Observer. Through its trio of automotive-related investments, OIF has emerged as the architect of the government's strategy to kickstart the development of a domestic auto industry which, Dr Scacciavillani characterises as a game-changer for Oman's economic growth.
According to the economist, an automotive plant has the potential to attract investments on a massive scale in equipment and parts manufacturing, automation, and services, encompassing the entire auto production supply chain. "The multiplier effect associated with the auto industry is huge," he said. "Clustered around a vehicle assembly plant are typically hundreds of manufacturing units producing everything from iron and steel, aluminium, glass, plastics, electronics, rubber products, and so on. So we can anticipate a major influx of players looking to invest in products and services that are integral to the success of an auto industry."
Boding well for this upbeat picture of a bustling auto industry hub in Duqm is the SEZ's strategic geographical location, ample space, excellent connectivity and infrastructure, and proximity to export markets, according to the economist. The bulk of auto exports is expected to be targeted at markets within the Gulf Cooperation Council (GCC) as well as the wider Arab region which are covered by free trade pacts. Equally significant for Oman is the labour-intensive nature of the auto industry, Dr Scacciavillani points out. "Factory floor workers are typically highly-skilled and well-paid. Moreover, for every direct job that is created by the industry, there are several indirect jobs that will be generated across the supply and support chain. Thus the employment generation potential of the auto industry promises to be huge," he added.
In the United States, the automotive industry is a critical component of economic growth with extensive interconnections across the industrial landscape of the nations. It accounts for roughly 3.5 per cent of the overall Gross Domestic Product (GDP) and provides direct employment to over 2 million people engaged in designing, engineering, manufacturing, and supplying parts and components to assemble, sell and service new motor vehicles. The automotive industry is also a main driver of Europe's economic development, providing jobs for 12 million people and accounting for 4 per cent of the EU's GDP. The EU is among the world's biggest producers of motor vehicles and the sector represents the largest private investor in research and development.
© Oman Daily Observer 2016
