Oman plans to transform a vast brownfield site in its capital Muscat into a new mixed-use waterfront development as the country aims to promote tourism, attract multinationals and diversify its economy away from fossil fuels.

The Al Khuwair Downtown and Waterfront development project, which was officially launched in February 2024, is a major part of a plan to reinvent the urban fabric of Oman’s capital city. Designed by Zaha Hadid Architects, the 3.3 million sq m project envisions the transformation of an administrative and industrial area close to the city’s airport into a new district. 

With an estimated cost of $1.3bn, the masterplan includes a marina dotted with a cultural centre, offices, residential, hotels and luxury retail developments. A new metro line will also be built to connect Al Khuwair with other parts of Muscat.

“This creates a paradigm shift in the urban scenery of Muscat,” says Khalfan Al Shueili, who was appointed Oman’s minister of housing and urban planning in August 2020. As a “pivotal” part of the greater Muscat plan, the redevelopment is seen as a way to create a vibrant downtown in Oman’s rapidly expanding capital. Muscat’s population is forecast to almost double from 1.5 million today to 2.7 million in 2040.

“For some time we have had our own way of building cities, but this [development] is trying to produce world-class, modern infrastructure [by the] waterfront,” says Mr Al Shueili. The mixed-use development project is “already at the heart of the city,” he says, and argues that it will produce a “ripple effect” for prospective foreign investors and the wider economy. In the first phase of the project, almost 500,000 sq m of office space will be built as a means to attract multinationals seeking a foothold in Oman.

“We aim to bring in a good consortium of investors who are very serious that aim to build long-term partnerships for Oman,” says Mr Al Shueili, who notes the aim is to attract investors, developers, contractors and manufacturers of components used in real estate development. “It will help us connect all of these dots and make [Al Khuwair] a success story.”

Vision 2040

Al Khuwair is one part of Oman Vision 2040, a nationwide initiative launched officially in July 2021, aimed at diversifying the oil-dependent economy. A pipeline of construction projects worth a total of $33bn have already been announced, including Sultan Haitham City, a sweeping project on Muscat’s outskirts which includes 20,000 new homes.  

“Driving this Vision 2040 forward is not going to be an easy programme for us,” says Mr Al Shueli. “We have to let go of our dependence on oil and gas. We need to unlock all the potential of our country.”

Projects within Vision 2040 are ambitious enough to attract long-term strategic investors, but also “realistic in terms of size and variety”, says Mr Al Shueli. Given other Gulf countries have hugely ambitious projects, notably in Saudi Arabia, Oman’s goal is to complement these efforts and provide additional experiences to attract more tourists from abroad.

“We don’t see it really as competition. Some of the same developers in Saudi Arabia have shown interest in Oman. There is probably going to be a good value chain [of opportunity in these developments],” he says.

Tourism is a critical pillar of these efforts, with the Omani government targeting OR20bn ($51bn) of investment in the sector by 2040. More than three million tourists visited Oman in 2023, an increase of 41.2% on the previous year, according to official figures. The government aims to increase tourism’s contribution to gross domestic product from 4% today to 10% by 2040.

“Oman has a very big story in tourism. Its environment, heritage, different landscapes and the experiences that people get are not manufactured. They’re actually very authentic, genuine and accessible. Muscat is at the heart of that,” says Mr Al Shueili. A $2.4bn mountain tourism project on Jabal al Akhdar, which is situated about 95 miles from the capital, is another flagship initiative of the government to attract even more tourists.

The drive to diversify the Omani economy is nothing new. Vision 2020, the predecessor to the current road map, was announced in 1995. The Duqm Special Economic Zone, also known as Sezad, multiple other free-trade zones and industrial parks have been central to boosting manufacturing contribution to Oman’s gross domestic product. 

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This article first appeared in the April/May 2024 print edition of fDi Intelligence.