Estate practices: Special economic zones are helping to spur development

In order to ensure more balanced economic growth throughout the sultanate, a number of industrial estates have been developed. The management of these properties falls under the responsibility of the Public Establishment for Industrial Estates (PEIE), a government body set up in the early 1990s.

In large part, Oman’s industrial parks accommodate light and consumer industries, though companies such as Sohar Aluminium located at the Sohar Industrial Estate (SIE) are an exception to this trend. Built in 1993 on the outskirts of Muscat, the Rusayl Industrial Estate (RIE) was the country’s first and measures almost 7.5m sq metres. Two larger parks have been built since then: the SIE, which covers more than 21.6m sq metres, and the 36.1m-sq-metre Sur Industrial Estate, according to PEIE figures.

Other industrial areas are located in Raysut, Nizwa and Buraimi. The PEIE assists investors in assembling sites, developing buildings and assessing infrastructure needs in addition to helping facilitate obtaining any requisite operational permits.

Significant Developments

The ongoing expansion of Duqm, a small coastal town in the Al Wusta governorate, is one of the more significant developments within the industry segment. With its port and airport set to become operational in 2013 and its ship repair yard and dry dock officially inaugurated in mid-2012, Duqm is rapidly becoming a centre for industry. All economic activities taking place at Duqm are developed, managed and regulated by the Special Economic Zone Authority at Duqm (SEZAD), an administratively and financially independent state-owned body. SEZAD has also created a special economic zone, which includes an industrial area.

In order to accelerate the pace of development, Duqm’s own tender board was established in early 2012. While the board’s initial objective is to set up tender committees and form policies and procedures, hastening the tendering process of a number of large infrastructure projects remains a significant priority.

Rent Prices

Heavy industry plot sizes at Duqm vary from 20 ha of land to 50 ha, with annual rents of $2.50 per sq metre to $3 per sq metre, according to SEZAD. Land lease rates for medium and light industry are between $3 to $3.50 per sq metre, and plot sizes can vary widely, from 0.5 ha up to 10 ha. Warehouse spaces from 0.5 to 2 ha of land are available for $3.50 to $4 per sq metre.

With 80 km of coastline and measuring 1777 sq km in total land area, Duqm’s special economic zone is the largest in the MENA region, according to SEZAD.

Yet, just as importantly as the zone’s size, investors looking to set up operations in Duqm can carry out their needed administrative requirements through SEZAD’s one-stop-shop services.

A similar arrangement may be set up in Sohar. Located north of Muscat, Sohar is home to a port and free zone in addition to the SIE, and it is expected that the clustering of all three into a single economic zone, a concept known as “Gateway Sohar,” would both generate additional jobs as well as expedite business operations. Announced in mid-2012, Gateway Sohar would help to support logistics and industrial activities with a sole customs regime and a single system for health, safety, security and environmental regulation throughout the zone.

Help From The Air

The forthcoming Sohar International Airport (SIA) is expected to become operational in 2014 and will provide Sohar-based firms with new transport options. At the moment, all commodities moved through Sohar must either come by sea or road, which can cause challenges for firms looking to ship perishable products such as flowers or food.

The GCC is a net importer of food, and food security is a major concern in the region. Sohar is working to carve a niche market for food trading or increasing processing capacity to allow it to cater to both Oman and the greater region.

Construction has already been finished on the new airport’s runway, and a passenger terminal will also be built. According to the Oman Airport Management Company, SIA’s terminal will provide an annual capacity of 500,000 passengers and offer 9000 sq metres of gross floor area. SIA will be capable of transferring 50,000 tonnes of cargo per year.

Road Work

Ongoing road construction should further facilitate development of Gateway Sohar. While Sohar provides businesses with an industrial base of operations in proximity to the capital, road infrastructure between the two cities has proved inadequate for the volume of traffic. One road currently links Muscat and Sohar; however, this will eventually be expanded to three roads: the existing road, a coastal road and an expressway due to be finished by 2014.

One notable company operating out of the SIE is Brazil’s mines and metals conglomerate Vale. The firm runs a steel and pellet plant located on the SIE and signed an agreement with the Sohar Industrial Port Company (SIPC), which oversees operations at the Port of Sohar, in May 2008. Production at the Vale facility began in April 2011, and construction of a second line of operations at the plant was finished near the end of the same year. The firm reports that its SIE-located facilities are capable of producing 4.5m tonnes of direct-reduction pellets each year. Vale has also partnered with SIPC to construct a deep-water terminal, and has signed a 20-year gas contract with the Ministry of Oil and Gas and a 20-year power agreement with the government-owned Majan Electricity Company. “We must target industry power needs since it is the engine for development and a primary consumer of power,” Ahmed bin Saif Al Mazrouy, the general manager of Majan Electricity Company, told OBG.

Small But Mighty

Although not on such a large scale, smaller industrial estates have also proven to be an important component of the sultanate’s evolving economy. At 5.5m sq metres, the Buraimi Industrial Estate (BIE) is much smaller than the SIE or Duqm’s special economic zone, according to PEIE figures. However, the industrial park has been key to building up the industry sector in the Al Buraimi governorate.

Indeed, as of May 2012 a total of 155 factories were operating at the BIE, with a further 55 factories in the construction phase. There were 1485 employees, and Omanisation at the estate exceeded 30%, according to the Oman News Agency. The BIE offers investors a number of incentives such as a renewable five-year tax exemption and Customs duty exemptions when importing equipment, raw materials, spare parts and tools. The industrial park is also centrally located, only 100 km from both Sohar and Dubai.

Labour issues remain something of a challenge for Oman’s industrial parks. In mid-2012 business leaders from the RIE met with Ali bin Masoud Al Sunaidi, the minister of commerce and industry, in order to explore methods of upgrading Oman’s industrial estates. This included a discussion over how to raise Omanisation levels. One potential step forward, as noted in the meeting, would be to set up vocational training institutes – which has helped to boost Omanisation levels in a number of other economic sectors.