New kid on the block: With a growing free zone and port, Sohar is drawing new interest

Located some 230 km north-west of Muscat, Sohar is the sultanate’s third largest city and an emerging economic centre in its own right. While the Port of Sohar, a deepwater industrial seaport in operation since 2004, is a key component of Sohar’s expanding economy, the nearby Freezone Sohar is becoming especially vital as well. The free zone is managed by the Sohar Industrial Port Company (SIPC) – which also operates the Port of Sohar – and owned by the Sohar International Development Company, a joint venture between the Port of Rotterdam in the Netherlands, India-based SKIL Infrastructure and the Omani government. The first phase of Freezone Sohar includes 500 ha of built-up land, 200 ha of which have been leased. The entire area of the free zone covers 4500 ha of land. The first stage is scheduled to be completed by 2014.

Substantial Benefits

Investors at Freezone Sohar are typically downstream steel manufacturing and logistics firms. Those which operate out of the free zone gain a number of benefits such as 100% foreign ownership and a simplified Customs duty of 5% when moving products out of the free zone to sell in Oman or another GCC country. In addition, all free zone investors also receive a 10-year corporate tax holiday (corporate taxes are usually around 12% in Oman). This holiday can be extended to 20 years for those firms that reach a 50% Omanisation level, with the minimum Omanisation level set at 15%. A further incentive includes a single processing system for procuring all permits, approvals and licences, according to the Port of Sohar.

A number of companies have recently set up operations in Freezone Sohar. Gulf Mining Materials Company (GMM), a subsidiary of the locally-based Gulf Mining Group, signed a lease agreement with the free zone in May 2012 to set up a ferro-chrome smelter. In 2011 India-headquartered Indsil Group and local holding company Muscat Overseas Group agreed to construct four ferro-chrome smelters in the free zone. Also based in India, manufacturing firm Vandana Global, has expressed interest in building a ferro-chrome facility.

Special Chemical Centres

KLJ Resources , a New Delhi subsidiary of KLJ Group, aims to build a chemical plant in Freezone Sohar, and another New Delhi-based firm, AI Metals, plans to construct a recycling plant for plastic granules. A third India-headquartered firm, Cords Cable Industries (CCI), noted its interest in September 2012 of setting up a manufacturing facility and stocking centre to serve its GCC customers. CCI manufactures a variety of cables and power cords.

An agreement was also signed in late 2011 to build a food hub in the free zone. Signed by a consortia of Omani and South African companies, the new hub is intended to position Oman as a food distribution and consolidation centre for the region. Construction plans include temperature-controlled facilities built over several stages. The hub is scheduled to become operational by the first quarter of 2013.

In addition to setting up a logistics centre, the food hub investors aim to initiate agricultural enhancement programmes to improve farming and food processing practices in the Batinah region. Further efforts will focus on agricultural education and training programmes, which are expected to create new jobs.

“Challenges remain with finding investors in many areas because the infrastructure in place is still nascent,” Sheikh Khalil bin Ahmed Al Salmi, the deputy CEO of Oman Drydock Company, told OBG. “However, power, water and port facilities are being put in place, and we are focused on developing the human resources at our disposal and creating complementary service industries around industrial operations.”

The free zone and the Port of Sohar have also worked with the Public Authority for Stores and Food Reserve, a government body responsible for food security strategy, to build food commodity storage capacity at the zone. “The GCC is a net importer of food, and food security is a major concern in the region,” Jamal Aziz, the CEO of Freezone Sohar, told OBG. “Sohar needs to carve a niche market for food trading or increasing processing capacity to cater to Oman and the region.”