Free zones and special economic zone to boost investment

Located on the south-east coast of the Arabian Peninsula, Oman enjoys a strategic location as a shipping and trading centre for markets in Europe, Africa and Asia.

To realise the benefits of this important location, the government promulgated Royal Decree 56/2002, which provides a general legal framework for the development of free zones (FZs). Currently, Oman has three FZs (Sohar, Salalah and Al Mazunah), as well as a special economic zone (SEZ) in Duqm. The development of FZs and SEZs is in line with the spirit of Vision 2020, the country’s national development plan, which aims to reduce the oil sector's contribution to Oman’s GDP.

Free Zones

Each of the FZs has its own unique features and facilities. Sohar Free Zone, for instance, provides facilities to attract investors in the metal and steel, food and logistics sectors. Sohar Free Zone offers close proximity to Sohar Industrial Estate and the Port of Sohar. The incentives available include a tax exemption for up to 25 years, full exemption of Customs duties on goods imported into the free zone, and full foreign ownership of the business.

Salalah Free Zone pursues investors in the chemical and material processing, manufacturing, and assembly and logistics sectors. Salalah Free Zone boasts competitive costs in terms of labour, utilities and infrastructure compared to other regions in the country. Salalah offers tax and commercial incentives which include: income tax exemption for up to 30 years; full exemption of Customs duties; no minimum capital; full foreign ownership; and a 10% Omanisation rate.

Al Mazunah Free Zone (AMFZ), in Dhofar region in the south-west, attracts investors in the trading, light industry and assistant services sectors. AMFZ offers easy access to the Yemeni market with its lower labour costs and population of 28m. AMFZ provides tax and commercial incentives including an income tax exemption for up to 30 years, full exemption of Customs duties, no minimum capital, full foreign ownership and 10% Omanisation rate. Also, Yemeni nationals are allowed to work in the zone without visas or work permits.

Special Economic Zone

In order to further encourage investment into Oman, the government has initiated the development of Duqm Special Economic Zone (DSEZ). Located in the Al Wustah region in the centre of the country, Duqm is 550 km south of the capital, Muscat, and will be one of the largest FZ projects in the MENA region. Further, its 1777-sq-km total area is bordered by an 80-km coastline. Located on the Arabian Sea coast, DSEZ will become a key hub and gateway not only to Oman, but also to the rest of the Middle East, North and East Africa, and South Asia.

DSEZ attracts local and foreign investors of various sectors. It is a model of an integrated economic development comprising several zones, namely: port and the dry dock; fishing port and fisheries industries; industrial areas; logistics services; commercial businesses centre; tourism area and spas; educational town; filters and petrochemicals complex; New Duqm Town; and Duqm Airport. In addition to the facilities provided, DSEZ also offers various incentives including competitive land lease rates, a 30-year income tax exemption, Customs duty exemption and allowance of full foreign ownership of the business.

Oman Oil Company, in cooperation with the International Petroleum Investment Company of UAE, has commenced the establishment of an oil refinery at Duqm with a potential capacity of 230,000 barrels per day. A second phase comprising a petrochemical complex was under development at the time of writing.

The dry dock, which is managed by the Korean group Daewoo, is already working at full capacity. The port is managed by the Port of Duqm Company, a joint venture between the Port of Antwerp and the government of Oman. The initiative has already begun commercial activities and is currently serving Petroleum Development Oman and other oil companies in transporting heavy equipment to oil fields in and around Duqm.