A range of incentives available in Oman's special economic zones

 

To encourage industrial investment in Oman, the government has established special economic zones where investors enjoy tax exemptions, trade facilitation, and competitive advantages on imports and Customs duties. There are four such free trade zones – Al Mazunah, Sohar, Salalah and Duqm – each at different stages of development, and all designed for foreign companies to leverage Oman’s position as a regional manufacturing and distribution base.

Of the four, Al Mazunah and Salalah are the oldest, opening in 1999 and 2005, respectively. The former is oriented towards trading, light industry and assistant services, while the latter, which remains under active development, is geared towards manufacturing and assembly, chemicals and material processing, and logistics. Sohar Port and Free Zone, likewise, continues to be developed with planning under way for the first phase of the site’s expansion, known as Sohar Port South. The plan is expected to add 200 ha of land to Sohar Port’s current 2000 ha, as part of the free zone’s long-term strategy to grow the industrial and maritime hub by as much as 50%.

NEW INDUSTRIAL PARK DEVELOPMENT: The China-Oman Industrial Park at Duqm is among the most ambitious of the new-city projects being developed by Chinese firms under the framework of the Belt and Road initiative. The 11.72-sq-km endeavour in the 2000-sq-km Special Economic Zone of Duqm is being built by Oman Wanfang, a Chinese investor consortium of six private companies.

The Omani government is looking to develop the area around Duqm into a major business zone, attracting more foreign investment and providing local businesses with an opportunity to compete for tenders floated by the Chinese companies operating in Duqm. The firms participating in Belt and Road are seeking to leverage the low costs of oil and gas in the Middle East in order to develop advanced manufacturing capacity closer to target export markets.

MAJOR PROJECTS: In April 2017 Oman Wanfang signed land lease agreements with Chinese firms for the first 10 projects in the industrial park. The total value of the first stage of investments amounts to $3.2bn, around 30% of total anticipated investments in the park of $10.7bn by 2022.

The Phase 1 initiatives are a $2.3bn methanol-to-olefin venture; a $410m power project; a $150m five-star hotel; a $138m building materials market; an $84m sports-utility vehicle factory; an $81m desalination and bromine extraction plant; a $215m manufacturing base for solar panels and equipment; a $10m factory for production of pipes used in oilfields; a $22m factory for steel pipe, wire, reinforced steel and parts production; and a factory producing pipes used in oil and gas fields.

All first-phase projects are expected to be brought on-line within five years, subject to resource availability. Apart from these 10 projects, another 25 that make up the second phase of the investment programme are conducting their market feasibility studies to set up manufacturing units in Duqm subject to land availability and market conditions.

GAS SUPPLY: The nature of future investments in the China-Oman Industrial Park and in Duqm more broadly will depend on the availability of natural gas. For heavy industry in particular, sourcing gas at competitive prices will be critical to project feasibility.

“We are not operating in a vacuum,” Lee Chee Khian, CEO of Duqm Special Economic Zone Authority, told OBG. “We are competing with neighbouring countries that can supply cheaper gas and similar tax benefits. We can only compete on location, avoiding the Strait of Hormuz, but we have to be careful. If we charge a little bit too much for natural gas, the advantage of location becomes secondary.” Security of supply and pricing for the natural gas required to launch heavy industry projects were therefore among the key issues being negotiated in late 2017.

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