Behind the scenes: SMEs and smaller industrial estates provide economic support away from major centres and industries

In addition to the three major port and free zone complexes at Sohar, Duqm and Salalah, a handful of industrial estates and zones are also operating around the sultanate. Aimed at diversifying industry and boosting incomes in governorates beyond the capital regions, these facilities also face some of the same challenges as the larger zones. One of the key hurdles will be developing local businesses, and, in particular, small and medium-sized enterprises (SMEs), with these often unsung heroes of the economy vital for the long-term growth of the sultanate.

Roll Call

The main government body responsible for industrial zones is the Public Establishment for Industrial Estates (PEIE). Formed in 1993, the agency works to attract investors to the estates and set up regulatory frameworks. Starting out with the Rusayl Industrial Estate near Muscat, it now operates nine such entities nationwide. By the end of 2014, the PEIE’s estates have attracted OR5bn ($12.9bn) in investments, with private sector investment in PEIE projects growing 106% between 2007 and 2014, and rising 27% between 2013 and 2014. In terms of jobs, during the first half of 2014 PEIE provided 3955 openings, around two-thirds of which went to Omanis, with the number of projects within PEIE zones and estates increasing from 1409 in 2013 to 1468 in 2014.

On The Border

One of the establishment’s flagship projects is also a free trade zone (FTZ), located in Dhofar muhafazah, or governorate, at Al Mazunah, some 260 km from Salalah and close to the Yemeni border. Indeed, it is cross-border trade with this neighbouring country on which this FTZ depends. The Yemeni city of Al Ghaydah is some 245 km away, while Seiyun is 500 km away. The FTZ is unique in that it offers visa-free entry for trade between the two countries, with no border delays due to traffic. Yemenis may also work in the zone without a work visa.

Situated on a 4.5m-sq-metre site, it offers 100 plots, divided into different sizes, where businesses can enjoy a raft of incentives. These include a 30-year exemption from tax on profits, as well as exemptions from Customs duties and commercial agencies laws. An Omanisation requirement of just 10% also applies, as does potential 100% foreign ownership, while there is no minimum investment requirement to use foreign currencies, easing trade in Yemeni rials. In early 2015 the PEIE announced that work was under way on expanding Al Mazunah, which has become more of a focus since conflict in neighbouring Yemen closed off many other trade routes into the country.

Premier Site

Elsewhere, the PEIE’s first industrial estate at Rusayl is on a 7.9m-sq-metre site 45 km from Muscat. The estate now boasts some 211 factories and workplaces, up from 12 at its inauguration in 1985. The facilities produce a mix of industrial and consumer goods. As Oman’s oldest industrial estate, Rusayl is about to undergo a major upgrade and modernisation, with Omani consultancy the National Engineering Office selected in August 2015 to create a plan for new infrastructure. This will include new roads, parking facilities and gatehouses.

Up & Coming

PEIE’s Knowledge Oasis Muscat (KOM), Oman’s flagship technology park, is located within the capital itself. Operating since 2003, 120 firms are registered there, including Hewlett-Packard Arabia, BAE Systems Communications, Microsoft, Ericsson, Business Gateways International, Oman Data Park, Information Technology Authority, Oman Broadband Company, and dozens of other IT companies, along with the IT and research arms of the sultanate’s banks and major companies. KOM is set for a major expansion, via the Technopolis project, a 1m-sq-metre addition that aims to transform the park into a fully functioning city. Residential areas, museums, hotels and green spaces are to be added during a four-package project.

Special Focus

Further out from Muscat is another site, the Sur Industrial Estate. Established in 1999, this covers 36.1m sq metres on the coast and is 300 km from the capital, with one of its attractions being a deepwater harbour. The estate has an oil and gas industry and petrochemicals focus, with Oman Liquefied Natural Gas, the National Gas Company and Oman India Fertiliser Company being key tenants. Other industries at Sur include cement and construction materials, as well as fishing industries and furniture. Figures released at the end of 2014 for 2013 showed an annual increase in the number of factories on the estate from 33 at year-end 2012 to 53 at the close of 2013. The value of localised investments had reached OR1.9bn ($4.9bn) by year-end 2014.

Diverse Offering

The Nizwa Industrial Estate, some 180 km from Muscat in the interior, covers just over 3m sq metres and has access to the new Muscat-Nizwa highway, providing rapid connectivity with the capital. In February 2015 two Omani outfits, OFP and Sharakah, announced a deal to set up a manufacturing unit at the estate, targeted at meeting the needs of the oil, gas and utilities sectors. Currently, the estate is home to businesses producing light industrial and consumer products.

The Buraimi industrial estate is in Dhahirah muhafazah, on the border with the UAE. On a 5.5m-sq-metre site, the estate currently has some 331 businesses, most taking advantage of its strategic location. The estate is less than 40 km from Al Ain International Airport in the UAE and 120 km from Dubai International Airport and the Port of Jebel Ali, as well as 100 km from Sohar and 300 km from Muscat. Further connections to both the UAE and the rest of Oman are also likely to be added soon, with the planned arrival of a rail link between Buraimi and Sohar.

Ideal Location

Finally, in the southern muhafazah of Dhofar, the Raysut Industrial Estate lies just 4 km from Salalah. Located on around 3m sq metres, the estate offers easy access to the port and new airport, with tenants benefitting from natural gas supplies and the fast developing logistics and services infrastructure around Salalah. Manufacturers on the estate produce a variety of goods, from vegetable oil to office supplies, with February 2015 seeing two more factories begin operations: Gtech, which makes power distribution controls, and Eurotherm, which manufactures polypropylene pipes.

PEIE and the Omani government have plans for expansions and new industrial estates, too. The most advanced is the Samail estate, in Al Dakhiliyah muhafazah, just 45 km from Muscat International Airport and close to Rusayl. The estate covers roughly 7.4m sq metres and since its establishment in 2010 has attracted more than 130 investors to sign leases. Currently, 183 business units are in operation, and a $101m contract to further develop Samail was issued by PEIE in February 2015.

Another project is the Ibri Logistics Area, located in Dhahirah, along the border with Saudi Arabia and the UAE. This will be on an area of over 3m sq metres, containing warehousing, loading and unloading stations, light industrial units and, when the rail link arrives, a railway station. Italy’s F&M Ingegneria is project consultant. This will also benefit from the newly opened road connecting Tanam near Ibri to Saudi Arabia.

Growth For All

When it comes to local companies, efforts are being made to encourage SMEs and Omani entrepreneurs to take advantage of the estates. Set up by royal decree, Sharakah is one such organisation that is contributing to this agenda, with this outfit supporting over 50 SME projects in seven different muhafazah. This support includes advice and funding. Figures from the Sharakah website provide some indicator of the main challenges. Of the 32 businesses financed by the organisation since 2008, 66% are run by expatriates and 34% by Omanis. This is, however, higher than the national average, and an August 2014 Central Bank of Oman report stated that 40% of the sultanate’s workforce is employed by SMEs, but only 5% of these workers are Omani.

Encouraging locals to take the plunge with their own start-ups and SMEs, or go and work for them, is complicated by a variety of factors, some cultural, some economic. Traditionally, talented Omanis head for the public sector, which offers good salaries, benefits and job security – all three of which would be unusual to find in a private sector start-up, or indeed, in many established SMEs. Yet as Oman seeks to diversify, ahead of a future with potentially lower oil and gas revenues, the basis of much public sector funding, this segment will be crucial. Recognition of this is behind the establishment of the Public Authority for SME Development (PASMED) in 2013. PASMED has been working hard with other bodies such as the Al Raffd Fund, which works with Omani youth to help local budding entrepreneurs get started. Awards, training sessions, networking opportunities with large companies and skill-sharing schemes are all part of its programmes. The success of these has important implications for Oman’s regional development, with SMEs forming the backbone of local economies.