Trading and Investing in the Salalah Free Zone

December 6, 2017 in Infrastructure

The trade and commerce administrations of Omar have cultivated an economic ‘Free zone’ next to the port of Salalah, where goods can be exchanged under favourable customs regulations. The Salalah site is just one of five other economic zones in Oman.

The zone offers industrial estate for manufacturing facilities, a mix of developed and undeveloped land, warehouse facilities, and one stop shop services to create a healthy base for production, trade and sales.

Salalah Free Zone was established in 2006 through the Royal Decree No. 62/2006. The free zone was established on 1848.19 hectares of lands in two major plots, adjacent to the port, divided between Raysut and Adhan. The government of Oman is leasing the land for a period of 50 years to the Salalah Free Zone Company, effective as of March 2007. Salalah Free Zone Company SAOC is the sole operator for the Free Zone in Salalah, and the platform is entirely government owned. It creates a centre for heavy industries, contributing to the national economy by creating 2,000 direct jobs and attracting a foreign investment of $55 million.

The free zone has been carefully engineered to maximise potential business deals and trade. The nearby port greatly supports the movement of resources from Salalah to local and international destinations. Major shipping companies such as Maersk Line will use the port as a transshipment hub. Mr. Hasan Lala, General Manager Investment of Darvesh, said:

“We are looking at Salalah as an investment opportunity because it is going to emerge as a transshipment hub in the near future. We are here to fill the gap with basic facilities, which are needed in Salalah for those who are coming here to do business.”

Mr. Lala’s idea has also been articulated by port management. According to Peter Ford, CEO of the Port of Salalah, “a successful free zone is in the port’s interests, and vice versa.” He has confirmed that, so far, “it has been a very good relationship on both sides.” Mr. Ford was able to elaborate. He said:

“Without the port’s direct connectivity to 60 global markets by over 3,200 ships annually, the free zone customers would have a difficult time transporting their products to markets. Supporting the free zone in attracting businesses to set up in Salalah is one of the pillars of our strategy. We have grown our Commercial Department by 200% to support that.”

He added:

“The Port of Salalah provides the fastest connection times to the Indian Ocean Basin and throughout the entire East African-Indian Gulf with the main trade lanes of Asia and Europe. That is where shipping lines can save their money, by taking these huge ships that generally have great economies of scale, and using a central location to get as close to the final market locations as possible. These network savings reach into the tens of millions of US dollars annually.”

“Additionally, local Omani businessmen can use the backbone of the network to reach their markets. We provide major value to the lines, and then the local businesses get to piggyback on that.”

Furthermore, goods can be dealt with in appropriate conditions when taken by sea. Mr. Lala explained:

“We see good demand for all the products which we are planning to launch in SFZ. Cold storage is needed to store fish and other consumable products, dry stores for fast moving commercial goods, and dry stores for fast moving consumer goods.”

Necessary storage conditions will be available on large, capable vessels. Mr. Ford spoke to us about how ship and port development will increase throughput and service quality. He said:

“We have millions of dollars in technology investments ongoing. We have just finished the development of a new terminal operating system for our general cargo terminal, which will add value to the port and to our customers, who will be able to receive real-time information on their commodities and vessels.”

With port and ship upgrades well underway, one of the next areas of promise for the Salalah free zone is textiles. Eng. Azzan Bin Ahmed Al Shanfari from the free zone management board said:

“The textiles and garments manufacturing business is flourishing as well; we are now a major exporter to the United States, taking advantage of the Free Trade Agreement (FTA) that Oman has signed with the US.”

It is clear that international markets are a significant part of the economic strategy at the Salalah free zone. Indeed, the free zone exports over 12 million garments of clothing per year, and that figure is likely to rise. With the $20 million total from international investment, and the 200,000 sq ft of production space, Fashion Apparel has become the largest company in Salalah. Related industries, such as the jewelry industry, are also realising their potential at Salalah. The gems and jewellery company Tara is likely to start its trading activities soon, bringing goods from its factories in India once the financial trade structures have been set up. The advantageous features of these structures have been specified in the Royal Decree Number 67/2003. With particular attention to the third article, companies such as Tara will be pleased to note that:

  1. A Free Zone in the Wilayat of Salalah shall be established under the name ‘The Free Zone in Salalah’ on the land specified in the enclosed plan.
  2. Salalah Free Zone Company SAOC shall be the operating party for the Free Zone in Salalah.
  3. The operating party and the working company shall be given the incentives, privileges and facilities stated in the Free Zones Law and the enclosed list.
  4. This Decree shall be published in the official gazette and shall come into force with effect from the following day after its publication.

Though the decree represents an appealing legal agreement, a significant memorandum of understanding was also signed between Oman Gulf Logistics and Salalah Free Zone in order to boost the logistics sector and facilitate the demand of investors. The company has been allotted 100,000 square metres to develop the facilities. Awadh bin Salim al Shanfari, CEO of Salalah Free Zone, expressed gratitude over the growth of basic infrastructure and facilities for investors and assured the gathering that the SFZ would keep on improving facilities to attract more and more investments. Ali bin Mohammed Tabouk, Executive Vice-President for Commercial Affairs in the free zone, said it was proud moment for the Salalah Free Zone to see Made in Oman products in the international market. “We endeavour to achieve our goal in making Salalah a hot destination for investors,” he said.

It is not just international investors who are adding to, and benefitting from, the thriving climate of the free zone. More than $1.3 billion in capital investments committed this year alone came from the local Oman Oil Company (OOC), the energy and strategic investment arm of the Omani government. The investments will contribute to the execution of two vital midstream and downstream projects — a Liquefied Petroleum Gas (LPG) extraction plant valued at $830 million and an estimated $450 million ammonia venture. Managing Director on the Salalah Free zone board Awadh bin Salim al Shanfari said:

“Salalah Free Zone has been very keen to host strategic projects, two of which have been signed so far this year, and we thank Oman Oil Company for their trust in the free zone.”

To date, total investments in the free zone has reached a sizable $5.6 billion, according to a top official of the nation’s first special economic zone. As the free zone grows, the number of companies will grow, and city population will increase- all in balance. There will be a need for additional office space, hotels, restaurants, apartments, retail space, leisure and various other services. The Salalah Free Zone encourages investors to consider opportunities in Real estate (Office space; Apartments), Hospitality (Hotels; Restaurants), Retail, Leisure. It is sure to attract a wide variety of clientele, traders, workers and tenants, who will fuse together in an area destined for economic success.