Oman's FTZ Policy

In August 2020, Sultan Haitham of Oman issued Royal Decree 105/2020, which established the Public Authority for Special Economic Zones and Free Zones (OPAZ). The Authority is the legal successor to the Special Economic Zone Authority at Duqm, meaning all the tasks and resources of the Duqm Authority are now within OPAZ.1

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August 26, 2022

September 2, 2022

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Introduction

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The SEZ at Duqm in Al-Wusta governorate is receiving a lot of attention from all sides, and with good reason. It’s Oman’s largest and most innovative SEZ, which presents a unique combination of geoeconomic advantages that are combined with state-of-the-art digital governance practices.²

However, Duqm may owe its existence to its predecessors: Oman’s Free Trade Zones. What is the history of these zones and why do they matter?

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Oman in the early 2000s

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Oman had discovered oil in the 1960s, with production starting in 1967. Oman’s reserves are not large, and Oman’s producers required close cooperation with OPEC in order to efficiently stay in the global market. By 2000, it was clear that oil and gas energy did not offer a sustainable future for the Sultanate.³

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The late 90s showed that oil and gas were not enough to catalyze growth in Oman.

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In the early 2000s, special economic zones as a concept were not new to Oman, or the Arabian Peninsula. Dubai had already proven its capability to attract investment and increase economic development for the UAE. As a result, other regional countries attempted replicating that success in their own economies.⁴

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Oman’s Free Zones

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In 2002, Royal decree 56/2002 created the legal precedent for the establishment of free economic zones within Oman. Then-Sultan Qaboos bin Said saw these zones as a way to diversify the country away from oil and gas. Three free trade zones exist in Oman today: Salalah, Sohar, and Al-Mazunah free trade zones. ⁵

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According to the decree, all of Oman’s free zones provide the following benefits:

100% foreign ownership
Corporate Tax Holiday of up to 25 Years
One-Stop Shop for all Clearances
Free Trade Agreement with US and Singapore
0% Import or re-export Duties
0% Personal Income Tax
Low Omanisation Requirements (10-15%)

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Salalah Free Trade Zone

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Salalah, the country’s second largest city located in the south, holds the country’s largest Free Trade Zone. The Zone was created in 2006 by royal decree 62/2006, and focuses on chemical materials processing, manufacturing, assembly and logistics.

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There are, as of January 2021, five tenants within the zone.

Octal Petrochemicals, a US-based manufacturer or PET plastics
Salalah Methanol Company, in close cooperation with the Ministry of Oil and Gas, is supplied through the existing gas pipeline systems
Sapphire marine, a commercial fishing and pleasure boat building company
Oswal Agro Chemicals & Fertilizers Pvt. Ltd., a subsidiary of Oswal Global
Dunes Oman, owned by Brakes India. The tenant operates a foundry and produces ductile iron casings.⁶

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Octal Petrochemicals is the largest tenant in the Salalah Free Trade Zone.

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Sohar Free Trade Zone

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Sohar Free Zone was built as an extension of the already existing Sohar Port (built in 1995), through Decree 123/2010. The zone is operated by Sohar Industrial Port Company (SIPC), a 50/50 joint-venture between the Port of Rotterdam Authority and the Omani government, which was created in 2002.

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Tenants in the zone include:

Vale S.A., a Brazilian mining giant with Iron Pellet interests in the zone
Oman Methanol Company,
Sohar Aluminium Company’s smelter
Suhayl Bahwān’s Urea-Ammonia Plant
ORPIC Aromatics Plant
Sohar Power Company Desalination Plant

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The Sohar Aluminium Company’s smelter is the first of its kind in Oman.

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Sohar’s rapid development, although mostly positively received, has had a significant impact on the local population. The percentage of expatriates living in Sohar area saw a steady increase in 2004-2010, rising from around 20,000 (19%) to 47,000 (32%) in that period.⁷

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Al Mazunah Free Zone

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The Al Mazunah Free Zone is the smallest of the 3 zones, founded by royal decree 103/2005. Al Mazunah is located 4 kilometers from the Yemeni border, but effectively outside of Oman’s tax boundaries. This means goods and people entering from Yemen may enter the zone without a border check.

Cross-border trade is the primary activity within the zone: most of the zone infrastructure and advantages are directed towards storage and transshipment.⁸

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Conclusion

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Although not as heavily invested as the Special Economic zone at Duqm, Oman’s Free Trade Zones are a quiet success. They do not show signs of suffering from common Free Zone issues, including property expropriation, corrupt officials, inefficient bureaucracy or poor market fit.

They will continue to strengthen Oman’s economy, and serve as an effective foundation for Duqm. As the successor to these zones, expectations are high for the Duqm SEZ and there is no room for error.

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Sources

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