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| DEVELOPMENT
OF SMEs On top of the agenda |
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Saleem Q. Al
Zawawi
Economic Advisor - Ministry of Commerce & Industry
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“The Salalah Free Zone is Oman’s most exciting new
business environment, and it will foster partnership
and collaboration across industries and borders.”
- Saleem Q. Al Zawawi, economic advisor to HE Maqbool
bin Ali Sultan, Minister of Commerce & Industry,
in an exclusive interview to Oman Vistas
Excerpts:
What are the investment opportunities
in Oman? Which are the thrust areas?
Despite remarkable strides Oman has made in its
endeavour to diversify its economy, oil still remains
single most important source of revenue, hence the
need for more diversification. The diversification
in Oman has to be focused in two ways: First, adding
value to our natural resources mainly gas, by utilizing
gas as feedstock in petrochemical industries or
as energy in industries like aluminium smelter.
We have been successful in attracting multinational
investors such as Dow Chemicals of USA, Alcan of
Canada, Ferostal of Germany, LG of Korea and investors
from GCC, India and other countries.
Unfortunately our gas resources are limited and
we can no longer expand in these industries for
the time being. However once these mega projects
are implemented (some of them are already implemented),
it will pave the way for numerous investment opportunities
in downstream and ancillary projects specifically
in petrochemicals and metallurgy. Additional logistics
and infrastructure requirement to support these
projects would be huge. In addition to this, substantial
investments will also be required in supporting
logistic and other services.
The next priority is diversion of economy in non
oil, non gas sectors like tourism, knowledge economy,
fisheries, trade, minerals and other services. While
tourism has shown tremendous growth in the recent
past and has the potential to grow further in the
future, other sectors are in the process of achieving
significant growth. With the overall developments
that are taking place in Oman and in the region
especially in oil and gas, manufacturing, tourism,
construction, real estate and ICT related services
– there is great opportunity in the service sector.
Once established, such entities will not only be
able to serve Oman but also look beyond the regional
boundaries.
What is the Ministry doing to promote Foreign Direct
Investment? Are there any core areas earmarked for
the same?
The Sultanate of Oman remains committed to a policy
of open market economy, based on free competition
where the private sector, both foreign and local,
is encouraged to play a leading role as the driver
of our economy. Oman constantly examines ways of
creating an environment which is conducive to investment.
Simplification of ‘doing business procedures’ and
transparent corporate governance are the priority
areas for Oman to maintain its status as an attractive
destination for domestic and foreign investment.
As mentioned earlier we have been successful in
attracting multinational investors and this will
undoubtedly have a knock-on effort in encouraging
further foreign investment.
Oman’s accession to WTO, GCC Customs union, the
rise of the Greater Arab Free Trade Area and the
signing of the Free Trade Agreement with USA has
expanded the market accessibility for the Omani
products and services. Further initiatives such
as GCC-EU and GCC-India FTAs are in the pipeline
We have established specialized institutes to serve
the investors and have state of art infrastructure
facilities. OCIPED and One Stop Shop provide assistance
to local and foreign investors to establish the
business in Oman. The Knowledge Oasis Muscat has
been very successful in attracting knowledge based
industries. The establishment of Free Zone in Salalah
is another milestone in this direction. We have
industrial estates in various regions and we are
expanding our port facilities across the country.
As mentioned earlier, the priority areas for investment
include manufacturing and service sectors such as
tourism, logistics, ICT, construction, real estate
education, health and other services.
It is believed that expatriates
needs a capital to the tune of RO 150,000 to start
business on their own but the same is not the case
with Omani nationals? Why the difference?
Foreign investment is encouraged for economic growth
as well as facilitating the transfer of technology,
know how and managerial skills and benefiting from
the vast experience of the multinationals. Generally
the investment level required for such projects
are high. Further foreign investors when establishing
the project in Oman look for a regional market.
Due to these reasons the minimum investment level
for foreign investment is higher. We do realize
that certain sectors like knowledge based projects
such as IT and professional companies do not require
high level of initial capital and for such sectors
the capital requirements are lower. Further there
is no minimum capital restriction for foreign investors
in the Salalah Free Trade Zone.
Is Oman targeting big names
and big investments only?
As I mentioned earlier, our focus areas are downstream/upstream
development to gas based projects and service sectors
such as tourism, ICT, logistics, construction, real
estate and oil and gas related services and others.
Apart from that human resource development and health
services are the priority areas. The investment
level required for these projects may vary depending
on the project.
Development of small and medium enterprises (SME)
is top of the agenda for the ministry and we have
recently established a separate division within
the ministry to develop the sector. SMEs will boost
the economy, create more job opportunities and pave
way for the joint ventures between foreign and local
investors. The role of foreign investors from now
on shall be non-oil, non-gas sectors and on industries
based on large scale gas based projects.
When is the Salalah free
zone likely to start operation? Has it moved to
the execution stage?
A Free Zone has been established in Salalah. This
is Oman’s most exciting new business environment
and a free zone that fosters partnership and collaboration
across industries and borders. Along with its highly
strategic location, SFZ offers world-class infrastructure
and support services providing start-to-end-function
facilities for both multinationals and start-ups.
SFZ has been established by the Government of the
Sultanate of Oman, with a commitment to make its
19 million square metres one of the most progressive
and desirable business locations in the Gulf. With
an array of business-friendly incentives, proximity
to the Middle East’s fastest growing seaport and
world-class infrastructure, Salalah Free Zone offers
investors the ideal base in the Middle East for
reaching global markets.
Located on the world’s fastest growing and busiest
shipping lane, Salalah Port - which is managed by
the A.P. Moller Group - is the regional hub for
several global shipping lines. Salalah is among
the world’s fastest growing cargo transhipment ports,
and is fully geared to act as the entry and exit
point for much of the Free Zone-related cargo -
whether container, general cargo, bulk, oil, gas,
liquid, or Roll On Roll Off cargo.
For businesses at the Salalah Free Zone the advantage
of this synergy is unmistakable. Beside the competitively
low initial cost of setting up, and a one-stop-shop
arrangement for licences, permits, visas, customs
clearances, etc., a whole host of other investment-friendly
incentives are available to businesses operating
at Salalah Free Zone.
The array of special incentives include a lease
for 50 years (renewable for another 50 years); 100
percent foreign ownership, zero customs duties on
imports and exports, no minimum capital investment
requirement, no taxes on profits or dividends for
30 years, no tax on personal incomes, no restrictions
on repatriation of capital, profits and investments
and flexible customs procedures
Prices seem to be on the
rise - from housing to essential commodities. What
do you attribute this inflationary trend to? Is
the ministry undertaking any steps to curb the price
rise?
After a phase of falling prices, Oman's inflation
turned positive at 0.7 percent in 2004 and increased
further to 1.9 percent in 2005 and to 3.2 percent
in 2006. The increase in the inflation rate is mainly
due to the increase in prices of imported food items
and other non-fuel commodity prices. In 2006, the
prices of food articles alone increased by 10 percent
globally and non-fuel commodity prices experienced
an increase of 28 percent driven by 57 percent increase
of metal prices. In addition, the pass-through effect
of cumulative depreciation of the US dollar over
a period also caused rise in import prices. Integration
of the Omani economy with the world economy allows
faster transmission of global inflation through
the prices of imports.
Though Oman cannot do away with inflation as the
country mostly depends on direct import of consumer
products and also on imported inputs for local production,
Oman could contain its inflation rates lower than
its trading partners and neighbouring countries
– UAE at 9.3 percent and Qatar at 11.9 percent -
through appropriate measures of government interventions.
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