Friday, March 14, 2014

Focus On: DUQM Special Economic Zone

In 2011, the Duqm Special Economic Zone (“SEZ”) was created pursuant to Royal Decree 119/2011. The aim of the SEZ is to contribute to the country’s GDP, to enhance the employment opportunities for Omanis and more importantly to boost the social and economic development of Wilayat Duqm. Since 2011, the SEZ continues to offer many opportunities for both Omanis and foreign investors.

The Legal Framework

In addition to the SEZ, Oman has three more free zones, namely Salalah Free Zone, Sohar Free Zone and Al Mazunah Free Zone. Each zone is established pursuant to a Royal Decree. Each free zone is managed in accordance with the relevant executive regulation approved by the Free Zone Committee. Each of the free zones offer certain incentives to specified industries and services.

What makes SEZ special among other zones in the Sultanate is that the Duqm’s SEZ Authority (the “Authority”) alone is affiliated to the Council of Ministers. Therefore, the Authority at Duqm is able to collaborate with all the ministries in the Cabinet.

The Authority carries multiple functions and roles in relation to business ventures seeking to locate in the SEZ. According to His Excellency Yahia Al Jabri, Chairman of the SEZ, “The Authority does not purely act as an external regulator, but they also act as a business enabler and a facilitator.”

The SEZ is managed by a Chairman who also holds the rank of a Minister. Royal Decree 119/2011 grants the Chairman, among other powers, the right to shift any of the employees of the ministries, authorities, units and committees (who are practicing actions, tasks or activities related to implementing the project), to SEZ after coordinating with the Ministry of Finance.

SEZ Incentives

By statute, the SEZ offers the following incentives to investors:

  1. The investors are exempted from tax;
  2. Long-term leases and reduced rates;
  3. No restrictions on foreign ownership;
  4. No minimum capital requirements;
  5. 100 per cent repatriation of capital and profits;
  6. No nationalization except by virtue of the law and with fair compensation;
  7. Imports into the SEZ will be duty-free;
  8. No custom duties for the goods imported into or exported from the SEZ;
  9. Grants visas and residency permits to non-Omanis working in the SEZ;
  10. The SEZ provides a “One Stop Shop” facility to register, license, and provide approvals for business ventures located in SEZ;
  11. Allows establishment of representative offices within Oman’s customs territory;
  12. The Authority and government owned companies established in the SEZ are exempt from the Tender Law; and
  13. Except for the legally banned imports, the projects registered at SEZ are entitled to import all commodities to the region without any prior licensing. The commodities offered will not be subjected to any retention period nor will the commodities be subjected to any limitation on their transfer of commodities inside the Sultanate or to the SEZ.

The Licenses offered at SEZ: Apart from the above said incentives, the Royal Decree 79/2013 issued the System of the Special Economic Zone at Duqm (“RD 79/2013”). RD 79/2013 provides investors with further incentives for grant of requisite licensing.

RD 79/2013 grants the Authority the right to register the projects inside the zone as per the Commercial Registration Law. The Authority is entitled to issue the necessary licenses for the tourist projects and issue environmental permits for the projects, as well as take the necessary environmental measures to implement the environment protection and anti-pollution law.

RD 79/2013 further stipulates that a labour office shall be established at SEZ by a Ministerial Decision issued by the Minister of Manpower. The office will be responsible for issuing licenses for the foreign workforce.

A branch office for the Directorate General of Immigration and Passports will also be established at SEZ whereby they will be responsible for issuing entry visas and residence to the foreign workforce to work at SEZ. The entry visa is also extended to families of the residents.

A customs office at SEZ will also be established by a decision of the Inspector-General of Police and Customs which will be operated in accordance to the system of customs issued by the SEZ Board.