Wednesday, March 11, 2015

Overview of the Special Economic Zone Authority Duqm

Duqm is currently subject to one of the most ambitious infrastructure developments to have taken place in the Sultanate of Oman. The focus on this article is to provide an overview of the investment opportunities and incentives to investing in the Duqm Free Zone.

Duqm Project at a Glance

The Special Economic Zone Authority Duqm (“SEZAD”) was created in 2011 pursuant to Royal Decree 119 of 2011 and was reinforced by Royal Decree 79 of 2013 which granted SEZAD with financial and administrative autonomy status to manage, regulate and develop all economic activities in the Duqm Free Zone.

With a land area of 1,745 km2 (two and a half times the size of Singapore) and 70 km of coastline, Duqm Free Zone is the largest in the Middle East, Africa and Asia (“MENA”) region and one of the largest worldwide. It is an integrated development comprising of 8 zones which are:

  1. Industrial Zone;
  2. Fisheries Zone;
  3. Sea Port & Drydock;
  4. Residential Zone;
  5. Central Business District;
  6. Tourism & Recreational Zone;
  7. Logistics Hub; and
  8. Education & Training Zone.

The Antwerp Port Consortium managed port is already partly operational and accessible for cargo operations. Completion of the first phase of the port is scheduled for mid-2016 and will become fully operational by 2017, where it will then handle containers, general and bulk cargo. The deep inner basin with a depth of 18 meters will host 20 berths on a 2.25 km by 350 meters long commercial quay in addition to a governmental quay. After completion of the second phase, a 6.5km2 basin and an additional 13,500 meters of commercial quays will provide for more than 130 additional berths. The drydock, operated by South Korean company Daewoo Shipbuilding and Marine Engineering, began full operations in 2012 and is reported to be the second largest of its kind in the MENA region. It serves up to ten ships at the same time.

The 365 km2 Industrial Zone, located near to highways, a port, an airport and a railway, will serve petro-chemical, building materials, minerals and inorganic chemicals, fishery and aquaculture, food manufacturing, clean technologies, life sciences and allied businesses.

New Duqm Town is set to accommodate more than 100,000 residents by 2020 on an area of 23 km2. The town centre will host malls and parks, business districts, a regional hospital, administrative offices and a public library. The Crown Plaza as well as Park Inn by Radisson hotels are already operational, serving both, business travellers and tourists. Duqm attracts tourists by their pre-historic “Rock Garden”, the Oryx Reserve, nearby Wadi Al-Sayy Natural Park, Al-Shuwyar Village and Masira Island.

The Educational and Training Zone has two objectives: providing local manpower with the skills required and providing engineering and troubleshooting services to local industries. Emphasis will be placed on advanced IT & Communications, Green Technologies, Marine Sciences and Business Administration.

Duqm Airport, scheduled for completion in 2015, already started early operations in July 2014. The passenger terminal has a capacity of 500,000 travellers per year and a 4 km runway.

Strategic Location

Duqm offers a unique value proposition to investors in that it is strategically located in the Sultanate’s Al Wusta region, facing the Arabian Sea. One of the key advantages is that Duqm Port can be reached without passing the Strait of Hormuz. Duqm also lies within easy proximity of the markets of the MENA region. In addition the Al Wusta region itself has prolific oil and gas fields as well vast mineral deposits making it a sound location for any investor.

Key Incentives

SEZAD entertains One-Stop-Shops in Muscat and Duqm, thus enabling investors to handle all paperwork at one place. The One-Stop-Shops take care of and provides the investors with all governmental approvals, permits and licenses needed. They also handle all visa procedures including labour clearances and immigration tasks for the expatriate workforce and their dependants.

SEZAD offers plenty of incentives for foreign investors which include:

  1. All legally permitted types of economic activities can be licensed, regardless of type or size;
  2. One-Stop-Shops in Muscat and Duqm;
  3. Up to 100% foreign ownership;
  4. No minimum capital requirement;
  5. Relaxed 10% Omanisation quotes;
  6. Expatriate manpower applications shall be handled within 5 working days;
  7. 30 years tax-exemption (renewable for additional 30 years);
  8. No income tax;
  9. Exemption from Customs Duties;
  10. Free import of all kinds of goods (except legally banned imports);
  11. No currency restrictions, free repatriation of profits & capital;
  12. Exemption from Commercial Agency Law provisions;
  13. Usufruct agreements up to 50 years (renewable for similar periods);
  14. Products finished or assembled within SEZAD are treated as locally produced products.

In addition, the following legal entities can be established as SEZAD has no minimum capital requirement and is not subject to the requirement of having Omani participation in the ownership of:

  1. General Partnership;
  2. Limited Partnership;
  3. Joint Ventures;
  4. Foreign Branch Office;
  5. Limited Liability Company LLC;
  6. Joint Stock Company; and
  7. Holding Company.

Business Opportunities

The objective of the SEZAD is to stimulate employment growth and business opportunity in the Wusta region. Accordingly it is imperative to administer a system of incentives designed to attract international investors to Duqm which is vital to contribute to the long term prospects of the Duqm Free Zone. In a personal meeting with us, the SEZAD Chairman H.E. Yahya Al-Jabri and One-Stop-Shop Manager Mr. Saleh Al-Hosni advised that SEZAD projects planned from 2015 - 2020 comprise of:

  1. Telecommunication & IT networks;
  2. Water Distribution and Waste Water Recycling Projects;
  3. Commercial / Residential Building (consultancy services);
  4. Logistics Services (Domestic and Overseas), including cargo carriage, warehousing, handling services and value-added logistics;
  5. Aquaculture Projects;
  6. Fisheries and Food Processing Projects (including storage and cooling facilities);
  7. Medical and tourism related training centres;
  8. Healthcare; and
  9. Supporting Services: insurance, equipment maintenance, suppliers etc.

SEZAD is furthermore promoting Public Private Partnership projects in the range of:

  1. Air Cargo Facilities;
  2. Renewable Energy (Solar & Wind Power);
  3. Waste Management Systems (residential & industrial); and
  4. Schools, universities and training institutions.