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COVER STORY - PART 1
Due South
 
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The Salalah Port, Free Zone and Raysut Industrial Estate have the potential to power the region in the trade world
Nazia Khan

To understand the natural strategy advantage that Salalah enjoys, all you need to do is look at a map. Nestled in Oman's southern Dhofar region, Salalah's location makes it an effective entryway linking the Gulf to several major trade routes. Says Mohammed al Theeb, deputy chief executive officer of the Salalah Free Zone (SFZ), which is in its first phase of infrastructure development, "If you consider the trade routes, we have 1.6bn customers around us. A look at the equatorial trade route reveals that the overall market is growing at eight per cent worldwide. In Asia/Europe, the growth is 14 per cent. The potential for us is huge."

There's no denying Salalah's potential. Adjacent to SFZ's location is the Port of Salalah (POS), budding hub for countries on the Indian Ocean Rim and the Gulf, right at the main East/West sailing routes. POS, which began operations in 1998, is a full-service port, offering a range of value-added services including reefer facilities, container maintenance and repair, as well as cargo consolidation, apart from basic services. In the first quarter of 2006, it had handled more than 800,000 TEU. Says Tiemen Meester, CEO, POS, "Construction of two new berths, which will increase the port's capacity to about five million TEU, is well on its way."

Four kilometres away from POS is the Raysut Industrial Estate. Covering an area of 150 hectares, it provides a base for state-of-the-art businesses related to everything from cement, vegetable oils and water tanks to flour, pharmaceuticals and livestock. A gas distribution network project valued at RO495,000, to supply gas to the estate's tenants, was completed last year, and promises to attract further new gas-based businesses to it. And the Salalah Airport is being expanded to cope with the needs of the future. Informs Salem al Yafaey, Salalah Airport director, "To facilitate smoother and faster flow of increasing inbound and outbound passenger operations, the need for modification to the terminal building, especially the arrival and departure areas, was greatly felt. The new airport will be completed in the next four years."

Conversion formula
It is plain to see that the ingredients for Salalah's succession to a super business destination are all there. What has taken time, however, is the process of all the elements coming together cohesively. Consider that POS started providing its services six years after the Raysut Industrial Estate was set up in 1992, whereas a more synchronised start of operations would have meant greater benefits for both entities. The SFZ project, first conceptualised in the year 2000, encountered its share of snags before it was officially launched in 2005. These delays haven't meant that Salalah has lost out, but it has lost time. The good news now is that things seem to be moving ahead.

The first phase of infrastructure development at SFZ, which covers an area of around 200 hectares and involves the levelling of land as well as the provision of a utility network of roads and lighting, should be ready by the end of the year. Informs Theeb, "Following that, we will begin work on the second phase, which will include building the SFZ headquarters, warehouses, offices for rent, as well as more land development." The attractive package of benefits offered at SFZ will include 100 per cent foreign ownership, as well as tax holidays.

Meanwhile, the symbiosis between the port and the industrial estate is growing. Says Ahmed Aqeel al Ibrahim, managing director, Salalah Medical Supplies Manufacturing Company, "Things have definitely improved for us thanks to the port's services. When we started production, we had to stock raw materials for about two months. Now, we stock from one week to ten days. That's a saving for us because a longer gap means greater expenditure on warehouses."

It was a feasibility study about businesses relating to gloves and cotton, published by the Ministry of Commerce and Industry, which led Ibrahim to start Salalah Medical Supplies. While gloves are its main product, the company also produces cotton rolls, medical plasters, gauzes and surgical masks. Today, the ISO 9001: 2000 certified company's sales reach RO3.5mn, compared to RO200,000 in 1998. That kind of growth and diversification seem characteristic of companies located in the Raysut Industrial Estate. Salalah Mills Company, which has an estimated 20-25 per cent share in the local market, exports 50 per cent of its production. Its main export markets are Yemen, Somalia, Djibouti and Tanzania. Says general manager Ahmed al Dhahab, "Flour production in Oman and the UAE exceeds local consumption. So there is a lot of competition in the local as well as export markets. Being located in Salalah, we have the advantage of being closer to markets with higher population, among them Yemen and East African countries." Since its inception in 1998, Salalah Mills has expanded its wheat storage capacity by more than 100 per cent. And its production capacity has gone from 300 tonnes a day to 460 tonnes a day.

The development focus is clear at the Oman Pharmaceutical Products Company as well. Says Upendra Quenim, deputy general manager - Quality Assurance, "We chose Salalah as the location for our factory as our focus is on going global. We supply to the local market, but we are also registering our products in other Gulf countries, and we export to Germany and the UK." As a step to enter the US market, the company is trying for an Abbreviated New Drug Appli-cations filing with the US FDA. The company, which manufactures formulations like tablets, capsules, liquids and ointments, is also approved by the EU GMP (European Union Good Manufacturing Practice) authority.

Real time test
It is a fact however that until SFZ starts operations, POS, with its direct and indirect impact on import and export businesses, remains the key facilitator for growth in the region. A greater understanding of its working automatically leads to a greater understanding of trade across Salalah.

Explains Meester, "The nature of containerisation is such that the port does not see the actual commodities it handles. But traditionally the key commodities here would include electronics and consumer goods from Asia, refrigerated fruits from Africa, and industrial goods and refrigerated foodstuffs from Europe." He adds that the Dhofar region does not yet offer the production or consumption seen in the northern part of the sultanate, which is why most containers are routed through Muscat or Dubai with pre-/on carriage via trucks.

Through its services, the port supports industries including bunkering, surveys, ships chandlers, and vessel repair facilities, among others. And it creates business for suppliers of everything from cranes to vehicles, food and office equipment. The ripple effect generated by these businesses is over and above the RO27mn that is the port's turnover.

While those from the industrial estate who use the port's services find them satisfactory, they believe that there is room for improvement, particularly when it comes to tariffs. Says Ibrahim, "The handling costs at the port, and the rates to send containers from Salalah, are expensive compared to Dubai and Muscat." Dhahab concurs that rates are the main constraint, and adds, "The port management needs to pay more attention to dhows as they are the main mode of transport to East Africa. In addition, they need to invest further in new equipment such as cranes."

Meester believes that tariffs cannot, per se, create business. "But they can certainly lose it, so they remain a very important part of the equation. Our business is such that we do not just compete locally, but with a whole range of other ports from Aden and Dubai to Colombo in Sri Lanka. Also, the transshipment rates have an impact on the equilibrium for the decision on whether the shipping lines will use a hub, or work with direct port-to-port services." Meanwhile, feedback from customers is being addressed at the port.

Working out
With the port as well as businesses in the industrial estate expanding their operations, and the upcoming SFZ progressing as planned, empl-oyment opportunities will be created by the thousands in Salalah. The need of the hour now is to have enough institutes and training programmes in the region to prepare for the demand in advance. Says Dhahab, "Our industry requires technically qualified people. However, there aren't any technical institutes in Salalah that conduct short courses to provide recruits that industries in Salalah need."

In the absence of institutes, it is left to companies to take the initiative to train prospective employees. Ibrahim informs that about 40 per cent of Salalah Medical Supplies' workforce has come to it through its periodic training programmes. POS also runs a joint training programme with the Ministry of Manpower to provide young graduates with an opportunity to get hands-on experience. The programme duration ranges from six to 18 months depending on the area of work. Meanwhile, the Salalah branch of the Oman Chamber of Commerce and Industry conducts free lectures and seminars on sales, marketing and accounting, among other subjects. Adds Naif al Rawas, chairman of the Salalah branch, "If you consider what Salalah was like ten years ago, there have been a lot of positive changes here. With the expansion of the port and the development of the airport as well as the SFZ, Salalah will be able to attract more foreign investors than ever."

The future is certainly bright. It just needs to be taken in hand and moulded further. Once that happens, there'll be no stopping Salalah.

?span class="bldMaroon">Royal decree on setting up of Salalah Free Zone

His Majesty Sultan Qaboos bin Said has issued Royal Decree number 62/2006 on the setting up of the Salalah Free Zone

  • Article One of the decree states that the free zone in the wilayat of Salalah be named the Free Zone in Salalah on the land space, specified in an attached drawing
  • Article Two states that the Salalah Free Zone Company will be the operating authority of the Free Zone in Salalah
  • Article Three states that the operating authority and the operating company will be granted incentives, privileges and facilities stipulated in the Free Zones Law
  • Article Four states that the decree be published in the official gazette and come into effect from the next day of its publication

IN STORE AT THE PORT

The Port of Salalah, which recently bought two new very large 40mt cranes, is currently looking for expansion opportunities in terms of land as well as warehousing

The construction of two new berths, which will offer 18 metre water depth, are on the way towards expected completion in 2007 and 2008 respectively. These specifications of the berths are in line with some of the world's largest container cranes so that the port can operate the largest vessels expected to be built in the years to come

The port is currently looking to develop a further three berths that will provide it with much needed capacity beyond 2010

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