SMEs supported by SOHAR
SOHAR Port and Freezone focuses on building Oman’s SME sector, while strengthening ties with Iran and Saudi Arabia, according to CEO, Mark Geilenkirchen.
Do you work with SMEs in any way? Are they in your supply chain?
At SOHAR, both large and small companies are given all the tools they need to succeed, and we help to organise regular SME forums to inform new enterprises about the opportunities for setting up a business. SMEs are often much better at identifying and embracing new industrial trends and helping to bring innovation into their respective sectors. This allows them to be pioneers in emerging technologies, paving the way for bigger and bolder investments later on. A thriving SME ecosystem not only generates many new jobs, but also ensures that products and services do not fall behind the competition. SMEs can be much more adaptable to change than larger and more complex organisations. However, the greater variance in their profitability and their chances for long-term survival compared to larger firms, accounts for special problems when it comes to financing. SMEs tend to be confronted with higher interest rates, as well as credit rationing because of a shortage of collateral.
Newcomers at SOHAR are guided through the process of securing the permits they require to begin operations through our ‘one-stop-shop’ that was designed in consultation with Port of Rotterdam and the Oman Government to simplify clearance processes. One hundred per cent foreign ownership is among a host of other benefits available to Freezone business owners, as are very low levels of core capital, an important consideration for any aspiring start-up or SME. As an integral part of plans to diversify Oman’s economy and create sustainable employment, SOHAR has brought more than 1,000 per cent growth to the region in recent years as well as many skilled job opportunities.
What benefits does SOHAR Port and Freezone offer investors and entrepreneurs looking to establish their businesses there?
It’s always about a number of factors and SOHAR seems to have found the perfect mix. Location is obviously key, and having a modern Freezone located next door to one of the world’s fastest growing ports, with over 2,500 ships a year, is clearly a big plus in SOHAR. Add to that landside connectivity with new and uncongested highways to the UAE, Saudi Arabia and the other Gulf States. Available energy at reasonable rates and a good supply of local labour at various skill levels are also important. Finally, the right legal and regulatory framework is vital: SOHAR allows free repatriation of capital and profits; corporate tax holidays of up to twenty-five years; no personal income tax, currency restrictions or duty on imports and exports; and no restrictions on sales to the GCC market on payment of a small, local duty. The costs of doing business at SOHAR compare favourably with some of our more established regional competitors.
The first direct passenger line between Chabahar, Iran and Muscat was recently announced. Can you tell us a little bit about that agreement?
According to the Iranian embassy in Muscat, the flow of tourists from Iran to Oman increased by around 10 per cent in 2015, and the number of Iranian visas issued to Omanis increased by nearly 40 per cent. This month we saw the inauguration of the first passenger shipping line between Iran and Oman. A modern catamaran now makes a weekly crossing between Chabahar and Muscat, which takes around three hours and fares range from around $100 up to $200. The Iranian Government has announced that Iranian passenger ships will also be deployed on this route in the near future. Back in February this year, we launched a cargo connection between the Iranian Port of Shahid Rajaee and SOHAR Port. This route was opened primarily to facilitate the transport of agricultural products and perishable goods between our two countries.
Earlier this year, we attended a number of events, including the Focus Iran Summit, Sea Expo, and OPEX in Tehran, as well as the Second Iranian Iron and Steel Conference in Isfahan. Our goal was to build awareness for everything that SOHAR has to offer, and start to connect our Port and Freezone with Iranian businesses across many sectors, especially our four main clusters: food, logistics, metals and petrochemicals.
We believe that we offer an ideal, modern gateway for the entire region thanks to our prime position outside the Strait of Hormuz and our close proximity to Iran. With over 80 million people, Iran is the biggest consumer market in the Gulf region and, as the country reopens its doors for international business, the predominantly young and well-educated population will be eager to connect and access more goods and services from overseas. Our Freezone offers many advantages for Iranian businesses looking to invest and develop themselves outside Iran–whether it is within the Middle East region or the rest of the world. SOHAR offers seamless sea-road-air access. Recent agreements to create a trade corridor stretching from Turkmenistan, Uzbekistan and Kazakhstan in the north, through Iran to Oman and India, will further enhance ties between Oman and Iran; and the establishment of an undersea gas pipeline will also enable us to deepen energy relations via Iran with gas-rich Central Asia.
What is Oman’s logistic sector outlook as we move towards 2017?
Oman is focusing on developing itself as a global logistics hub and thanks to the Sultanate’s strategic location the logistics sector is set to prosper. Oman serves as a regional transhipment centre by sea, and is also an ideal gateway for moving goods by land into the interior of Saudi Arabia, the United Arab Emirates and Yemen.
In 2015, the logistics sector contributed 4.9 per cent to Oman’s GDP. The logistics market in Oman is expected to rise annually at a CAGR of 6.9 per cent, to reach over $12 billion by 2020. The Government is concentrating on the sector through the Oman Logistics Plan 2020 and the Oman Logistics Strategy 2040. These plans aim to improve soft infrastructure, including the necessary regulatory environment, support mechanisms and national institutions to catapult the Sultanate into the top ten of the world’s most logistics-friendly economies by 2040.
Oman’s modern ports are not only essential for the Sultanate, but also for the GCC as a whole, as rising connectivity within the region will continue to drive more traffic through them. The upcoming opening of a new 680-kilometre highway connecting SOHAR Port with Riyadh will provide a more direct route between Oman and Saudi Arabia. The new highway, traversing some of the world’s most difficult desert terrain, will cut more than 500 kilometres off the journey. It will avoid the congested UAE-Saudi border crossings, so it can reduce the actual journey time for a truck by three or four days–and time is money in logistics.
Work on the highway is completed on both the Oman and Saudi Arabian side, and the only missing link is the completion of the Saudi border post. We expect the road to be opened early in 2017, once the Saudi authorities have signed things off. We see the highway as a win-win for both countries and we expect inbound and outbound traffic to and from the Kingdom to increase quite significantly.