GRM 2010 GRM 2011

Abstract Details

Family Name:
First Name:
Title of Paper:
Background on SOHAR Port and Freezone
Paper Proposal Text :
SOHAR Port and Freezone is a deep sea port and adjacent free zone in the Middle East, situated in the Sultanate of Oman, midway between Dubai and Muscat. Ports and industrial complexes require a long-term view, as they need substantial infrastructure investments to develop. With current investments topping US$26 billion, SOHAR is now one of the world's fastest growing port and free zone developments and lies at the centre of global trade routes between Europe and Asia. The Port is managed by Sohar Industrial Port Company (SIPC) setup as a 50:50 joint venture between the government of the sultanate of Oman and Port of Rotterdam in 2002.

SOHAR saw its first vessel berth in 2004 and last year handled well over 2,600 ships — and over one million metric tons of sea cargo every week. SIPC has a 43-year concession to operate the port on a landlord-tenant basis; in other words, SIPC invests in infrastructure like quay walls, jetties, roads and utility provision and collects rent from its terminal operators and tenants.

SOHAR provides unequalled access to the fast diversifying economies of the Gulf States and Iran, while avoiding the additional costs for shipping of passing through the congested Strait of Hormuz into the Arabian Gulf. A new and uncongested network of highways and a planned rail system provide direct connectivity to the UAE and Saudi Arabia. A new cargo airport provides access to the rest of the world. Equipped with jetties with the deepest draft of any port in the Gulf or South Asia, SOHAR is one of only ten ports worldwide capable of handling the Valemax class — the world’s largest ships. Developed by the Brazilian mining company Vale, the fleet of 35 ships weighs in at 388,000dwt each and measure 366 metres in length, more than the height of the Eiffel Tower in Paris.

SOHAR has leading global partners including Hong Kong based Hutchison that operates the port’s 1.5 million TEU state-of-the-art, remote-controlled container terminal; C. Steinweg of the Netherlands that operates the general cargo terminal; and German Oiltanking that operates the liquid and gas storage terminal.

SOHAR was a forerunner for public-private partnerships in Oman and thanks to its overwhelming success the model is now being replicated at other ports and infrastructure facilities; most recently together with the Belgian Port of Antwerp at Duqm Port. SOHAR Freezone was added next to the port in 2010, and allows companies 100% foreign ownership; relaxed Omanisation laws, that govern the number of Omani nationals to be employed in private businesses; no corporate or personal income taxes; and the free movement of goods. Goods entering the GCC economy from the Freezone pay a flat rate duty of only 4%.

Purpose of the case study
The case study will set out to show the challenges overcome and opportunities generated by the pubic-private partnership developed for SOHAR Port and Freezone. Specifically, the paper will look at these five critical areas:

Investment: utilising the public-private partnership specifically as a confidence building factor to attract more foreign direct investment, especially in attracting world-class terminal operators, industry and business partners; most recently, in building ties with the Chinese government’s US$4 trillion One Belt One Road initiatives - a revival of ancient trade corridors and a way for China to package its foreign policy objectives with overseas economic investments intensifying trade, telecommunications and infrastructure investment with the Middle East, Central Asia and Europe. SOHAR was recently awarded by the Financial Times Group’s fDi Magazine as Global Free Zone of the Year for attracting new investment.

Innovation: developing SOHAR as a hub for innovation through closer collaboration with world-class universities and international research institutes, to find smarter solutions to overcome challenges facing industry, shipping and logistics and developing sustainable energy solutions in an era of energy transition, from oil and gas to renewable sources

3. Sustainable development: by focusing on education, training and SME support, creating a model that integrates the entire community of North Battinah in Oman in a gateway hub model, in order to create direct and indirect employment opportunities, sustainable growth and long-term regional prosperity

4. Environment: becoming the region’s first ‘green port’ by championing environmental initiatives and some of the world’s highest environmental standards, in a traditionally old and ‘dirty’ industrial sector, helping to create business opportunities in everything from cleaner shipping and lower emission ship fuels, to reusable and recyclable industrial waste products

5. Knowledge transfer: creating a competitive business advantage by optimising cross-functional learning and experience sharing between the port’s multicultural human resources

The road ahead
The strong development of the past decade provides a good platform to build upon. However, past growth is by no means a guarantee for future success. The paper will also look at critical factors for sustainable growth of the publicprivate partnership at SOHAR, specifically in these four areas:

1. GCC trade: the GCC is a major economic block, similar in size to the economies of countries such as Russia or India. Given the substantial trade barriers that still exist, the current level of intra-GCC trade is low and there is a substantial upward potential. More economic integration of the GCC countries would also contribute to a stronger integration of the GCC into the world economy. Furthermore, the nuclear agreement between Iran and the US may provide a basis for more economic participation of Iran, but uncertainties still remain.

2. Ease of doing business: Oman is in the middle of its so-called Tanfeedh process, a national programme for enhancing economic diversification bringing together ministers, representatives of the private sector, academia and civil society in full-time workshops in collaboration with the Malaysian government’s ‘Performance Management and Delivery Unit (PEMANDU)’ with a focus on five targeted sectors: manufacturing, tourism, transport and logistics, mining, and fisheries. The programme will focus on raising the contribution of these sectors to the Sultanate’s GDP, providing a platform for a sustainable partnership between the public and private sectors, improving the ease of doing business in Oman and creating more job opportunities

3. Energy transition: all GCC countries are signatories to the Paris Agreement and have committed to a fundamental shift towards lowcarbon energy sources, such as solar power. The Middle East suffers from freshwater scarcity, because it currently relies on water desalination for around 70 per cent of its water. Water consumption is expected to increase with the growth of population and as economic development continues, placing increased pressure on water availability. Following the Paris climate agreement, the price of oil and gas is highly uncertain, however government policies are aimed at a more diversified energy mix.

4. Demographic and social change: the GCC region is experiencing high population growth, high youth unemployment and increased urbanisation. Moving forward, more urbanisation is expected as well as an increase in the construction of modern and sustainable cities. It is expected that by 2050, 90 per cent of the GCC population will be living in cities. The tightening of governmental budgets because of low oil prices has put a strain on public spending, fuelling a debate about taxation, citizenship rights, labour market reforms and public investment priorities. The core challenge is to maintain the current high wage levels in the GCC. Excellent research and education are crucial in this respect, but universities in the GCC countries are still not world-class