Salalah A Case Study
SPS: Salalah is ideally positioned to exploit its strategic location
Paul Grant reports on progress at the Middle East's latest free zone initiative in Oman.
Part of the reason may be the growing demand for employment by an ever increasing level of educated university and college graduates and secondary school leavers who now make up some 30-40,000 bright young people each year - a figure which is growing annually. Industries of the home-grown type are few and far between and are usually linked to the investments made by the Sultanate's oil related activities.
Oman's first attempt to establish a free zone was made through a joint venture between Salalah Port Services (a joint Oman Government and AP Moller venture) and Texas based Hillwood Development (part of Ross Peron Jr's empire). Unfortunately the marriage was doomed from the start as the Texas way of doing business did not fit well into the Omani system. But the Sultanate was not deterred in its vision of offering an alternative location to neighbouring UAE free zones, notably Jebel Ali Free Zone and others such as Sharjah, Ajman and Fujairah.
CLOSEST TO EAST-WEST ROUTES If location is important then Salalah has the drop on all the others as, besides Aden, it is the closest free zone to the key east-west trade routes. And it is supported by a successful 'super-hub' operation at AP Moller's Salalah Port Services (SPS) which boasts the fastest growing container port in the region with an annual throughput of 2.3m TEUs. Growth at the port has been little short of meteoric and plans are in hand to double the size of the existing quayside facilities and construct a new deepwater breakwater.
The nearest competitor, Aden, has suffered a string of mishaps with events that cast doubt over Yemen's ability to control its internal problems and security such as the attack on the USS COLE followed by the incident on the tanker MV Limburg off the coast of Mukalla. This dealt a bitter blow to Yemen's desire to lift itself out of the shadows and develop its port & free zone operations. Further bad news was to follow when Singapore based PSA pulled the plug on its investment in Yemen Container Terminal which left Overseas Port Management (OPM) acting as caretaker operators until a successor was appointed.
Apparently the three frontrunners are DPI, ICTSI and Kuwait & General Company - whom we are unable to trace - and members of the opposition party are asking why DPI should even be considered as it already has involvement in two other neighbouring free zones and ports (Jeddah and Djibouti - directly opposite Aden). Nothing is ever quite as it seems in the Middle East however and events can quickly turn in an unexpected direction.
Last year the Oman government finally decided to embark on its own free zone strategy and appointed Tony Restall to the post of ceo of the newly formed Salalah Free Zone Company. Hitting the ground running from a recent assignment as the EU's project director in neighbouring Aden Free Zone, Restall knew all too well what the competition could and could not do. The position called for a diplomatic approach to guide the free zone legislation through the various ministries culminating in a Royal Decree supported by a competitive set of investor benefits.
Commenting on his appointment Restall said - that entering a market 20 years behind the competition is never easy but Salalah has the timing on its side. "Decisions made 20 years ago to relocate in Dubai and Jebel Ali were made when vessel sizes were 1800-2200 TEU's. Today, the size of modern container carrier dictates that they must stick to a trade route with the least diversion. Salalah is ideally positioned to exploit its strategic location. Also, we are one of the only free zones to have access to its own supply of natural gas through a 24" Gas Pipeline and on-site power station. It's only been 10 months but we have been swamped with enquiries representing over US$ 5bn of potential investment. Investment equates to jobs and we are greatly encouraged by the results so far.".
In its day Dubai and the UAE was easy to sell - Restall was on the original team that launched Jebel Ali Port and Free Zone - but anyone trying to move around Dubai nowadays knows only too well the inherent traffic congestion that success has brought to Dubai. Traffic problems are something that cannot be solved quickly or easily and investors are fed up with two hour jams into and out of the Free Zone every day.
Restall says Salalah also scores high in the quality of life stakes, the 'Stress Free Zone' he calls it.
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