The Sultanate of Oman is taking an important step towards strengthening its pharmaceutical manufacturing capabilities through the development of specialised industrial clusters for pharmaceutical industries and medical devices in economic and free zones.
The initiative reflects a broader industrial policy direction: moving beyond conventional manufacturing towards knowledge-intensive industries that can generate higher value added, develop national capabilities and connect Oman with regional and global value chains. The Royal endorsement of the proposal to establish specialised clusters for pharmaceutical industries and medical devices provides an important foundation for developing an integrated pharmaceutical manufacturing base in Oman. According to the Public Authority for Special Economic Zones and Free Zones (OPAZ), the initiative aims to enhance national drug security, localise pharmaceutical and biomedical industries and attract qualitative investments to the sector.
The first phase includes the development of Salalah City for Pharmaceutical and Medical Industries, through cooperation between Salalah Free Zone and Raysut Industrial City, with a combined area exceeding one million square metres. A specialised zone for pharmaceutical and medical industries is also planned in Khazaen Economic City, covering more than 500,000 square metres.
The current structure of Oman’s health manufacturing sector highlights the scale of the opportunity. Oman has around 12 health-manufacturing factories, with local production currently meeting about 10% of domestic demand, while more than 90% continues to be covered through imports. This significant import dependence demonstrates both the importance of strengthening national drug security and the considerable potential for developing a more competitive domestic manufacturing base. However, the objective should go beyond import substitution. The development of specialised pharmaceutical and medical-industry clusters provides an opportunity to build production capabilities that can progressively meet a larger share of domestic demand while developing the scale, quality, technology and competitiveness required to enter regional and international markets. The significance of this initiative therefore extends beyond the establishment of pharmaceutical factories. A successful pharmaceutical cluster should be viewed as an integrated industrial value chain, beginning with pharmaceutical ingredients and inputs and extending through formulation, manufacturing, quality testing, packaging, warehousing, distribution and exports. Over time, the cluster can develop capabilities in research and development, specialised medicines, biotechnology, diagnostics and other health-related technologies. This approach is particularly relevant to Oman’s Manufacturing Strategy 2040, where pharmaceuticals and medical equipment represent knowledge-driven activities with potential for higher domestic value creation. The objective should therefore not be limited to replacing imported medicines. While increasing domestic production of essential medicines can strengthen supply security, the longer-term industrial objective should be to establish competitive manufacturing capabilities that can serve markets beyond Oman. Oman’s relatively small domestic market makes an export-oriented approach especially important. Pharmaceutical manufacturing requires scale, specialised capabilities and continuous investment in technology and quality systems. Connecting Omani production to GCC, Middle Eastern, African and other international markets can help manufacturers achieve greater economies of scale and support the development of sustainable production capabilities. Foreign direct investment can play a critical role during the early stages of cluster development. Global pharmaceutical companies can bring advanced technologies, international quality standards, managerial capabilities and access to established global distribution networks. However, investment attraction should be increasingly targeted towards outcomes that strengthen the domestic industrial base. Incentives can therefore be linked to areas such as Omani employment and training, technology and knowledge transfer, local supplier development, research and development, and export performance.
The development of local suppliers is another important dimension. Pharmaceutical manufacturing can generate opportunities for Omani companies in packaging, printing and labelling, plastics, glass, chemicals, engineering and maintenance, laboratory testing, information technology, cold-chain logistics, warehousing, waste management and specialised professional services. These linkages can help transform the pharmaceutical cluster from a group of factories into a wider industrial network involving large manufacturers, SMEs and service providers. The development of human capital will also determine the long-term competitiveness of the sector. Pharmaceutical manufacturing requires specialised capabilities in chemistry, engineering, quality control, laboratory services, regulatory affairs and production management. In the initial phase, international expertise may be necessary to establish production and quality systems.
The priority should then be to systematically transfer knowledge and develop Omani capabilities through industry-training partnerships, specialised programmes and on-the-job learning. Research and development should form part of the long-term evolution of the cluster. It may not be necessary to begin with a large R&D base before establishing a competitive manufacturing platform. A more practical progression would be to build manufacturing capacity, develop skills, deepen technology transfer and establish domestic supply linkages before gradually expanding into R&D, product development and innovation. Over time, stronger links between pharmaceutical companies, universities, hospitals, laboratories and research institutions can create opportunities for higher-value activities. The geographical development of the clusters also provides an opportunity to strengthen regional industrial development.
Salalah has particular potential because of the integration between Salalah Free Zone and Raysut Industrial City, supported by Dhofar’s industrial and logistics capabilities. The development of interconnected value chains in the governorate can create opportunities for manufacturers, suppliers and service providers while supporting the wider economic diversification objectives of Dhofar. Khazaen Economic City, meanwhile, provides another strategic platform because of its location, logistics integration and proximity to markets and consumption centres. The development of pharmaceutical activities in both locations can therefore support a more distributed industrial base while allowing investors to select locations according to their production, logistics and market requirements. The next stage should focus on turning the physical clusters into functioning industrial value chains.
This requires coordinated investment promotion, streamlined regulatory processes, specialised infrastructure, reliable utilities, efficient logistics, workforce development and mechanisms that connect anchor investors with Omani suppliers. Most importantly, the success of the pharmaceutical cluster should be measured not simply by the number of factories established, but by the industrial capabilities created. These include manufacturing value added, pharmaceutical exports, foreign direct investment, skilled Omani employment, technology transfer, local supplier participation, research and development, product registration and the ability of Omani manufacturers to enter regional and international markets.
The development of pharmaceutical and medical clusters therefore represents more than an industrial real-estate project. It is an opportunity to build a knowledge-intensive manufacturing capability around a strategic sector, strengthen national drug security, deepen local value creation and create new pathways into global value chains. If implemented progressively, with strong private-sector participation and targeted investment policies, the pharmaceutical cluster can evolve from an initial manufacturing base into a broader health-industrial ecosystem — connecting manufacturing, logistics, skills, suppliers, research and exports, and contributing to the transformation of Oman’s industrial structure towards higher-value and more knowledge-intensive production.
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