Duqm SEZ Oman’s next economic growth engine

The man handpicked by the Omani government to crystallise and spearhead the initial development of a Special Economic Zone (SEZ) at Duqm says the mega hub has the potential to unlock transformational economic growth for the Sultanate over the long term.

Singaporean national Lee Chee Khian (pictured) describes his remit as the outgoing CEO of the SEZ Authority at Duqm (SEZAD) as “daunting yet momentous”: daunting because of the breath-taking scope of the government’s vision to create an uber-scale industrial, maritime and urban development in a remote, windswept corner of Oman; and momentous because the essential underpinnings of that grandiose economic vision are now essentially in place.
“An idea on the scale of an SEZ at Duqm, covering around 2,000 sq kilometres – an area bigger than many European or East Asian countries – can only be the product of great vision and monumental boldness. The government demonstrated it had both in abundance and pressed ahead with its ambitious venture from the outset. That made my job as CEO meaningful and productive.”
Earlier this year, Lee handed over the reins to his long-serving deputy, Dr Ismail bin Ahmed al Balushi, who assumed charge as CEO with effect from January 1, 2020. Speaking to the Observer just prior to his departure last week, back to his native Singapore, Lee spoke about the SEZ’s potential to serve as a new engine of economic growth for Oman spanning the next half century and beyond.
“Duqm as the new centre of gravity for industry and maritime trade in the region, coupled with Oman’s geopolitical characteristics as a politically stable and safe nation, lend it immense competitive advantage that investors can leverage to access huge markets in the Middle East, Indian subcontinent and East Africa. This is the essence of Duqm.” Lee, a veteran of his native Singapore’s pioneering decision to embrace free trade zones as a powerful vehicle for economic development, lists a number of sectors and activities that, he insists, hold particular promise from the standpoint of Duqm’s competitive advantage.

Petrochemicals
The opportunities are immense, says the former CEO of SEZAD. He explains: “Oman is already an Oil & Gas producing nation, which must now go increasingly downstream to optimise value production from its natural resources. From crude oil and natural gas, you can produce a wide array of petrochemicals, such as methanol, acetic acid, ethylene chloride, olefins, PET and other intermediate or finished products. Once you have the basic building blocks of petrochemicals in place in Duqm, investors will come in to add value to these products. Polyester, for example, can be converted into fibres which can then be made into blankets, clothing, and so on. Opportunities for the manufacture of car components and other products abound. The potential is limitless.”
Duqm Refinery – part of OQ (formerly Oman Oil and Orpic Group) – is investing in excess of $15 billion in the development of a grassroots refinery and downstream petrochemicals complex, along with its Kuwaiti partner. The availability of all kinds of feedstock is expected to pull in investors, according to Lee.
“Businesses investing in downstream petrochemicals will be attracted by the opportunity to co-locate their plants with feedstock producers in Duqm, thereby taking advantage of reduced transportation and logistics costs, and at the same time, bolstering their competitiveness. New players are expected to move in as well, offering common products and services for multiple clients. This creates a multiplier effect that offers better margins and competitive value for everyone operating across the value chain.”

Mining
An abundance of limestone in the hinterland of Duqm unleashes opportunities for investment in a wide array of industrial activities, says Lee. High-purity limestone (99 per cent) is perfectly suited for use in steel manufacturing, water treatment, desulphurisation of fuel gas for coal power plants, and so on. A slightly inferior grade (85 – 97 per cent purity) can be used in cement manufacturing and for agricultural purposes. Lower grades of limestone can be used in the production of aggregate for building and construction purposes.

Fisheries and aquafarming
A major fisheries port and industrial fisheries complex under development in the SEZ augurs well for the growth of large-scale fisheries and processing activities in Duqm, says Lee. “The focus should be on sourcing feedstock for the many private-led investments that are envisioned in this sector. For example, can we invest in an ocean-going commercial fishing fleet that can operate in the Indian Ocean, capitalising on quotas allocated by the Indian Ocean Tuna Commission? Other fleets will also come to Duqm to discharge their catch if we have suitable support facilities, such as bunker fuel, supplies and so on, as well as ice-making plants and fish processing factories.”
To supplement sources of feedstock for fish processing plants, Lee advocates for investments in aquafarming activities at key locations along the Wusta coastline. “Strong winds and choppy seas during the summer months prevent fishermen from venturing out to sea for about three months (June – August) of the year. By investing in aquafarms, we can ensure there is a steady source of raw material supply for the fish processing plants that would need to operate round the year in order to be sustainable.”

Food processing
and distribution hub
Investments in cold chain infrastructure necessary to support a thriving fisheries and processing industry in Duqm can also be optimised to support a wider food processing and distribution hub in Duqm, according to Lee. For example, livestock shipped in from Africa can be slaughtered halal style and processed to supply not only Oman, but the wider region. Further value addition can be created through investments in canned or processed foodstuff.
“Besides, given Duqm’s environmental conditions and remote location, imported livestock can be held in bio-secure settings until they are ready for slaughter and processing. Investments in grain storage and animal fodder will add to the value chain and support the growth of an integrated livestock processing industry. Processed foodstuff can either be shipped to overseas markets in reefer containers or by air, taking advantage of the presence of an airport with a full-fledged air cargo terminal at Duqm. In the return direction, empties can bring in vegetables and fruits for processing in Duqm to help create a more broad-based and diversified food production and distribution hub in this part of Oman.”

African Market
With many countries in Africa currently on a strong trajectory of growth, Duqm should home in on products and commodities that are an ideal fit for this booming market. Building materials custom-produced for the African market are particularly promising. Omani investors can either set up operations in Duqm to serve the African market, or consider operating within this market while sourcing their raw material requirements from Duqm. Besides, East Africa has a special affinity for Oman because of longstanding historical and cultural links. Swahili is also spoken in Oman, given local investors an edge in making inroads into Swahili speaking parts of Africa.

Soft infrastructure
As investment inflows into Duqm begin to pick up, the demand for a wide range of soft services, notably banking and insurance, catering and entertainment, health care, and so on, will proliferate as well. At some point, Duqm will have its own university as well, with a dedicated R&D component to support the needs of local industries.
“A university can be indispensable to Duqm’s long-term growth aspirations particularly as investors look at high-end sectors, such as pharmaceuticals, for example, that may require a bit of R&D. With the presence of a well-equipped university, investors can outsource their R&D requirements to local scientists. Besides, the university will be a good source of high quality human capital for local industries. A culture that enables entrepreneurship, leadership and innovation to thrive will create a multiplier effect for the wider economy.”

Logistics
There is no underestimating the potential of a thriving logistics industry in Duqm centring on its expansive maritime port and airport. The growth of industries in the SEZ will open up Duqm to inflows of copious varieties and quantities of raw materials, semi-finished goods and components and intermediate products, effectively paving the way for an upsurge in logistics related investments and activities, adds the former CEO of SEZAD.