Advantage in location outside the Gulf

As Oman invests heavily in attracting tourists to its natural wonders, it is also developing zones for heavy industries to capitalise on the country's strategic position outside the Gulf. Sohar, the country's second-biggest city after Muscat, is the industrial hub with a deepwater port, steel and chemical plants and a growing cluster of manufacturing companies.

The city is looking to attract foreign companies to the free zone, where ground will be broken this summer for a 500 hectare first phase, said Edwin Lammers, the executive commercial manager for the Port of Sohar. The zone will ultimately grow to 4,500ha. "In the port zone, there's not much space left. The growth is minimal since it's almost full," he said. "The true growth will come from the free zone."

Oman lacks the rich hydrocarbon reserves of neighbouring states such as Abu Dhabi and Saudi Arabia, but it has two advantages: ports outside of the Strait of Hormuz and regulations that make it easier for foreign companies to set up operations in the country. At Sohar, officials have sought to find their niche in industries that are not well developed in other GCC states, such as producing raw materials for steel making.

Vale, the Brazilian mining conglomerate, is building a US$1.35 billion (Dh4.95bn) plant there to manufacture iron ore pellets, while Shadeed Iron and Steel will be commissioned as the country's first integrated steel-making plant in the third quarter of this year. Heavy industry is to play a critical role in diversifying the economy away from dwindling oil and gas reserves and towards labour-intensive industries.

The port is expected to create 15,000 jobs, while the first phase of the industrial zone should directly add 10,000 jobs and 25,000 in the wider economy, Mr Lammers said. As Sohar develops more factories that convert the raw materials into finished products for consumers, the number of jobs could increase significantly, he said. "Typically, upstream, large-scale industries have relatively low numbers of employees," he said, referring to plants that produce raw materials. "The further downstream you go, the needs are greater for more skills and more technical labour."

* Additional reporting by Chris Stanton @Email:[e-mail]