New investments in Oman’s agro-industries will not only help bolster the Sultanate’s food security and ease reliance on imports, but also have the capacity to provide increased business opportunities in food processing and support services.
One of the largest of these investments was formalized in mid-April, with the announcement by the newly established Oman Sugar Refinery Company (OSRC) that it would be building a $200m processing plant at the industrial hub of Sohar on the north-eastern coast. When fully operational in early 2016, the plant will have an annual capacity of around 1m tons of refined sugar, with Ashwin Rana, the project director for OSRC, saying the refinery would be producing for local and regional markets.
“We are eyeing the GCC markets and other countries in the MENA region for exports,” he told reporters.
International firm Tate and Lyle Sugars, a partner in the project, has been contracted to supply the raw material for the plant, with the unprocessed sugar to come from Brazil, Thailand, India and Australia. Construction of the plant is to be undertaken by South African company Bosch Projects.
With Oman’s demand for sugar running at around 120,000 tons per annum – all of which is currently imported – the bulk of the plant’s production will be available for export. It is estimated that there is a 3m-tonne shortfall in sugar processing capacity in the Middle East. When operational, the OSRC plant will be well placed to capitalize on that demand.
The development of a nearby agro-bulk terminal is expected to facilitate exports. In late January, the Sohar Industrial Port Company announced plans to establish a new facility that will be able to handle food grains, agro-commodities, sugar and other food-related bulk cargoes, and could serve a wider food processing industry in the area.
OSRC’s chairman and managing director, Nasser Ali Saif Al Hosni, said the refinery had the potential to anchor further developments in Oman’s food processing sector.
“The establishment of a sugar refinery will also create many downstream opportunities, and above all it will enhance the food security of the country,” Hosni said.
The food processing industry ramp-up is not just occurring around Sohar. On Oman’s western coast it is the seafood segment that is in line to see solid growth after the government announced it would invest more than $250m to develop an integrated fisheries center as part of Duqm’s Special Economic Zone. As announced in early May, the fisheries industrial zone will cover 8 sq km and be built around a dedicated commercial harbor.
At least 60 industrial plots will be developed inside the zone, with the state’s funding to be used to provide infrastructure and port facilities. To encourage investors, the state is planning to offer long-term land leases and financial incentives in the form of tax holidays, duty benefits and soft loans for those committing to setting up shop at Duqm.
The zone’s plan calls for the private sector to invest in a broad range of processing operations, from canneries and packaged fish factories to fishmeal and fish oil plants, with the feedstock for these industries coming from both locally based and foreign-owned boats working in the North Indian Ocean.
Hamed bin Said Al Oufi, the undersecretary for fisheries wealth at the Ministry of Agriculture and Fisheries, said the Duqm project was part of a larger strategy to maximize Oman’s potential as a marine food production center.
“We are targeting to produce 500,000 tons of edible fish and another 400,000 tonnes of inedible fish,” Al Oufi told an investors’ forum. “So we are talking about something close to 1m tons of fish production in Oman in the next 10 to 12 years.”
The move to strengthen Oman’s food industries appears to be timely. According to a report issued by Dubai-based finance house Alpen Capital, food consumption in the GCC region is set to rise by more than 3% annually over the next five years. The report, released at the beginning of May, said the food industry had the potential to offer attractive investment propositions for long-term investors, as expanding disposable incomes and populations fuelled growth.
“Although high dependence on imports poses a challenge for the economy, it creates several opportunities for private sector companies to position themselves and take advantage of the growing demand,” Alpen Capital managing director Sameena Ahmad said.
Oman’s agriculture sector is unlikely to ever be able to wholly meet domestic requirements for certain goods, such as fresh produce, but development of the Sultanate’s food processing industry could reduce its import bill and potentially boost export earnings. Improved logistics support, including the planned rail link that will eventually connect Oman’s main ports to the rest of the Gulf region, will strengthen its credentials as a destination for industrial investment, while the incentives being offered by the state could add to the Sultanate’s appeal to overseas and local food processors.
Oxford Business Group