Pradeep Kumar Nair, CEO of Sebacic Oman, talks about manufacturing sector’s role in Oman’s economic diversification and the potential of Duqm in redrawing the Sultanate’s industrial future.
Manufacturing sector is a key plank in government of Oman’s economic diversification strategy. How are industries going to shape Oman’s economic future?
Industrial growth is inevitable for the economic growth of any country. No country can depend on a single sector for sustainable economic growth. Of course, there are some other success stories like Dubai or Malaysia, but they still have an emphasis on industrial growth, which is very important for any country. Oman is going in the right direction by promoting industrial development and bringing in investors from all over the world, especially from India and China who will contribute in a big way towards the growth of manufacturing sector in the country. This would reduce the country’s dependency on income form hydrocarbon or tourism sectors. In the future, may be 25 years or 50 years down the line, for any country to grow it has to be a self-sustaining economy, which is possible only through industrial development.
And what is the current status of Sebacic Oman project in Duqm?
Duqm is an interesting place now. In fact, we were the first ones to step into Duqum and our plot number is one in the heavy industrial zone. And we are very happy that we are blessed by His Majesty’s government and the full support of HE Yahya Al Jabri and our chairman Sheikh Hilal bin Khalid Al Mawali.
We signed the usufruct agreement only two years back on May 10, 2015; we are very proud to say that within two years, we have completed 55 per cent of the plant construction, and by the end of 2017 we will commission the plant which will be up and running by early 2018. We will start full-fledged production in the first quarter of 2018.
We also take pride in putting this on record that we will be the first company to use Port of Duqm’s containers. The first set of our containers have already been shipped from China. Port of Duqm has now been registered for containers from anywhere in the world so that we can get all our containers from China and India shipped straightaway to Duqm. We will be having our chartered ships between India and Duqm. We are also being supported by Oman Shipping Company and CMA CGM, the ocean alliance.
We already have everything lined up for the next ten years. The business plans are done; the products, markets and customers were identified. We are starting with one factory and will move onto the expansions later. Our expansion plans are already in place. And soon there will be some other investments which will be announced in due course.
Duqm is going to be one of the most happening places in Oman’s industrial map. How attractive is the region from a foreign investor’s perspective?
Duqm is becoming an exciting place. Chinese investments have come in; they are huge and could not have come at a more opportune time.Duqm is a virgin untapped resource, strategically located in the center of shipping route. When you talk about an ambitious project of Duqm’s stature and scale, government did a commendable job within a short period of six to seven years by building ports and dry docks and putting in place other infrastructure facilities. They have also been successful in attracting investments. New investments coming up from Indian state of Gujrat, an Oman-Qatar bus assembly unit and investments from China are all going to enhance the attractiveness of Duqm. And I think local companies also will now slowly start taking part as they see these developments. So yes, I feel there is a positive momentum in Duqm.
How is Sebacic Oman going to contribute to downstream and ancillary industries in Duqm, and to Oman’s industrial sector and economic diversification in general?
After our commissioning of the plant, there will be more activities in Duqm, because we have many ancillary industries attached to us. In addition, we’ll be the largest users of sulphur from the refinery, as we are going to use 200 tonnes a day.
Sebacic Oman is going to be the largest bio refinery plants in the world and when we start our operations, there will be many products which will come out of our own factory, which are downstream value added products. And all our customers as well as raw material suppliers will definitely like to be placed next to us. We also wish that our raw material suppliers would be based just next door to us, so we would pull them in here. Therefore I can assure you that once we start production in the next two years you’ll see more ancillary units of Sebacic Oman in Duqm.
Second, people are waiting to see one success story which is going to be Sebacic Oman and it will be one that everyone can showcase and that will boost the confidence in everybody and make them come to Duqm.
Another salient feature of Sebacic Oman is that it will have research and development centre where Omanis will be trained. We have young Omani PhDs working with us now; and we have started research facilities in collaboration with SQU. We have already initiated the processes and will be having in-house training for Omanis within the factory itself. We take pride in saying that even while we are in a free zone like Duqm we have taken more Omanis than the normal stipulated 10 per cent because we believe in Oman’s development.
How big is your export market going to be?
We already have an expanding market in the US, Europe, Japan and China, to which right now our Indian factory is catering. That’s why we did this expansion here. And all our product markets are increasing day by day, as we are catering to the increasing demand for bio plastic and biopolymer products from across the industries in all over the world. And I take pride in saying that Oman is the first in the entire GCC and MENA region to promote a bio refinery, instead of a petroleum refinery. It shows Oman’s willingness to diversify away from the traditional businesses.
Has the oil price fall affected the government’s ambitions vis-à-vis Duqm?
I would not put it that way. The fall of oil prices has definitely affected the ambitions of the government. But it has only affected the ambitions but it has not stopped the projects. I would rather say that the government has cut down on the extravaganza, but it has not cut down its spending on the infrastructure developments required in Duqm. This is not the first time that oil prices have gone down. Economies go up and down, and it has nothing to do with the development of the country as it would recover as and when the economy would correct itself. In addition, it’s a good thing that oil prices went down because now Gulf countries have started thinking of alternative sources of development. With the advancement in renewable energy all over the world, this is a necessity. I am very happy to see that Oman has realised this very well and is promoting different industries in the country through its economic diversification programme, Tanfeedh.
It seems it will take a few more years for Duqm Refinery to be fully operational. How is it going to affect you? Are you dependent on the refinery for your feedstock?
No. We are not dependent on the refinery at all. Ours is a bio refinery and our basic feedstock is castor oil. In fact, we are using one of the refinery products which, if I don’t get from Duqm refinery, I can get from Sohar. But having said that, I see a good progress on the refinery project in Duqm. The entire land has been levelled and it is now ready for demarcations; the air quality monitoring stations have been put in place. In fact, the monitoring stations have been put up in my factory so that we can support them for air monitoring. With the new partner on board, the refinery project is gathering momentum. Our business model is that we are not dependent on the refinery but we can become an added asset to the refinery because we are using the wastes of the refinery.
According to you, how attractive is Oman for foreign investors?
There is a lot of potential for the development of manufacturing sector in Oman because the country has a lot of minerals. It can diversify into different fields, because it has vast lands and a large coast line. Oman has the potential to generate solar energy as well. We see Oman as a very prime location due to its geo- political stability. More important for us is the Sultanate’s historic relationship with India. We feel Oman taps more into Indian investors who are just a two-hour flight away. In addition, the tax-free regime is attractive for the Indians. It will help manufacturers who are into exports to offshore their businesses or put their additional capacities in Oman.
If you look at the growth of India in the last 20 years, you can see that India is a major market. It’s not only that we will do the manufacturing but we ourselves are the consumers. We don’t need to go into anyone else to consume; so if an apparel manufacturing comes to Oman and if the government gives them the support, the entire apparel can be consumed by India only. So the Indian relationship needs to be strengthened. I am very happy that Duqm is focusing on India and China in a big way.
What are the main challenges confronting a foreign investor in Oman?
On a personal level, I own 60 per cent of Sebacic Oman and my personal investment is $12mn. My suggestion is that there should be a segregation of investors on the basis of how much they invest. Those who invest up to $5mn dollars should be given a particular channel or facility so that if they face any issue, they can approach one level of departments or officials to sort it out. Similarly those who invest more than $10mn should be given another level of treatment. A new investor often gets confused as to who should he/she approach for which problem. I’m lucky that I have a very good partner; but it’s really not good that I go to my partner for each and every small thing. But how many people would be lucky like me? It’s a free zone where people would come with their investments so they should be given a different priority depending on the investments.
If the government does that by giving priority treatments to individuals on the basis of how much they invest, it will really make huge change. There are many challenges being faced by an investor at ground level that people at the top cannot realise. It really doesn’t reach their level. To give you one simple example, I had a lot of difficulty getting my investor visa renewed. It was very cumbersome for me to be pushed from pillar to post. I don’t want that to be repeated for someone else.