Impact Study on the effects of Free Zones in Oman

IMPACT STUDY ON THE EFFECTS OF FREE ZONES IN OMAN 23

ImpactStudy on the effects of Free Zones in Oman

ImpactStudy on the effects of Free Zones in Oman

Abstract

Freezones have become widespread with the liberalization of investmentand international trade. Oman free zones are appropriate for theforeign companies that intend to use Oman as the local distributionor manufacturing base. The free zones are mostly for export- andimport oriented companies who only need an office in Oman. FTZ arethe key actors in deepening of GVC (global value chain).Nevertheless, the world trade due to insufficient information ontheir status knows little about their contribution. It is adescriptive analysis of Oman free trade zones. Oman established FTZat the beginning of the year 2000. It was aimed to expand its revenuefrom the non-oil sector and investment into its national economy. FTZof any given country offers opportunities to the investors an openaccess to the industrial infrastructure alongside the alternative ofa 100% returns on investment. FTZ also boost international relationsregarding trade and FDI of the country. This paper presents theimpact study on the impact of free zones in Oman. In addition, itdescribes both qualitative and quantitative analysis of the effectsof the free zones in Oman economy.

Manydeveloping nations of the world have moved from import strategy toexport promotion. Free zones are regions that are limitedgeographically where particular inducement such as tax benefits andduty-free importing are granted. They are considered as thefundamental instruments to stimulate exports, generate employment,attract foreign direct investment, accelerate the transfer oftechnology and boost economic growth.

InOman, afree zone is a particular region in the jurisdiction whererestrictions or taxes on trade or business are not applicable.Although United Arabs Emirates has been a leader in the GCC, as faras the development and establishment of free zones are concerned, theSultan of Oman has made it the principle not to stay too far behind.In a bid to expand its investment and the non-oil revenues into itseconomy, the country started setting up the free zones. FTZ gives theinvestors access to the infrastructures alongside the option of a100% disbursing back of the revenue, started improving foreign directinvestment and international trade relations. The Sultanate of Omanis an independent nation that was established in the 1650s afterliberation from the colonial rule of the Portuguese. The capital ofOman is Muscat and is located in the northeast of the country. KSA(Kingdom of Saudi Arabia), Yemen and UAE (United Arabs Emirates) arethe neighboring states of Oman. The country itself is a sultanatemonarchy led by the Prime Minister and Sultan Minister Qaboos binSaid Al-Said (Chadee,Roxas &amp Rogmans, 2014).

Inliterature, various studies reviewing the effects of free zones inOman have been illustrated. Nevertheless, the studies may selectcertain zones or concentrate on particular impacts that arise as aresult of free zones. However, there are limited studies that analyzefirms perception based on their economic impact to the economyregarding the law.

Inthis setting, the reasons of the research are to look at the effectsof free zones and review the perceptions of the consumers byexamining the degree of establishment goals of free zones in Oman.The concept of free zones shall be illustrated by explaining theeconomic impacts and objectives of the organization of the free zonesconcerning the literature review. The second part of the studydescribes the concept of the free zone. The three zones will bedescribed, and the success factor reviewed.

Thestudy is imperative for striving to fill up the gaps available in theliterature by exploring the economic effects all the three free zonesbased on the objectives of the stated law. Also, considering Oman`scurrent economic and political conjecture, where future andefficiency of free zones is illustrated, the discussions andconclusion of the research would be beneficial and practical forcommercial operators and the policy makers.

Methodologyof the Research

Thestudy is an impact study that covers the three free zones of Oman. Inthis context, a questionnaire study was conducted with firmsoperating in 3 zones in Oman. The target group of the questionnaireis the free zones for all the firms, which have purchasing andselling, production and R&ampD operating license. Since there is noexact number of the target population, there is limitation of time tocomplete the research. In this regard, the results derived from thequestionnaire should be reviewed based on the mere fact that thequestionnaire study was based on self-selected sample.

Thequestionnaire was sent to all firms in the free zones of Oman andthus pilot study was not conducted. The questions in this study werefocused on analyzing the impact of free zones in Oman’s economy.The questionnaire was conducted between 3rdand 4thJuly 2016 and 100 firms participated in the survey. About 15 percentof the target group responded to the questionnaire. Since theidentities of the firm are confidential, it was not possible toreview.

Thelaw inherent in the free zones determines the setbacks of thequestions. The questions from this study focused on reviewing firm’sperception of free zones in directing businesses to increaseparticipation rates of the firms. On the contrary, to increase theparticipation rates, the number of questions was limited toseventeen. The questions were included in the survey. Thequestionnaire study was conducted between 3rdand 4thJuly, 2012 where 154 firms participated.

TheoreticalFramework

Whereasfree zones continue to flourish in the world, the practical andtheoretical debate on the advantages and disadvantages of free zonesis an ongoing debate. Studies based on the impact of free zonesshowed that through diverse zones not all free zones could affectthe host economies such as Oman in a positive way not all free zonescan be considered a success. Therefore, there is no consensus in theacademic arena on the effects of free zones. Some analyst`s showsthat free zones can help in attracting foreign direct investmentpromote trade and thus generate foreign exchange earnings andemployment. Also, FDI can generate forward and backward linkage todomestic industries and ultimately have a spillover impact throughthe transfer of management skills, technology and expertise. Thereare various studies which lay the overall impact of the free zones indeveloping nations. Neoclassical school analyzes the welfare effectof free zones. Hamada (1974) is one representative of theneoclassical school.

FreeTrade Zones and Effects in Oman

FreeTrade Zone in Salalah

Thefirst Free trade zone of Oman in Salalah became equipped in 2005. Itinvolves three major projects: Dune Oman, Salalah Methanol and OctalPetrochemicals alongside a smaller project from Sapphire Marine whoassembles commercial fishing boats and yachts. In the present day,companies such as SAGA (leasing and operating of warehouse andstores) and ABI Showatech (assembly, mechanizing, and castingproducts of the engine) are established in Salalah FTZ. The SalalahFTZ has finished its initial stage of growth and has made progress tothe second phase. This area is planned to develop the free zone overa region of 19 sq.kms. It is an important and advanced step towardsthe establishment of a free zone in Salalah port after research hasproved its benefits and value. The step was illustrated by signing amemorandum of understanding related to the growth of the first stageof free zone project with the port services of Salalah. After thedevelopment of the port in a way that it would be one of the leadingcontainer ports in the Indian Ocean, the free zone was aimed atbuilding up Salalah making is a thriving local distribution center.Research has shown the great benefits anticipated from theestablishment of free zones which is illustrated in:

  • Expected prosperity of tasks related to reactivating the partitioning of the big shipments

  • The expected massive increase in volume of commerce, manpower, and investment

  • Success of other services alongside the region of the task is also expected

  • The free zone is expected to enhance the role of the custom storehouse

  • The functions of the international firms in distribution commerce

  • The setting is to present the international ship with fuel

TheFree Trade Zone Salalah is devoted to attracting the principal assetin light, medium and logistic sectors, information technology,re-export and medium industries. Investments are amounting to 2billion that have been provided to be attained within the next fiveyears. The firms in operating within the Salalah FTZ are:

  • Salalah Methanol Company that is managed by the Oman Oil Co already initiated production of its methanol using liquid natural gas that is supplied by Oman Oil

  • Octal Petrochemical with polymer product assembly facility exporting PET-Film through Salalah Port

  • Oswald Caustic Soda

  • Dunes Oman-established to produce automotive castings, a task of Brakes India Limited of The TVS group

  • Sapphire Marine_ this is a manufacturer of powerboats for military use and law enforcement for the Sapphire Marine Market makes luxury power boats.

DunesOman owned by the Brakes India function a foundry inside the zone,which has the capacity of producing 17,500 tons of gray iron andductile iron for the automotive industry. Dhofari Nutraceuticals isanother investor in Salalah FTZ, targeting the market for energydrinks and food supplements. The Salalah FTZ has the second locationin Adhan region which is close to Salalah Hilton. The growth in thissite is inclusive of leased offices and warehousing units. Free TradeZone in Sohar in the North of Oman situated on 4500ha land near SoharPort.

FreeTrade Zone in Sohar

Soharis Omani second city located an hour drive from Hatta border withUAE. Sohar Industrial Development Company manages the free trade zonecurrently under development. The existing Free Trade Zone investorsare the Port of Rotterdam, Government of Oman, SKIL &amp theNetherlands infrastructure in India. The confirmed investments inSohar Port include a deepwater jetty for an iron core by a BrazilianCompany Vale. Sohar FTZ is a location with unique strategic benefits.It has substantial advantages regarding smooth global logistics andcomprehensive market access. Also, the sultanate in the recent daystakes pleasure in equivalent primary infrastructure as a result ofland availability, industrial area, post, gas, and water, utilitiesof electricity, different transport means and communication services.Oman as a nation supports the establishment and setting up of newforeign ventures in its free zones that permit commerce withindividual qualities, facilities and incentives based on the laws ofthe land.

StrategicLocation

Sohar,FTZ, is situated at the entry of the growing gulf and sub-continentmarket. The international airports, railway system, good roads offerpotential for future growth. This zone relies heavily on the traverseroads of the western and eastern parts providing viable access to theglobal market. The area works hand in hand with Sohar Port and thislocation offers several advantages. Ultimately, its strategicposition shuns the increased premiums that are related to thewaterway passage and also ensure that instant admission to theshipping lanes of the world is made. The industrial region of Soharwas founded in 1992.

Soharis located in Batinah area. Batinah is approximately 200 kilometersfrom Muscat and about 179km from Dubai. The FTZ in Sohar is relatedto transport network inclusive of the present Muscat highways and theexpressway that have been planned. The available set up is inclusiveof the Batinah railway system that is connected to the dry bulk Barkaport and runs across Batinah coastline. Muscat and InternationalDubai airport are not more than 220 kilometers apart. The Sohar portis situated near the industrial region near the manufacturing areasand has deep harbors for the ship to anchor. The administration ofthe harbour is reliant on SIPC Industrial Company. This is afifty/fifty joint venture between Oman state and Port of Rotterdam.The existing investments exceed $14 billion and therefore, it makesit one of the largest ports in the world regarding development(Peterson,2013).

FreeTrade Zone in Al Mazunah

Al-Mazunahis a free economic zone started its operations in 1999 and issituated in the Southern location of Oman of Dhofar close in Yemenborder. The zone is located 260km from Salalah and 500km from Sayunand 245km from Al Gaydah, the two closest cities of Yemen. With thecharacteristic of “Free Zone”, Al Mazunah is located beyond thelit of tax Oman boundary and as such, the business can enter AlMazunah exclusive of a visa or implementing the procedure betweenYemen and Oman border. Al Mazunah presents an outstanding capacity tothose who wished exchange goods through Yemen to Oman or situate thewarehouse amenities(Burke,2012).

Aninvestment of estimated 680 million Oman Rial in the project ispromised over the next five years. The area of focus for the Freezone`s development plan is the storage, processing and shipment ofproduct from Dhofari agricultural heartland, alongside the industrialand automobile vehicle trade. Mazunah area presents an excellentopportunity for those are interested in trading between Yemen andOman or establishing the storage utilities. There are a commercialexhibition and shops in the area, in addition to other utilities andgeneral storage plus communication services and the necessaryestablishment services such as roads, water, and electricity. TheSupreme Royal Decree No. 2005/103 issued in 2005 and established thefree zone in Al Mazunah. The general corporation of the industrialpark can ask any party to operate this region after getting thepermission of the free zone committee granting the incentives,facilities, and merits stipulated in Free Zones law (Pauceanu,2016).

LiteratureReview

FreeZone Concept

Whena distinct definition for free zones is demonstrated, World Bankdefines free zones as fenced areas that focus on manufacturing forexports which present free trade condition and liberal regulatorycontext. Based on UNCTC/ILO study, a free zone is a delineatedindustrial estate that constitutes a free trade.

Theresearch on OECD describes the free zones as State policy to enhanceexports by offering a business environment that is more competitivethrough the provision of unique incentives including tax exemptions.

Exportsof Free Zones in third World Nations

Thefree zones exports to third world countries exceeded its sale to Omanfrom the time free zones were established. The free zones exportshare reached 54.4% in total sales of the free zones (Ay,2012).

Graph1: As indicated in the graph above, the exports from free zonesreached the peak of around 6.9B. Thus, between 1988 to 2011, theexports reached 54.1 billion.

Source:Ministry of Economy. (Ay, 2012)

Opportunitiesand Benefits

TheSultanate of Oman geographical location is paramount. The Northernpart of Oman is near the “Strait of Hormuz”. This is asignificant shipment course for crude oil globally. The southern partof Oman harbors the famous trade seaway. The country is a secular,politically-opinionated and economically established country withconsiderable low inflation and trade surplus. It is one of the highlyliberalized nations in the region. The projects have been started insectors such as international transshipment, petrochemicals &ampchemicals and natural gas.

EmploymentStructure of Free Zones

Thefigures presented herein establish creation of employment of freezones. In the first years, only five firms provided job opportunitiesof not less than 200 employees. As these opportunities of thecompanies operating in free zones increases, microenterprisesdecrease while the medium, small-scaled and large enterprise hasincreased. The questionnaire study addressed the users of free zonesin a bid to reveal to reveal that the firms have begun exporting inOman (Ay, 2012).

Graph2: As indicated in the graph above, the employment creation effect ispresented. During the first year, only five firms presented jobopportunities for not less than 250 employees (per company) (Ay,2012)

Diversification

Thedevelopment of the free trade zones across Oman economy has been theintegral of the plan of Sultanate to diversify the economy beyond theoils sector through the development of export focused, value-addedindustries such as logistics, shipping, and manufacturing. The freetrade zones serve as a catalyst for this growth through the provisionof infrastructures such as ports and roads, financial incentives suchas customs duty and income tax waivers and regulatory framework thatencourages high-end domestic and foreign companies to establish theiroperations. Moreover, the aim of FTZs is to build trade andindustrial base in Sultanate of Oman to enhance a sustainableeconomic growth using the nation`s strategically significantpositions with its commercial harbors of Salalah and Sohar to improvetrade, creating jobs and bringing newer technologies in highervalue-added fields (Wippel,2016).

Fig3: The graph above shows GDP of different sectors of Oman Economy.The GDP from oil is highest as at 2005 and lowest in tourism. The GDPis estimated to reach 40.9% in other sectors of Oman’s economy by2020. Source: (Pauceanu,2016)

Fig4: The graph above shows that by 2011, 2,576 people were unemployedwhile 23,678 people were employed by 2011. The free zones aloneemployed 54,022 people.

(Ay2012, p.55)

Overviewof Oman Economy-Emergency of Free Zones

Freezones in developing nations took shape in 1970 when most of thedeveloping nations began to leave import substitution policies for anexport and open-oriented policies. Free zones were deemed to be avaluable tool in policy-making regarding export diversification,export growth, employment opportunities, FDI and foreign exchanges

TheGross Domestic Product growth has been strong driven primarily by gasand oil. This country is actively pursuing a development plan basedon privatization, diversification, and industrialization to minimizethe oil sector`s contribution to Gross Domestic Product. Presently,Oman offers a competitive context for the international investors. Itis one of the most secure nations in the world to do business sinceit has an excellent record for minimizing corruption andrestructuring its regulatory context. A free trade agreement (FTA)between Oman and United States came into power in 2009 (Zorob,2013).

TheSultanate of Oman economy has been growing gradually since twentyyears ago taking advantage of its location along Asia-Europe tradeline and in the middle, a wider area that spans from Southern bordersof Asia central to East Africa, and India to Pakistan. The country`sstability has contributed largely to its prosperity and progress.Oman enjoys strong financial foundation with a high Gross Domesticproduct per capita alongside other GCC nations, abundant naturalresources such as minerals, gas and oil and its positive tradebalance. (Al-Reesiet al., 2013).

Impactsof Free Zones in the World

Thestatic advantages are illustrated in export diversification andpromotion, direct employment, FDI, government revenues and foreignexchange earnings. As for the dynamic benefits, those are complex todetermine but more significant in the end for the host country isdescribed as skills improvement, technology transfer and backwardlinkage established with the domestic economy.

Therehas been an increasing trend in foreign exports of free zones. Asindicated below, the exports of free zones reached the maximum pointand became $6.9B. It is proven that the free zones have an impact onincreasing the performance and success of the export.39.2 percent ofthe sales from the free zones were made to foreign countries. Freezones imported goods equivalent to 86.4 billion dollars and soldthese goods mainly in Oman. The massive volume of the sales from freezones to Oman economy can be expounded through ex-establishing goalsthat envisage provision of continuous and cheap input supply to thedomestic economy. As a positive indicator, the share of Oman hasremained 4.1 percent in trade volume of free zones. It can thus beconcluded that the companies operating in free zones has achieved inincreasing diversity of the exports to foreign countries as apositive indicator of technology transfer.

Graph5:The figures related to the free zones shows that there has been anincreasing trend in exports of the free zones from 1987. In the graphabove, the exports reached the peak in 2011 which amounts to 5.1percent of exports from Oman. Thus, between 1987 to 2011, the exportsto third world countries reached 54.1B. (Ay2012, p.47)

Inline with the primary objectives of the basis of the free zones,there is a considerable share of the exports for many countries. Mostprominent nations that enjoys the contribution of free zones in theirexports includes Nicaragua 79.4 percent, Madagascar 80 percent andMorocco 61 percent

Resultsof theResearch

Theprimary goals of establishing the free zones in Oman is to increasethe exports by directing companies to export and increase investmentsand production related to exports. In this regard, 15 questionsderived from the questionnaire strive to observe the impacts of freezones in Oman. Six items were included. Reliability questions wereestimated through SPSS. The first item determines the effects of taxexemptions presented in free zones. Tax exemptions have changed inthe recent past for the purpose of directing exports orientedproduction and decrease sakes from free zones to domestic market.From the results above, it can be concluded that there is a stronglink between sales and the view on tax advantages. As in the 2nditem of the 15thquestions, these zones presented certain benefits to firms such ascontrol free customs in buying and trading goods from Oman withoutpaying tax. These benefits are expected will facilitate foreign inputand trade supply and thus present low cost of production, which wouldincrease the ability of the firms in free zones to compete in globalmarket and therefore export. The second item aims to determine thebenefits of low cost exports and production of firms in free zones.

Theresults of the questionnaire prove that tax benefits in free zonesencourage the export oriented tasks of the firms. Free zones providefree access to intermediate goods and raw materials necessary forproduction of goods. In the meantime, the results support that thefacilities and incentives provide low cost manufacturing forcompanies operating in free zones. These benefits are likely toincrease the capacity of firms to compete in the global market and inthe long run promote exports.

Theseresults can be supported by the mere fact that 62.3 percent of therespondents have exported their products for the first time.Nevertheless, it can be noted that despite the incentives andpolicies towards promotion of exports, more than 30% of therespondent firms argues that exports to foreign markets is lessappealing than selling in the domestic market. Tax benefits in thelast years for operating licenses besides producer’s license havebeen reduced to promote manufacturing.

Itshould be noted that the questionnaires support the fact that freezones in Oman are successful in directing companies to exportoriented production and exports, despite the mere fact that is a roomto expand facilities and incentives in Oman to direct the companiesto export oriented tasks.

Theresults from the questionnaire also showed that 28 percent of thefirms made their decisions to invest in Oman in order to benefit fromcheap labor and low cost materials. Nevertheless, it can be notedthat free zones could be unsuccessful in supplying raw materials andlow cost workforce. Thus, free zones could not meet the expectationsof the firms about their investment in free zones. The results of thequestionnaire show that almost 50 percent of the foreign investorsconsider that the free zones offer best conditions for investment.While 48.7 percent of the respondents have begun operating in Oman,59.4 percent of the firms are in foreign partnership or are foreign.Thus, free zones present favorable opportunities to attract newinvestments and therefore, free zones have the potential to attractforeign direct investment. In addition, this potential is supportedby certain benefits. Firms operating in free zones are exempted fromtax. In addition, custom duties are exempted on the imports. Inessence, this provides companies to supply their input needs in aneasy, secure, flexible and quick way

Impactof Free Zones in Oman

InOman, free zones can be operated and setup successfully afterresolutions that were made in the 1970s by which Oman startedpursuing export-oriented economic programs. Following free zonesproliferation in Oman regions, the economic effects of these freezones have been reviewed in several studies. The research in thisstudy is descriptive of the overall impact the free zones has on theeconomy.

Ay(2012) argues that in Oman, there is no positive input to Oman basedon foreign trade. Therefore, their function as a generator of foreigncurrency is not applicable, and they remain inadequate inexport-adjusted growth efforts. Free zones can only act as analternative policy to deal with the problem of employment.

Freezone experiences in Oman, and the rest of the world indicates thatthese zones have insignificant impacts on the improvement ofemployment and foreign trade. Oman thus encourages establishment andoperation of international business in FTZ.

Regardingthe employment creation effects in Oman, statistics illustrates thatthe level of employment increases gradually in the three free zones.The author also put forth that studies are showing that average wagein free zones is higher than those paid in the home country.Therefore, it is concluded that, to reach a conclusion based on theimpact of free zones wage implementation are hard as even wages indistinct free zones vary in the same country (Bräutigam&amp Tang, 2014).

Conclusion

Basedon the findings, the results of free zones can help us understand theFTZ modeled regions that shun the traditional hindrances in the tradeas tariffs and reduce bureaucratic directives. The great free zonesin Sohar and Salalah are compelling features of Omani economicenvironment while Al Mazunah is lesser known, newer and smaller freezone. The goal of free trade is to improve its presence in the globalmarket by attracting the foreign investments and new business. Freetrade can be exploited by everybody from large manufacturers to thesmall business to the individuals. Any entity or person that intendsto export or import goods and can consider taking the benefits offree trade zones. Operating within the free trade zones of thecountry offers diverse benefits to the exporters and importers. Thewidespread economic benefits are inclusive of the elimination ordeferral of exemption from certain taxes, customs duties, andinverted tariff relief.

Thefree trade zones also present the operational benefits such asincreased security, indefinite storage opportunities, and insuranceon goods. Oman`s FTZs plays an increasingly imperative role in theeconomic prospect of Sultanate and are considered to be the sectorthat needs to watch carefully for firms that have already establishedbusinesses in Oman in future. FTZSalalah is devoted to attracting the significant investment inregions of medium and light industries, logistics, trade, re-export.Oman free zones appear to play an imperative role in Sultanateeconomic future and are considered to a sector that needs to bewatched carefully for firms that have established their business inOman and those seeking to start a business shortly.

Thestudy is an exploratory research that covers all the free zones inOman. In this context, a questionnaire study was conducted with firmsoperating in 3 zones in Oman. Since there is no exact number of thetarget population and there is limitation of time to complete theresearch. The questionnaire was sent to all firms in the free zonesof Oman and thus pilot study was not conducted. The free zones lawsreview the limits of questionnaires in the study. The questions inthis study were focused on analyzing the impact of free zones inOman’s economy. Whereasfree zones continue to flourish in the world, the practical andtheoretical debate on the advantages and disadvantages of free zonesis an ongoing debate. Studies based on the impact of free zonesshowed that through diverse zones all free zones cannot affect thehost economies such as Oman in a positive way all free zones cannotbe considered a success. Some analyst`s shows that free zones canhelp in attracting foreign direct investment promote trade and thusgenerate foreign exchange earnings and employment. There are variousstudies which lay the overall impact of the free zones in developingnations. (Bräutigam&amp Tang, 2014)illustrated the consequences of free zones as dynamic &amp static.There has been an increasing trend in foreign exports of free zones.

FurtherImprovement and Further Research Directions

Thegovernment should cooperate and encourage investing companies thatcould provide the spare parts for manufacturing industries,transportation, machinery vehicles and maintenance and renewalservices. Comprehensive and precise studies ought to be done foridentifying all economic, social and resources aspects alongsidedetecting the collective talents and disadvantages based oncomprehensive mid-term, long-term or annual programs. Since thehistorical considerations ad climatic conditions have a defining rolein the success of free trade, it is recommended that Oman governmentprovide complete security within the area by getting assistance fromall the stakeholders working there in case a free trade zone iscreated within Oman. Telecommunication, transportation system,insurance &amp banking systems should be scrutinized. Access roadsin the neighboring provinces should be developed based on a preciseplan by attending the possibility of the neighboring regionsregarding being effective in that the current complications can beavoided.

References

Al-Mawali,N., Hasim, H. M., &amp Al-Busaidi, K. (2016). Modelling the Impactof the Oil Sector on the Economy of Sultanate of Oman.&nbspInternationalJournal of Energy Economics and Policy,&nbsp6(1)

AyS. (2012). “The Economic Impacts of Free Zones: The EstimationinTerms of Trade Volume, Employment and Foreign Capital of FreeZonesin Turkey and Bursa Free Zone”. İş, Güç IndustrialRelations and HumanResources Journal. No:11(3). Pages:31-46.

Al-Reesi,H., Ganguly, S. S., Al-Adawi, S., Laflamme, L., Hasselberg, M., &ampAl-Maniri, A. (2013). Economic growth, motorization, and road trafficinjuries in the Sultanate of Oman, 1985–2009.&nbspTrafficinjury prevention,&nbsp14(3),322-328

Abushammala,M. F., Qazi, W. A., Azam, M. H., Mehmood, U. A., Al-Mufragi, G. A., &ampAlrawahi, N. A. (2016, March). Generation of electricity from biogasin Oman. In&nbsp20163rd MEC International Conference on Big Data and Smart City(ICBDSC)&nbsp(pp.1-3). IEEE.

Abushammala,M. F., Qazi, W. A., Azam, M. H., Mehmood, U. A., Al-Mufragi, G. A., &ampAlrawahi, N. A. (2016). Economic and environmental benefits oflandfill gas utilisation in Oman.&nbspWasteManagement &amp Research,0734242X16628983

Al-Ansari,E. M., Rowe, G., Abdel-Moati, M. A. R., Yigiterhan, O., Al-Maslamani,I., Al-Yafei, M. A., … &amp Upstill-Goddard, R. (2015). Hypoxia inthe central Arabian Gulf Exclusive Economic Zone (EEZ) of Qatarduring summer season.&nbspEstuarine,Coastal and Shelf Science,&nbsp159,60-68

Bräutigam,D., &amp Tang, X. (2014). “Going Global in Groups”: StructuralTransformation and China’s Special Economic Zones Overseas.&nbspWorldDevelopment,&nbsp63,78-91

Burke,E. (2012). One blood and one destiny? Yemen’s relations with theGulf Cooperation Council

Chadee,D., Roxas, B., &amp Rogmans, T. (2014).&nbspProspectsand Challenges of Free Trade Agreements: Unlocking BusinessOpportunities in Gulf Co-operation Council (GCC) Markets.Springer.

Cotton,M. D., &amp Mahroos-Alsaiari, A. A. (2015). Key actor perspectiveson stakeholder engagement in Omani Environmental Impact Assessment:an application of Q-Methodology.&nbspJournalof Environmental Planning and Management,&nbsp58(1),91-112.

Hakimian,H. (2013). 4 Iran’s free trade zones.&nbspIranand the Global Economy: Petro Populism, Islam and Economic Sanctions,102

Kolb,J. (2015). Expatriate Entrepreneurship in the Gulf Region betweenInformality and a Globalized Knowledge Society.&nbspAmericanJournal of Entrepreneurship,&nbsp8(2),89-107.

Mostafaeipour,A., Mohammadi, K., &amp Sabzpooshan, M. (2015, March). Wind-solarenergy potentials for three free trade and industrial zones of Iran.In&nbspIndustrialEngineering and Operations Management (IEOM), 2015 InternationalConference on&nbsp(pp.1-9). IEEE

Pauceanu,A. M. (2016). Foreign Investment Promotion Analysis in Sultanate ofOman: The Case of Dhofar Governorate.&nbspInternationalJournal of Economics and Financial Issues,&nbsp6(2)

Pak,A., &amp Majd, F. (2011). Integrated coastal management plan in freetrade zones, a case study.&nbspOcean&amp coastal management,&nbsp54(2),129-136

Peterson,J. E. (2013).&nbspOman`sinsurgencies: the sultanate`s struggle for supremacy.Saqi

Peterson,J. E. (2013).&nbspOman`sinsurgencies: the sultanate`s struggle for supremacy.Saqi UNCTAD, T. (2005). corporations and the internationalization ofR&ampD.&nbspWorldInvestment Report

Yücer,A., &amp Siroën, J. M. (2016). Trade Performance of ExportProcessing Zones.&nbspTheWorld Economy

Wippel,S. (2016). Port and Tourism Development in Oman: Between EconomicDiversification and Global Branding.&nbspUnderConstruction: Logics of Urbanism in the Gulf Region,101

Zorob,A. (2013). Oman Caught Between the GCC Customs Union and BilateralFree Trade with the US: Is It Worth Breaking the Rules?. InRegionalizingOman&nbsp(pp.185-203). Springer Netherlands

Impact Study on the effects of Free Zones in Oman

IMPACT STUDY ON THE EFFECTS OF FREE ZONES IN OMAN 23

ImpactStudy on the effects of Free Zones in Oman

ImpactStudy on the effects of Free Zones in Oman

Abstract

Freezones have become widespread with the liberalization of investmentand international trade. Oman free zones are appropriate for theforeign companies that intend to use Oman as the local distributionor manufacturing base. The free zones are mostly for export- andimport oriented companies who only need an office in Oman. FTZ arethe key actors in deepening of GVC (global value chain).Nevertheless, the world trade due to insufficient information ontheir status knows little about their contribution. It is adescriptive analysis of Oman free trade zones. Oman established FTZat the beginning of the year 2000. It was aimed to expand its revenuefrom the non-oil sector and investment into its national economy. FTZof any given country offers opportunities to the investors an openaccess to the industrial infrastructure alongside the alternative ofa 100% returns on investment. FTZ also boost international relationsregarding trade and FDI of the country. This paper presents theimpact study on the impact of free zones in Oman. In addition, itdescribes both qualitative and quantitative analysis of the effectsof the free zones in Oman economy.

Manydeveloping nations of the world have moved from import strategy toexport promotion. Free zones are regions that are limitedgeographically where particular inducement such as tax benefits andduty-free importing are granted. They are considered as thefundamental instruments to stimulate exports, generate employment,attract foreign direct investment, accelerate the transfer oftechnology and boost economic growth.

InOman, afree zone is a particular region in the jurisdiction whererestrictions or taxes on trade or business are not applicable.Although United Arabs Emirates has been a leader in the GCC, as faras the development and establishment of free zones are concerned, theSultan of Oman has made it the principle not to stay too far behind.In a bid to expand its investment and the non-oil revenues into itseconomy, the country started setting up the free zones. FTZ gives theinvestors access to the infrastructures alongside the option of a100% disbursing back of the revenue, started improving foreign directinvestment and international trade relations. The Sultanate of Omanis an independent nation that was established in the 1650s afterliberation from the colonial rule of the Portuguese. The capital ofOman is Muscat and is located in the northeast of the country. KSA(Kingdom of Saudi Arabia), Yemen and UAE (United Arabs Emirates) arethe neighboring states of Oman. The country itself is a sultanatemonarchy led by the Prime Minister and Sultan Minister Qaboos binSaid Al-Said (Chadee,Roxas &amp Rogmans, 2014).

Inliterature, various studies reviewing the effects of free zones inOman have been illustrated. Nevertheless, the studies may selectcertain zones or concentrate on particular impacts that arise as aresult of free zones. However, there are limited studies that analyzefirms perception based on their economic impact to the economyregarding the law.

Inthis setting, the reasons of the research are to look at the effectsof free zones and review the perceptions of the consumers byexamining the degree of establishment goals of free zones in Oman.The concept of free zones shall be illustrated by explaining theeconomic impacts and objectives of the organization of the free zonesconcerning the literature review. The second part of the studydescribes the concept of the free zone. The three zones will bedescribed, and the success factor reviewed.

Thestudy is imperative for striving to fill up the gaps available in theliterature by exploring the economic effects all the three free zonesbased on the objectives of the stated law. Also, considering Oman`scurrent economic and political conjecture, where future andefficiency of free zones is illustrated, the discussions andconclusion of the research would be beneficial and practical forcommercial operators and the policy makers.

Methodologyof the Research

Thestudy is an impact study that covers the three free zones of Oman. Inthis context, a questionnaire study was conducted with firmsoperating in 3 zones in Oman. The target group of the questionnaireis the free zones for all the firms, which have purchasing andselling, production and R&ampD operating license. Since there is noexact number of the target population, there is limitation of time tocomplete the research. In this regard, the results derived from thequestionnaire should be reviewed based on the mere fact that thequestionnaire study was based on self-selected sample.

Thequestionnaire was sent to all firms in the free zones of Oman andthus pilot study was not conducted. The questions in this study werefocused on analyzing the impact of free zones in Oman’s economy.The questionnaire was conducted between 3rdand 4thJuly 2016 and 100 firms participated in the survey. About 15 percentof the target group responded to the questionnaire. Since theidentities of the firm are confidential, it was not possible toreview.

Thelaw inherent in the free zones determines the setbacks of thequestions. The questions from this study focused on reviewing firm’sperception of free zones in directing businesses to increaseparticipation rates of the firms. On the contrary, to increase theparticipation rates, the number of questions was limited toseventeen. The questions were included in the survey. Thequestionnaire study was conducted between 3rdand 4thJuly, 2012 where 154 firms participated.

TheoreticalFramework

Whereasfree zones continue to flourish in the world, the practical andtheoretical debate on the advantages and disadvantages of free zonesis an ongoing debate. Studies based on the impact of free zonesshowed that through diverse zones not all free zones could affectthe host economies such as Oman in a positive way not all free zonescan be considered a success. Therefore, there is no consensus in theacademic arena on the effects of free zones. Some analyst`s showsthat free zones can help in attracting foreign direct investmentpromote trade and thus generate foreign exchange earnings andemployment. Also, FDI can generate forward and backward linkage todomestic industries and ultimately have a spillover impact throughthe transfer of management skills, technology and expertise. Thereare various studies which lay the overall impact of the free zones indeveloping nations. Neoclassical school analyzes the welfare effectof free zones. Hamada (1974) is one representative of theneoclassical school.

FreeTrade Zones and Effects in Oman

FreeTrade Zone in Salalah

Thefirst Free trade zone of Oman in Salalah became equipped in 2005. Itinvolves three major projects: Dune Oman, Salalah Methanol and OctalPetrochemicals alongside a smaller project from Sapphire Marine whoassembles commercial fishing boats and yachts. In the present day,companies such as SAGA (leasing and operating of warehouse andstores) and ABI Showatech (assembly, mechanizing, and castingproducts of the engine) are established in Salalah FTZ. The SalalahFTZ has finished its initial stage of growth and has made progress tothe second phase. This area is planned to develop the free zone overa region of 19 sq.kms. It is an important and advanced step towardsthe establishment of a free zone in Salalah port after research hasproved its benefits and value. The step was illustrated by signing amemorandum of understanding related to the growth of the first stageof free zone project with the port services of Salalah. After thedevelopment of the port in a way that it would be one of the leadingcontainer ports in the Indian Ocean, the free zone was aimed atbuilding up Salalah making is a thriving local distribution center.Research has shown the great benefits anticipated from theestablishment of free zones which is illustrated in:

  • Expected prosperity of tasks related to reactivating the partitioning of the big shipments

  • The expected massive increase in volume of commerce, manpower, and investment

  • Success of other services alongside the region of the task is also expected

  • The free zone is expected to enhance the role of the custom storehouse

  • The functions of the international firms in distribution commerce

  • The setting is to present the international ship with fuel

TheFree Trade Zone Salalah is devoted to attracting the principal assetin light, medium and logistic sectors, information technology,re-export and medium industries. Investments are amounting to 2billion that have been provided to be attained within the next fiveyears. The firms in operating within the Salalah FTZ are:

  • Salalah Methanol Company that is managed by the Oman Oil Co already initiated production of its methanol using liquid natural gas that is supplied by Oman Oil

  • Octal Petrochemical with polymer product assembly facility exporting PET-Film through Salalah Port

  • Oswald Caustic Soda

  • Dunes Oman-established to produce automotive castings, a task of Brakes India Limited of The TVS group

  • Sapphire Marine_ this is a manufacturer of powerboats for military use and law enforcement for the Sapphire Marine Market makes luxury power boats.

DunesOman owned by the Brakes India function a foundry inside the zone,which has the capacity of producing 17,500 tons of gray iron andductile iron for the automotive industry. Dhofari Nutraceuticals isanother investor in Salalah FTZ, targeting the market for energydrinks and food supplements. The Salalah FTZ has the second locationin Adhan region which is close to Salalah Hilton. The growth in thissite is inclusive of leased offices and warehousing units. Free TradeZone in Sohar in the North of Oman situated on 4500ha land near SoharPort.

FreeTrade Zone in Sohar

Soharis Omani second city located an hour drive from Hatta border withUAE. Sohar Industrial Development Company manages the free trade zonecurrently under development. The existing Free Trade Zone investorsare the Port of Rotterdam, Government of Oman, SKIL &amp theNetherlands infrastructure in India. The confirmed investments inSohar Port include a deepwater jetty for an iron core by a BrazilianCompany Vale. Sohar FTZ is a location with unique strategic benefits.It has substantial advantages regarding smooth global logistics andcomprehensive market access. Also, the sultanate in the recent daystakes pleasure in equivalent primary infrastructure as a result ofland availability, industrial area, post, gas, and water, utilitiesof electricity, different transport means and communication services.Oman as a nation supports the establishment and setting up of newforeign ventures in its free zones that permit commerce withindividual qualities, facilities and incentives based on the laws ofthe land.

StrategicLocation

Sohar,FTZ, is situated at the entry of the growing gulf and sub-continentmarket. The international airports, railway system, good roads offerpotential for future growth. This zone relies heavily on the traverseroads of the western and eastern parts providing viable access to theglobal market. The area works hand in hand with Sohar Port and thislocation offers several advantages. Ultimately, its strategicposition shuns the increased premiums that are related to thewaterway passage and also ensure that instant admission to theshipping lanes of the world is made. The industrial region of Soharwas founded in 1992.

Soharis located in Batinah area. Batinah is approximately 200 kilometersfrom Muscat and about 179km from Dubai. The FTZ in Sohar is relatedto transport network inclusive of the present Muscat highways and theexpressway that have been planned. The available set up is inclusiveof the Batinah railway system that is connected to the dry bulk Barkaport and runs across Batinah coastline. Muscat and InternationalDubai airport are not more than 220 kilometers apart. The Sohar portis situated near the industrial region near the manufacturing areasand has deep harbors for the ship to anchor. The administration ofthe harbour is reliant on SIPC Industrial Company. This is afifty/fifty joint venture between Oman state and Port of Rotterdam.The existing investments exceed $14 billion and therefore, it makesit one of the largest ports in the world regarding development(Peterson,2013).

FreeTrade Zone in Al Mazunah

Al-Mazunahis a free economic zone started its operations in 1999 and issituated in the Southern location of Oman of Dhofar close in Yemenborder. The zone is located 260km from Salalah and 500km from Sayunand 245km from Al Gaydah, the two closest cities of Yemen. With thecharacteristic of “Free Zone”, Al Mazunah is located beyond thelit of tax Oman boundary and as such, the business can enter AlMazunah exclusive of a visa or implementing the procedure betweenYemen and Oman border. Al Mazunah presents an outstanding capacity tothose who wished exchange goods through Yemen to Oman or situate thewarehouse amenities(Burke,2012).

Aninvestment of estimated 680 million Oman Rial in the project ispromised over the next five years. The area of focus for the Freezone`s development plan is the storage, processing and shipment ofproduct from Dhofari agricultural heartland, alongside the industrialand automobile vehicle trade. Mazunah area presents an excellentopportunity for those are interested in trading between Yemen andOman or establishing the storage utilities. There are a commercialexhibition and shops in the area, in addition to other utilities andgeneral storage plus communication services and the necessaryestablishment services such as roads, water, and electricity. TheSupreme Royal Decree No. 2005/103 issued in 2005 and established thefree zone in Al Mazunah. The general corporation of the industrialpark can ask any party to operate this region after getting thepermission of the free zone committee granting the incentives,facilities, and merits stipulated in Free Zones law (Pauceanu,2016).

LiteratureReview

FreeZone Concept

Whena distinct definition for free zones is demonstrated, World Bankdefines free zones as fenced areas that focus on manufacturing forexports which present free trade condition and liberal regulatorycontext. Based on UNCTC/ILO study, a free zone is a delineatedindustrial estate that constitutes a free trade.

Theresearch on OECD describes the free zones as State policy to enhanceexports by offering a business environment that is more competitivethrough the provision of unique incentives including tax exemptions.

Exportsof Free Zones in third World Nations

Thefree zones exports to third world countries exceeded its sale to Omanfrom the time free zones were established. The free zones exportshare reached 54.4% in total sales of the free zones (Ay,2012).

Graph1: As indicated in the graph above, the exports from free zonesreached the peak of around 6.9B. Thus, between 1988 to 2011, theexports reached 54.1 billion.

Source:Ministry of Economy. (Ay, 2012)

Opportunitiesand Benefits

TheSultanate of Oman geographical location is paramount. The Northernpart of Oman is near the “Strait of Hormuz”. This is asignificant shipment course for crude oil globally. The southern partof Oman harbors the famous trade seaway. The country is a secular,politically-opinionated and economically established country withconsiderable low inflation and trade surplus. It is one of the highlyliberalized nations in the region. The projects have been started insectors such as international transshipment, petrochemicals &ampchemicals and natural gas.

EmploymentStructure of Free Zones

Thefigures presented herein establish creation of employment of freezones. In the first years, only five firms provided job opportunitiesof not less than 200 employees. As these opportunities of thecompanies operating in free zones increases, microenterprisesdecrease while the medium, small-scaled and large enterprise hasincreased. The questionnaire study addressed the users of free zonesin a bid to reveal to reveal that the firms have begun exporting inOman (Ay, 2012).

Graph2: As indicated in the graph above, the employment creation effect ispresented. During the first year, only five firms presented jobopportunities for not less than 250 employees (per company) (Ay,2012)

Diversification

Thedevelopment of the free trade zones across Oman economy has been theintegral of the plan of Sultanate to diversify the economy beyond theoils sector through the development of export focused, value-addedindustries such as logistics, shipping, and manufacturing. The freetrade zones serve as a catalyst for this growth through the provisionof infrastructures such as ports and roads, financial incentives suchas customs duty and income tax waivers and regulatory framework thatencourages high-end domestic and foreign companies to establish theiroperations. Moreover, the aim of FTZs is to build trade andindustrial base in Sultanate of Oman to enhance a sustainableeconomic growth using the nation`s strategically significantpositions with its commercial harbors of Salalah and Sohar to improvetrade, creating jobs and bringing newer technologies in highervalue-added fields (Wippel,2016).

Fig3: The graph above shows GDP of different sectors of Oman Economy.The GDP from oil is highest as at 2005 and lowest in tourism. The GDPis estimated to reach 40.9% in other sectors of Oman’s economy by2020. Source: (Pauceanu,2016)

Fig4: The graph above shows that by 2011, 2,576 people were unemployedwhile 23,678 people were employed by 2011. The free zones aloneemployed 54,022 people.

(Ay2012, p.55)

Overviewof Oman Economy-Emergency of Free Zones

Freezones in developing nations took shape in 1970 when most of thedeveloping nations began to leave import substitution policies for anexport and open-oriented policies. Free zones were deemed to be avaluable tool in policy-making regarding export diversification,export growth, employment opportunities, FDI and foreign exchanges

TheGross Domestic Product growth has been strong driven primarily by gasand oil. This country is actively pursuing a development plan basedon privatization, diversification, and industrialization to minimizethe oil sector`s contribution to Gross Domestic Product. Presently,Oman offers a competitive context for the international investors. Itis one of the most secure nations in the world to do business sinceit has an excellent record for minimizing corruption andrestructuring its regulatory context. A free trade agreement (FTA)between Oman and United States came into power in 2009 (Zorob,2013).

TheSultanate of Oman economy has been growing gradually since twentyyears ago taking advantage of its location along Asia-Europe tradeline and in the middle, a wider area that spans from Southern bordersof Asia central to East Africa, and India to Pakistan. The country`sstability has contributed largely to its prosperity and progress.Oman enjoys strong financial foundation with a high Gross Domesticproduct per capita alongside other GCC nations, abundant naturalresources such as minerals, gas and oil and its positive tradebalance. (Al-Reesiet al., 2013).

Impactsof Free Zones in the World

Thestatic advantages are illustrated in export diversification andpromotion, direct employment, FDI, government revenues and foreignexchange earnings. As for the dynamic benefits, those are complex todetermine but more significant in the end for the host country isdescribed as skills improvement, technology transfer and backwardlinkage established with the domestic economy.

Therehas been an increasing trend in foreign exports of free zones. Asindicated below, the exports of free zones reached the maximum pointand became $6.9B. It is proven that the free zones have an impact onincreasing the performance and success of the export.39.2 percent ofthe sales from the free zones were made to foreign countries. Freezones imported goods equivalent to 86.4 billion dollars and soldthese goods mainly in Oman. The massive volume of the sales from freezones to Oman economy can be expounded through ex-establishing goalsthat envisage provision of continuous and cheap input supply to thedomestic economy. As a positive indicator, the share of Oman hasremained 4.1 percent in trade volume of free zones. It can thus beconcluded that the companies operating in free zones has achieved inincreasing diversity of the exports to foreign countries as apositive indicator of technology transfer.

Graph5:The figures related to the free zones shows that there has been anincreasing trend in exports of the free zones from 1987. In the graphabove, the exports reached the peak in 2011 which amounts to 5.1percent of exports from Oman. Thus, between 1987 to 2011, the exportsto third world countries reached 54.1B. (Ay2012, p.47)

Inline with the primary objectives of the basis of the free zones,there is a considerable share of the exports for many countries. Mostprominent nations that enjoys the contribution of free zones in theirexports includes Nicaragua 79.4 percent, Madagascar 80 percent andMorocco 61 percent

Resultsof theResearch

Theprimary goals of establishing the free zones in Oman is to increasethe exports by directing companies to export and increase investmentsand production related to exports. In this regard, 15 questionsderived from the questionnaire strive to observe the impacts of freezones in Oman. Six items were included. Reliability questions wereestimated through SPSS. The first item determines the effects of taxexemptions presented in free zones. Tax exemptions have changed inthe recent past for the purpose of directing exports orientedproduction and decrease sakes from free zones to domestic market.From the results above, it can be concluded that there is a stronglink between sales and the view on tax advantages. As in the 2nditem of the 15thquestions, these zones presented certain benefits to firms such ascontrol free customs in buying and trading goods from Oman withoutpaying tax. These benefits are expected will facilitate foreign inputand trade supply and thus present low cost of production, which wouldincrease the ability of the firms in free zones to compete in globalmarket and therefore export. The second item aims to determine thebenefits of low cost exports and production of firms in free zones.

Theresults of the questionnaire prove that tax benefits in free zonesencourage the export oriented tasks of the firms. Free zones providefree access to intermediate goods and raw materials necessary forproduction of goods. In the meantime, the results support that thefacilities and incentives provide low cost manufacturing forcompanies operating in free zones. These benefits are likely toincrease the capacity of firms to compete in the global market and inthe long run promote exports.

Theseresults can be supported by the mere fact that 62.3 percent of therespondents have exported their products for the first time.Nevertheless, it can be noted that despite the incentives andpolicies towards promotion of exports, more than 30% of therespondent firms argues that exports to foreign markets is lessappealing than selling in the domestic market. Tax benefits in thelast years for operating licenses besides producer’s license havebeen reduced to promote manufacturing.

Itshould be noted that the questionnaires support the fact that freezones in Oman are successful in directing companies to exportoriented production and exports, despite the mere fact that is a roomto expand facilities and incentives in Oman to direct the companiesto export oriented tasks.

Theresults from the questionnaire also showed that 28 percent of thefirms made their decisions to invest in Oman in order to benefit fromcheap labor and low cost materials. Nevertheless, it can be notedthat free zones could be unsuccessful in supplying raw materials andlow cost workforce. Thus, free zones could not meet the expectationsof the firms about their investment in free zones. The results of thequestionnaire show that almost 50 percent of the foreign investorsconsider that the free zones offer best conditions for investment.While 48.7 percent of the respondents have begun operating in Oman,59.4 percent of the firms are in foreign partnership or are foreign.Thus, free zones present favorable opportunities to attract newinvestments and therefore, free zones have the potential to attractforeign direct investment. In addition, this potential is supportedby certain benefits. Firms operating in free zones are exempted fromtax. In addition, custom duties are exempted on the imports. Inessence, this provides companies to supply their input needs in aneasy, secure, flexible and quick way

Impactof Free Zones in Oman

InOman, free zones can be operated and setup successfully afterresolutions that were made in the 1970s by which Oman startedpursuing export-oriented economic programs. Following free zonesproliferation in Oman regions, the economic effects of these freezones have been reviewed in several studies. The research in thisstudy is descriptive of the overall impact the free zones has on theeconomy.

Ay(2012) argues that in Oman, there is no positive input to Oman basedon foreign trade. Therefore, their function as a generator of foreigncurrency is not applicable, and they remain inadequate inexport-adjusted growth efforts. Free zones can only act as analternative policy to deal with the problem of employment.

Freezone experiences in Oman, and the rest of the world indicates thatthese zones have insignificant impacts on the improvement ofemployment and foreign trade. Oman thus encourages establishment andoperation of international business in FTZ.

Regardingthe employment creation effects in Oman, statistics illustrates thatthe level of employment increases gradually in the three free zones.The author also put forth that studies are showing that average wagein free zones is higher than those paid in the home country.Therefore, it is concluded that, to reach a conclusion based on theimpact of free zones wage implementation are hard as even wages indistinct free zones vary in the same country (Bräutigam&amp Tang, 2014).

Conclusion

Basedon the findings, the results of free zones can help us understand theFTZ modeled regions that shun the traditional hindrances in the tradeas tariffs and reduce bureaucratic directives. The great free zonesin Sohar and Salalah are compelling features of Omani economicenvironment while Al Mazunah is lesser known, newer and smaller freezone. The goal of free trade is to improve its presence in the globalmarket by attracting the foreign investments and new business. Freetrade can be exploited by everybody from large manufacturers to thesmall business to the individuals. Any entity or person that intendsto export or import goods and can consider taking the benefits offree trade zones. Operating within the free trade zones of thecountry offers diverse benefits to the exporters and importers. Thewidespread economic benefits are inclusive of the elimination ordeferral of exemption from certain taxes, customs duties, andinverted tariff relief.

Thefree trade zones also present the operational benefits such asincreased security, indefinite storage opportunities, and insuranceon goods. Oman`s FTZs plays an increasingly imperative role in theeconomic prospect of Sultanate and are considered to be the sectorthat needs to watch carefully for firms that have already establishedbusinesses in Oman in future. FTZSalalah is devoted to attracting the significant investment inregions of medium and light industries, logistics, trade, re-export.Oman free zones appear to play an imperative role in Sultanateeconomic future and are considered to a sector that needs to bewatched carefully for firms that have established their business inOman and those seeking to start a business shortly.

Thestudy is an exploratory research that covers all the free zones inOman. In this context, a questionnaire study was conducted with firmsoperating in 3 zones in Oman. Since there is no exact number of thetarget population and there is limitation of time to complete theresearch. The questionnaire was sent to all firms in the free zonesof Oman and thus pilot study was not conducted. The free zones lawsreview the limits of questionnaires in the study. The questions inthis study were focused on analyzing the impact of free zones inOman’s economy. Whereasfree zones continue to flourish in the world, the practical andtheoretical debate on the advantages and disadvantages of free zonesis an ongoing debate. Studies based on the impact of free zonesshowed that through diverse zones all free zones cannot affect thehost economies such as Oman in a positive way all free zones cannotbe considered a success. Some analyst`s shows that free zones canhelp in attracting foreign direct investment promote trade and thusgenerate foreign exchange earnings and employment. There are variousstudies which lay the overall impact of the free zones in developingnations. (Bräutigam&amp Tang, 2014)illustrated the consequences of free zones as dynamic &amp static.There has been an increasing trend in foreign exports of free zones.

FurtherImprovement and Further Research Directions

Thegovernment should cooperate and encourage investing companies thatcould provide the spare parts for manufacturing industries,transportation, machinery vehicles and maintenance and renewalservices. Comprehensive and precise studies ought to be done foridentifying all economic, social and resources aspects alongsidedetecting the collective talents and disadvantages based oncomprehensive mid-term, long-term or annual programs. Since thehistorical considerations ad climatic conditions have a defining rolein the success of free trade, it is recommended that Oman governmentprovide complete security within the area by getting assistance fromall the stakeholders working there in case a free trade zone iscreated within Oman. Telecommunication, transportation system,insurance &amp banking systems should be scrutinized. Access roadsin the neighboring provinces should be developed based on a preciseplan by attending the possibility of the neighboring regionsregarding being effective in that the current complications can beavoided.

References

Al-Mawali,N., Hasim, H. M., &amp Al-Busaidi, K. (2016). Modelling the Impactof the Oil Sector on the Economy of Sultanate of Oman.&nbspInternationalJournal of Energy Economics and Policy,&nbsp6(1)

AyS. (2012). “The Economic Impacts of Free Zones: The EstimationinTerms of Trade Volume, Employment and Foreign Capital of FreeZonesin Turkey and Bursa Free Zone”. İş, Güç IndustrialRelations and HumanResources Journal. No:11(3). Pages:31-46.

Al-Reesi,H., Ganguly, S. S., Al-Adawi, S., Laflamme, L., Hasselberg, M., &ampAl-Maniri, A. (2013). Economic growth, motorization, and road trafficinjuries in the Sultanate of Oman, 1985–2009.&nbspTrafficinjury prevention,&nbsp14(3),322-328

Abushammala,M. F., Qazi, W. A., Azam, M. H., Mehmood, U. A., Al-Mufragi, G. A., &ampAlrawahi, N. A. (2016, March). Generation of electricity from biogasin Oman. In&nbsp20163rd MEC International Conference on Big Data and Smart City(ICBDSC)&nbsp(pp.1-3). IEEE.

Abushammala,M. F., Qazi, W. A., Azam, M. H., Mehmood, U. A., Al-Mufragi, G. A., &ampAlrawahi, N. A. (2016). Economic and environmental benefits oflandfill gas utilisation in Oman.&nbspWasteManagement &amp Research,0734242X16628983

Al-Ansari,E. M., Rowe, G., Abdel-Moati, M. A. R., Yigiterhan, O., Al-Maslamani,I., Al-Yafei, M. A., … &amp Upstill-Goddard, R. (2015). Hypoxia inthe central Arabian Gulf Exclusive Economic Zone (EEZ) of Qatarduring summer season.&nbspEstuarine,Coastal and Shelf Science,&nbsp159,60-68

Bräutigam,D., &amp Tang, X. (2014). “Going Global in Groups”: StructuralTransformation and China’s Special Economic Zones Overseas.&nbspWorldDevelopment,&nbsp63,78-91

Burke,E. (2012). One blood and one destiny? Yemen’s relations with theGulf Cooperation Council

Chadee,D., Roxas, B., &amp Rogmans, T. (2014).&nbspProspectsand Challenges of Free Trade Agreements: Unlocking BusinessOpportunities in Gulf Co-operation Council (GCC) Markets.Springer.

Cotton,M. D., &amp Mahroos-Alsaiari, A. A. (2015). Key actor perspectiveson stakeholder engagement in Omani Environmental Impact Assessment:an application of Q-Methodology.&nbspJournalof Environmental Planning and Management,&nbsp58(1),91-112.

Hakimian,H. (2013). 4 Iran’s free trade zones.&nbspIranand the Global Economy: Petro Populism, Islam and Economic Sanctions,102

Kolb,J. (2015). Expatriate Entrepreneurship in the Gulf Region betweenInformality and a Globalized Knowledge Society.&nbspAmericanJournal of Entrepreneurship,&nbsp8(2),89-107.

Mostafaeipour,A., Mohammadi, K., &amp Sabzpooshan, M. (2015, March). Wind-solarenergy potentials for three free trade and industrial zones of Iran.In&nbspIndustrialEngineering and Operations Management (IEOM), 2015 InternationalConference on&nbsp(pp.1-9). IEEE

Pauceanu,A. M. (2016). Foreign Investment Promotion Analysis in Sultanate ofOman: The Case of Dhofar Governorate.&nbspInternationalJournal of Economics and Financial Issues,&nbsp6(2)

Pak,A., &amp Majd, F. (2011). Integrated coastal management plan in freetrade zones, a case study.&nbspOcean&amp coastal management,&nbsp54(2),129-136

Peterson,J. E. (2013).&nbspOman`sinsurgencies: the sultanate`s struggle for supremacy.Saqi

Peterson,J. E. (2013).&nbspOman`sinsurgencies: the sultanate`s struggle for supremacy.Saqi UNCTAD, T. (2005). corporations and the internationalization ofR&ampD.&nbspWorldInvestment Report

Yücer,A., &amp Siroën, J. M. (2016). Trade Performance of ExportProcessing Zones.&nbspTheWorld Economy

Wippel,S. (2016). Port and Tourism Development in Oman: Between EconomicDiversification and Global Branding.&nbspUnderConstruction: Logics of Urbanism in the Gulf Region,101

Zorob,A. (2013). Oman Caught Between the GCC Customs Union and BilateralFree Trade with the US: Is It Worth Breaking the Rules?. InRegionalizingOman&nbsp(pp.185-203). Springer Netherlands