Ithraa News Q2 - 2016

MAY TW ENT YSIXT EEN I SSUE TWO

The Public Authority for Investment Promotion & Export Development

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Ithraa Scoops Prestigious International Investment Award

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MAY TWENTYSIXTEEN ISSUE TWO

Formed in 1996, Ithraa is Oman’s award-winning inward investment and export development agency.

Ithraa News Doing Business in Oman A series of 12 Sector Films Doing Business in Oman is a series of 12 films showcasing people, businesses and sectors that are helping shape the Sultanate and drive the economy. From manufacturing, education, agriculture, tourism, logistics to the creative industries, this collection highlights Oman’s outstanding offer as a place to live, invest and do business.

Scan the QR code with your smartphone to watch the films http://bit.ly/1QRWgr8

We are an ambitious organization committed to promoting the business benefits of Oman to a global audience. Our experience, expertise and global reach helps companies of all sizes realize their potential.

Contents 4

Ithraa Events

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Down on the Farm

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Seeds of Change

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One-on-One

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And Finally...

Welcome to the second edition of Ithraa News a quarterly publication aimed at business leaders, entrepreneurs, investors and the people of Oman.

It takes a fresh look at the sultanate’s business scene and tells the story of the people and organizations driving our thriving economy.

Ithraa News is delivered to business leaders on an exclusive postal subscription list and supported by an online edition available to all.

This second bumper edition includes news on Ithraa scooping a prestigious AIM inward investment award in Dubai; export workshops held in Muscat and Salalah organized with Geneva-based ITC; and the resounding success of the OPEX trade show in Addis Ababa.

We have an interview with Eng. Saleh Al Shanfari, CEO, Oman Food Investment Holding Company who talks about the Sultanate’s agriculture sector and the launch of three multimillion farm businesses.

We also carry a one-one-one with His Highness Sayyid Faisal Al Said, Ithraa’s Director General of Investment Promotion. He discusses facing increasing international competition to attract investment and takes a look at how Oman is successfully rising to the challenge.

Our readers rely on us to be honest, informed and engaging. Indeed, we believe Ithraa News is a great platform to showcase the fantastic people and companies that make up Oman’s thriving, vibrant and ambitious business community.

We hope you enjoy the read.

Team Ithraa

Credits Editorial: Taleb Al Makhmari

Sajda Al Ghaithy

Nadia Al Lamki

Dave Pender Design: Lamahat Print: Al Anan Printing

Editor-in-Chief Senior Editor Editor Advisor www.studiolamahat.com www.alananprinting.com

Photographs courtesy of Ithraa, PEIE & Omran

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Ithraa Events

HE Dr. Ali Al Sunaidy, Minister, Commerce & Industry tours OPEX Addis Ababa

Export Intelligence from Ithraa & ITC

Local Companies March on Addis Ababa Organized by the Omani Products Exhibition (OPEX) Organizing Committee consisting of Ithraa, the Oman Chamber of Commerce & Industry and the Public Establishment for Industrial Estates, and under the patronage of HE Dr. Ali bin Masoud Al Sunaidy, Minster of Commerce & Industry, over 100 Omani businesses participated at the OPEX trade show 11 – 14 April in Addis Ababa. The four-day show offered thousands of visiting businesses an outstanding opportunity to view and experience Oman-made products and services.

Omani exporters talk market analysis

Over 60 Omani exporters attended a series of workshops in Muscat and Salalah organized by Ithraa in partnership with the Geneva-based International Trade Centre (ITC).

Aimed at current and potential exporters, government departments and academia, the two Ithraa-led workshops were held 7 – 8 March in Muscat and 9 – 10 March in Salalah.

As the joint agency of the United Nations and the WTO, ITC is the only multilateral agency dedicated to supporting the internationalization of SMEs. Its joint mandate combines a focus on expanding trade opportunities with the aim of fostering sustainable development.

Ithraa staff promote Oman’s export success

A key challenge facing would-be Omani exporters, pointed out Mrs. Al Balushi, is the scarcity of reliable trade intelligence on developed and emerging markets. Exporters need to stay abreast of competitive conditions in their current markets, scan opportunities for new markets, as well as look for opportunities to diversify or value-add to their existing product range. At the same time, importers worldwide also seek to optimize the potential offered by preferential trade agreements and improve the efficiency of their sourcing by scanning for new and competitive supplier countries.

ITC has a strong track record of connecting developing country businesses to value chains, building sustainable market linkages and delivering positive development outcomes.

“ITC addresses these issues with its suite of user friendly market analysis tools that can help Omani exporters stay up-to-date with international trade trends, improve their selection of export markets and suppliers, research and analyze markets in-depth and grow their trade over time. Indeed, these were topics covered by ITC personnel at the Muscat and Salalah workshops,” commented Ithraa’s Director General for Export Development.

“We are delighted to partner ITC management and bring their international export expertise to Oman,” enthused Mrs. Nasima Al Balushi, Ithraa’s Director General of Export Development and organizer of the Muscat-Salalah workshop program.

ITC’s Market Analysis Tools are accessible to Omani companies, tools that will help them examine export and import statistics from over 220 countries and territories on 5,300 internationally traded products. “Access to this type of information is invaluable to Omani exporters,” concluded Nasima.

According to Mrs. Nasima Al Balushi, Ithraa’s Director General of Export Development and OPEX Committee Member: “Oman produces an array of high quality premium products which are in demand across the globe. When colleagues and I led the mission to Ethiopia – which is a key growth market for us – it was clear throughout the trip that Oman-made products are hugely valued by international businesses, retailers and consumers.”

Growing business is an important topic for CEOs of companies of all types across Oman right now - and if you talk about where growth is going to come from in the next decade for Omani companies, it is going to be in tackling overseas opportunities.

Trading internationally is a natural step for many Omani businesses looking to grow.

Over the past two years, OPEX shows have been held in Jeddah, Riyadh, Dubai, Doha and more recently in Addis Ababa. Feedback received by the Organizing Committee clearly suggests the shows are paying dividends and helping change the way Omani non-oil exporters conduct business. As a result, more Omani firms are trading internationally.

“We were delighted with how successfully the show was received in Addis Ababa.

We always knew there was a real need for an Omani products event like this in Africa but the way it was so positively received was beyond even our greatest expectations.

We now have a solid foundation from which to assist local companies further explore and penetrate the Ethiopian market,” enthused Nasima.

Concluding, Ithraa’s Director General remarked: “Key to any successful local enterprise development campaign is the attitude that SMEs are the country’s backbone and that Oman must do whatever it can to help them thrive. In this regard, events like OPEX are extremely important to our business community and can yield significant commercial returns for those that participate.”

Key to any successful local enterprise development campaign is the attitude that SMEs are the country’s backbone and that Oman must do whatever it can to help them thrive.

Nasima Al Balushi Director General of Export Development

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Down on the Farm

Oman Food Investment Holding Company SAOC (OFIC) is a newly established state-owned enterprise mandated to promote Oman’s food security, through partnerships with government agencies, private operators and investors.

Ithraa News sat down with Eng. Saleh Al Shanfari, OFIC’s CEO to get his views on agriculture investment opportunities, food security, SMEs, the rising demand for poultry, meat and dairy, to encouraging Oman’s youth to consider farming careers.

Eng. Salah Al Shanfari OFIC’s CEO

What’s the story behind OFIC and what are you looking to achieve over the next 10 years?

OFIC is a wholly owned Government company whose brief is to improve the self-sufficiency of food production in Oman and support food security, by various commercial ways and means.

Enormous investment is needed in Oman’s agriculture sector to realize food security and nutrition goals. How’s OFIC contributing to this?

There are excellent opportunities to invest in Oman’s agriculture sector.

OFIC has carried out studies in poultry, dairy and red meat sectors which has resulted in the creation of three multimillion companies that will improve the supply of food with proper quality certification, focusing on delivering higher value and nutritional produce to consumers right across Oman.

OFIC has made an impact investment in Mazoon Dairy Co (SAOC) a US$258 million national flagship dairy project – can you tell us more about this important initiative?

Mazoon’s total investment is US$258m with OFIC taking a 20% stake.

The vertically integrated farm will start with about 4,000 cows in 2017, with a target of a 25,000-strong herd by 2026. The project began in 2015, with commercial production expected to start in 2017 with plans to scale up substantially over the longer-term. Mazoon has a target of producing 202m litres of milk by 2026 and 985m by 2040.Combined with increases in output from other producers, and a new milk collection scheme being initiated by the Government with participation from OFIC, this should cut milk imports from 69% in 2014 to 13% in 2026.

GCC states import as much as 90% of their food, with the majority of states importing 60-80%. How can investment in Oman’s agriculture and fisheries sector help reduce reliance on foreign imports?

OFIC’s projects will improve the availability of local produce and reduce the dependency on foreign imports. On full production, the impact will be significant as there will be huge import substitution, which will improve the balance of trade.

Realizing the importance of start-ups and SMEs to Oman’s long-term economic future, the government has put considerable resources into nurturing and supporting them. With this in mind, could you highlight some of the opportunities that exist for the small business entrepreneur in Oman’s agriculture sector?

With Greenfield projects such as OFIC’s, there is a spin-off to the local economy, as everything starts from the beginning. The initial process involved local consultants carrying out feasibility studies, these were reviewed and then approved by founding shareholders. We have now moved to the detailed design and construction stage that will involve civil, mechanical and electrical contracting, provision of services, procurement of machinery and equipment. In this process there are a lot of opportunities for local SMEs to get involved and add value to what OFIC is looking to achieve.

Another large-scale agriculture project OFIC is backing is A’Namma Poultry Company. As GCC poultry consumption increases there is a growing market to service, how do you see A’Namma Poulty catering to that demand?

Again, in 2015 OFIC announced the establishment of the A’Namaa Poultry Company, a poultry project investment with US$258m 50% of which is debt and 50% equity. OFIC holds 20% in the project with the remaining held by institutional investors. The company is expected to produce 60,000 tonnes of poultry meat a year by 2020, which equates to almost 60 million birds from a site near Ibri in north-west Oman.

As of late 2015, A’Namaa management was in place and the company is expected to be operational by 2017. Combined with existing producers, the project is expected to ensure that Oman meets 70% of its poultry needs from domestic production by 2030, up from 36% at present.

OFIC expects to engage partners across the project development cycle, including supplying equipment, construction, retailing and distribution, boosting job creation in a number of sectors as well as supporting local SMEs

Where does OFIC see opportunities in the GCC poultry, meat and dairy markets?

In determining the direction of OFIC, we identified three core activities in 2013 that needed to be addressed. We saw the opportunity for locally produced products in poultry, meat and dairy. Of course, in each case there has to be a strong commercial argument to initiate these investments. We managed to instigate, finalise and bring in the required equity in each of the projects. Indeed, there was over subscription in all projects. Of course, we have now created a benchmark that needs to be retained as we move forward.

What policy measures would you like to see in place at the national level to help support Oman’s poultry, dairy and meat sector development?

The existing policies support agriculture development in Oman.

The smart use of our limited water resources is encouraged.

Indeed, recycling water is at the core of each of our projects.

Animal feed is sourced from abroad thus avoiding using our own water supply. A one-stop shop principle would be useful where both local and international investors could go through the licensing process faster than current processes. Furthermore, FDI to drive an open economy should be at the heart of economic policy. Oman is a diamond, it has much to gain from inward investment in food projects as well as tourism. We can adapt the lessons learned from Ireland, Singapore and Brazil in attracting inward investment and in exporting food – think locally act globally.

Consumers worldwide are increasingly focused on health and nutrition. In this regard, they are concerned about the widespread use of antibiotics in farm animals and the impact this may have on their wellbeing. How is OFIC addressing this?

Health and nutrition are core values for each of our operating companies. The use of antibiotics should be limited in all projects.

We will have stringent control over our bio-security at all our farms.

No one can enter without going through a rigorous process to avoid contamination. We will adopt all the necessary health and safety processes to ensure we optimise our production of clean, safe and nutritious food.

How important is it for local farmers to be involved in the retail, distribution and promotion of their produce?

Support from local farmers can be done through the cooperative movement in Oman. It is possible then to enter into contract growing with cooperatives that meet an agreed protocol. Once this is in place, volumes would increase to meet the needs of both parties. The benefits of our purchasing power can be passed to local farmers, which in turn would improve their profitability.

Agriculture has an image problem. For the majority of young people, agriculture isn’t “cool” or attractive. Most think of it as back-breaking labour, paying low wages and offering little room for career advancement. How does OFIC change those perceptions?

You are right. Today, we are living in an era where rapid urbanization has led to a decline in rural populations and for the first time in history the majority of the world’s population lives in cities. The UN’s World Health Organization predicts that “by 2030, 6 out of every 10 people will live in a city and by 2050, this proportion will increase to 7 out of 10 people” meaning that more young people than ever before are moving to cities and towns to find work, leaving few behind to work in rural areas.

Our projects will have state-of-the art technology and have best-in-class information surrounding the operations in each case. We need quality graduates in agriculture, science, business, ICT and finance.

These positions are long-term, challenging and highly rewarding.

Through our cooperation with local universities, Technical Colleges and The Research Council we see opportunities for applied research which supports postgraduates studying the food sector. OFIC’s projects are knowledge-driven and require the support of highly-trained employees who can help deliver increased food self-sufficiency for Oman.

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Encouraging urban farming is an important step toward building a more sustainable food system in Oman. It can also contribute to the Sultanate’s economic development by creating food-related jobs and keep more food system money within the local economy.

Seeds of Change

Today, more food is shipped than ever before, with most traveling an average of 2,400 - 4,000 kilometres from farm to plate. Not only does shipping add to pollution, the 7-10 days produce spends in transit results in spoilage waste and, as some evidence shows, decreased taste and nutrition.

Do you have an urban farm project, or know someone who does? If so, we would love to hear from you: ithraanews@ithraa.om

Approximately 54% of the world’s population now live in cities...

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As a response to these changes we are witnessing a renaissance in urban farming. Indeed, the Food and Agriculture Organization of the United Nations reports that 800 million people worldwide grow vegetables, fruits or raise animals in cities, producing what the Worldwatch Institute reports to be an astonishing 15 to 20% of the world’s food.

Urban farming has become a means to increase access to locally grown food and a way of reintroducing the public to the many aspects of food that we have lost as a culture. How food grows, what grows regionally and seasonally are all important lessons and make a better informed urban consumer.

By growing what we need near where we live, we decrease the food kilometers associated with long-distance transportation. We also get the freshest produce money can buy and we are encouraged to eat in season.

Here are 12 reasons to start growing your own in the concrete jungle.

Healthier foods means healthier lives and healthier communities

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Brings nature back to the city

Puts nutrition back on the table

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Fresher food lasts longer on shelves and in refrigerators, reducing waste

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Helps cities save money by recycling

... a number that is predicted to grow to 70% by 2050.

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Creative & strategic garden locations reduce urban “heat island” effects

Improves access to healthy food

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Community & school-based gardens promote citizen engagement

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Provides job training

Lowers your carbon footprint

Helps families save money

Preserve our cultural heritage

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Oneon-One

HH Sayyid Faisal Al Said Ithraa’s Director General of Investment Promotion

HH Sayyid Faisal Al Said Ithraa’s Director General of Investment Promotion Countries the world over are facing increasing competition to attract investment. How is Oman responding to this?

Oman is working relentlessly towards becoming an innovation-driven economy, powered by a highly-educated and ambitious workforce.

The foundation of this has already been created and is exemplified in the development of the Special Economic Zone Authority at Duqm, a project twice the size of Singapore; the expansion of our ports in Salalah and Sohar; and the continued enhancement of the Sultanate’s transport infrastructure, airports, free zones, technology and science parks, and industrial estates. All of this is building a competitive economy that is attractive to inward investors looking to leverage Oman’s strategic location and penetrate emerging markets in the Gulf, Asia and Africa.

In 2015 we partnered with Deloitte to develop a new plan to attract higher levels of investment and talent to Oman in order to capitalise on these sizeable investments and to build on Ithraa’s track record of attracting investment such as Vale’s US$1.25 billion Sohar industrial complex; Sohar Aluminium’s US$2.4 billion smelter; and Majid Al Futtaim Properties’ US$380 million Muscat retail space.

Attracting high-impact inward investment has become a priority for Oman and in common with other countries and cities around the world with similar ambitions, we have an attractive tax regime, sophisticated financial markets, implemented business-friendly policies and launched technology and science parks and business incubators – to strengthen our economy, attract talent, technology and know-how, and create employment opportunities.

But what really attracts international investors, entrepreneurs and talent who create economy-boosting companies? In order to answer this question Team Ithraa met with 120 representatives from Fortune 500 companies. Their responses highlighted: quality labour force; favourable government business regulation; access to a large customer base; and strong transport networks that connect cities regionally and internationally. Over a third mentioned access to talent

as a key factor in their decisions for where to set-up operations and live. Given the sultanate’s significant investment in education, training and infrastructure, we believe we are on the right track to attract the investment we are looking for.

However, to make the transition to higher productivity and higher levels of prosperity we fully recognize that further efforts are required to enhance Oman’s competitiveness. In this regard, we have strategic partners tackling this, including the recently-formed Riyada (Public Authority for the Development of Small & Medium Enterprises) that has been created to harness Oman’s entrepreneurial spirit; Al Raffd Fund, financed 118 industrial projects in various governorates of the sultanate worth $19.7m in 2015; Oman Rail, the 2,135km railway network that will help position Sohar, Duqm and Salalah as the key entry points to the growing GCC market; The Research Council which is funding ground-breaking scientific research in health, energy, education and ICT; The Public Establishment for Industrial Estates which has seen its volume of total investment reach US$12.7bn, an indication of Oman’s growing manufacturing sector; The Information Technology Authority which is developing a national communication infrastructure linking all government entities; and the Knowledge Oasis Muscat (KOM) based National Business Centre, the government’s newly created business incubator.

This significant momentum, driven by public as well as private investment, is helping us grow our ability to compete internationally and enhancing the long-term productive capacity of the Omani economy.

Economic diversification is a hot topic in Oman.

Could you share your thoughts on this?

Today, Omani non-oil exports can be found in 140 countries and in 2015 we exported US$8 billion worth of non-oil commodities. This is healthy and exciting. Indeed, it speaks volumes about the quality of the products made in Oman.

If I am to talk diversification and attracting high-impact investment, I would have to mention Vale - a Brazilian multinational metals and mining company who made an initial investment of US$1.25 billion in their Oman operations. They have generated more than 1,200 direct jobs and injected over US$2.5 million into local SME contracts which will lead to further job creation and national capacity building.

They have also invested heavily in training more than 200 of their employees all of whom are now qualified mining industry engineers, technicians and operators.

It is also important to look at what is happening around us. It is estimated that by 2025, 600 cities will generate nearly 65% of the world’s economic growth. But, the most revealing fact is that by 2025, cities in emerging economies will account for close to half of overall growth. One billion people will enter the global consuming class by 2025. They will have incomes high enough to be classified as significant consumers of goods and services, and 600 million of them will live in emerging markets on Oman’s doorstep.

These trends point to great opportunities for not just Omani firms but also the ports, airports, industrial estates and free zones the government is investing in. We are strategically placed and have the business base, track record, infrastructure, experience, talent, leadership and connectivity to help any business take their activities global.

What about helping Omani start-ups and small businesses succeed internationally?

Through experience, Team Ithraa has found that small Omani companies that are new to exporting often need help getting started.

Even companies that are aware of global opportunities often prefer operating within the confines of Oman’s market, where they have successfully grown their businesses.

We understand that small Omani companies require assistance expanding into foreign markets due to their own internal constraints and perceived trade barriers. Businesses have suggested that challenges with customs and compliance, distributors, intellectual property protection, financing, marketing, packaging and language barriers are some of the biggest barriers to becoming exporters.

In response to these challenges, Ithraa created the Trade Up seminar series which is designed to help small firms that are new to overseas trading take the plunge, as well as assist those already trading internationally to increase sales. Through the Trade Up series, we have tapped into the experiences of seasoned exporters to give businesses ideas and advice on how to avoid the main pitfalls and build a successful book of export business.

What are your thoughts on Oman’s youth and promoting entrepreneurship?

For the past 25 years, public policy makers have sought to increase the entrepreneurial capacity of young people. Initially, this was a response to the global youth unemployment of the early 1980s but more recently there has been a concern with regard bridging the gap between the world of work and education. In a response to this, Oman has seen a number of highly successful enterprise schemes designed to specifically help young people start and run their own businesses. Perhaps the best known international example is the UK’s Prince’s Trust.

On the domestic front, we have the National Business Centre, an incubator program based at KOM, Riyada, The Research Council, Sharakah, Injaz and the Entrepreneurs Oman Group - all helping promote entrepreneurship and the enterprise culture amongst the Sultanate’s youth. In this regard, I believe we have the necessary ingredients to take youth entrepreneurship on and up. Indeed, today’s youth has a significant interest in the start-up culture.

We carried out a survey of 2,000 young Omani people aged 15 – 24 and found that 82% want to be self-employed in the future.

Is there a particular sector you would like to see Oman’s youth involved in?

The circular economy, environmental initiatives focused on promoting innovation and entrepreneurship in anything from organic urban agriculture, renewable energy, waste management through to recycling all offer huge opportunities. We need start-ups that can respond to changing consumer demands - people are more environmental conscious today and they need catering for.

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And Finally...

Ithraa Scoops Prestigious International Investment Award Oman’s reputation as a leading international business location was recognized at the renowned Annual Investment Meeting (AIM) held 11 – 13 April at the Dubai International Convention and Exhibition Centre.

Launched in 2013 by the UAE Ministry of Economy, and held under the patronage of HH Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President, Prime Minister and Ruler of Dubai, the Annual Investment Meeting presents awards to the best investment promotion agencies (IPAs) from eight regions worldwide.

Recognized for excellence in attracting inward investment, a panel of international experts evaluated Ithraa’s work in attracting and helping establish Octal’s US$500 million greenfield plastics project on Salalah Free Zone.

The panel scrutinized the Ithraa-Octal case study using a strict set of criteria that included: size and type of inward investment; job creation; innovation and technology transfer; exports; import substitution; local linkages; sustainability; and eco-friendliness.

By receiving the award, Ithraa has demonstrated exceptional dedication to helping companies, like Octal, find a strong business base in Oman and export to markets worldwide.

Commenting on the AIM award, Ithraa’s Mr. Ali Al Balushi, Advisor, Planning & Follow-up said: “I am thrilled Ithraa has received this accolade as it recognizes the outstanding inward investment and export promotion work we do with our partners in government and the private sector.”

Team Ithraa celebrate inward investment honour

Ithraa’s success is based on its clear international strategy with its bespoke approach to different markets and sectors, crucially supported by a range of private and public sector partners. The award underscores Oman’s outstanding business offer and further enhances its global recognition as a great place to do business and as an investment destination.

Octal Chief Executive, Nicholas Barakat said: “Team Ithraa is attracting businesses from all over the world to base themselves here. The results of their work generates jobs and creates commercial opportunities for the people of Oman. The importance of Ithraa’s work cannot be overstated.

Winning a prestigious AIM award is a great honour and well deserved.”

Mr. Al Balushi concluded: “being shortlisted for an AIM award, even better winning one is proof to colleagues and clients that our work has been judged to be among the best in the world. It is a great morale booster for Ithraa and Oman’s business community.”

Ithraa’s Advisor enthused: “We are absolutely committed to supporting local and international businesses succeed and the AIM award is testament to our continued innovation to develop these relationships. Indeed, foreign capital is crucial for Oman’s future growth and we work hard to attract international investors.”

Talk to Us Tel: +968 24 62 33 80 Fax: +968 24 62 33 36 www.ithraa.om Ithraa, PO Box 25, Wadi Kabir 117, Sultanate of Oman.

The Public Authority for Investment Promotion & Export Development