30 May Interview with Nailesh Kanaksi Khimji, Director, Khimji Ramdas Group
For what reasons is Oman heavily investing in its logistics sector under the Vision 2040 initiative?
Vision 2040 has been presented to the entire country for investors and the population to understand the direction we are heading and ensure a collective effort. Oman’s unique identity is shaped by a fusion of different cultures, which makes it a welcoming country for global investors and people with an open mind towards religion, foods and customs. Throughout our history, Oman has had strong connections with Africa, Iran and India, with people of Indian, African, Iranian and Balochistan origin living here along with the original Omani tribes. We also have a strong trade history with the Far East. Today there is diverse representation in the government, with no group sidelined or treated as a minority. All are here to contribute to what is best for the country. We have recently reenergized this concept by ensuring Oman is well connected with its neighbors and the rest of the world through road, sea and air transportation. We have an incredible opportunity to make our mark on the world.
A major aspect of the Vision 2040 initiative is the importance of Oman’s strategic location next to the Arabian Sea with easy access to the Indian Ocean and the Suez Canal. Traditionally, the only spot for trade between Singapore and Europe is Jebel Ali port in the UAE. However, accessing the port requires entering the Strait of Hormuz, which adds an extra six days of transit if one wants to return to the Suez Canal. Trade is much faster through Oman, whether through Salalah, Duqm or Sohar ports. Additionally, the Arabian Sea enjoys a high amount of safety compared to the Arabian Gulf and the Red Sea, which are often on high alert. Many international players, including navies, come to Oman for relaxation. Given our safe waters, we have an excellent opportunity to promote international trade without risks. The government of Oman has been clear in directing investment in logistics and reviving sea trade to position Oman as a path between Asia and Europe.
Airports in Oman serve the two following primary purposes: providing easy access to economic free zones for industrial growth and promoting tourism. The location of our airports was chosen in relation to these two factors. Cargo movement primarily relies on the sea. However, Oman is working on developing train networks. Roads are already established. Recently, the borders with Saudi Arabia opened, providing a direct trucking route to the country. Previously, one would have to pass through the UAE to access the market. Our strategic geographic location allows Oman to serve as a gateway for its neighbors to the Arabian Sea.
We currently have a window of opportunity in that Oman mainly imports, with minimal exports. Cargo leaving Oman in containers is relatively inexpensive due to the global repositioning of containers, which costs shipowners money. They subsidize the cost of shipping empty containers out of Oman and back to their origin country and then ship full containers back into Oman. As they make money on bringing in cargo, they bear the cost of the movement of empty containers. As a result, they offer favorable rates for using them to export from Oman. However, this may change as Oman develops more industries to balance the import-export ratio. Oman would be very dependent on imports if it were not for our oil resources.
What makes Oman a prime market for investment in its tourism sector?
A second focus under the Vision 2040 initiative is tourism. Oman has a diverse geography with microclimates in places like Salalah, where there are monsoons even in the summer. We have a 1,000-mile coastline that encompasses beaches, fjords and mountains. Oman is an outdoor country. When asked what the difference between Dubai and Muscat is, my answer is simple. Dubai is suited for indoor people, whereas Oman is for outdoor people. If you like adventure, hiking, scuba diving and exploring caves, Oman is the place for you. We have a great deal of tourism potential, and we do not need to try very hard because our people are naturally hospitable, welcoming and multilingual due to our trade history. We are well spoken, humble and welcoming. In landlocked countries, people often live in walled cities and have a defensive mentality. In coastal countries like Oman, the mentality is different; people are welcoming. For example, our taxi drivers are also excellent tour guides. They will show you Oman through their eyes without asking additional questions. The country has a population of 2.5 million Omanis and 2.5 million expats. We have less than ten nationals per square kilometer and the country is very spread out. We have many small villages scattered across the country that are thriving, with people continuing to live, farm and preserve their old cultures and heritage.
What kind of incentives are in place that US investors can take advantage of when entering the Omani market?
Our trade with the US has historical significance. We were likely the first envoy from the Arab world to welcome George Washington when the United States was formed, and we are the only country in the GCC that has a free trade agreement (FTA) with the United States. Oman also has excellent infrastructure to support various industries. Interested investors should focus on export-oriented industries as our population is relatively small. Our FTA agreement with the United States means US firms wanting to set up in Oman are treated as Omanis. They do not need other permission to come and establish a company here and partners are not required. Trade between the United States and Oman is tax free due to the agreement; whatever you produce in the United States can be brought to Oman without any taxes and whatever you produce here can be sold to the United States and other Gulf countries without any taxes. We have trade alliances in the region, extending from the Arab world to the Indian Ocean Rim, which gives us a tremendous advantage in producing and selling from Oman. The population here is educated and tech savvy. We face challenges in exporting our youth to work abroad because they love their country. However, with education and open mindedness, it will take one generation to become global citizens.
What advantages do investors gain by setting up shop in Oman’s many growing industrial zones?
We have set up our factory in the Sohar special economic zone. As an American citizen, you can set up a company anywhere in Oman without needing a local sponsor. Free zones are designed for non-Omani individuals or entities who require a local sponsor and wish to fully own their businesses. The special economic zones are well equipped with infrastructure such as gas, electricity and access to roads to support industrial operations. One of Oman’s advantages is that the infrastructure is already in place before investors arrive, which makes building up operations cost effective. These economic zones are ready and conveniently located near ports with easy global access. All you need to do is invest.
How significant is Khimji Ramdas Group in Oman’s history as a trade nation?
Our ancestors from India made Oman their home between 150 and 200 years ago. Our company recently celebrated 150 years. I am part of the fifth generation of the family business, with the sixth generation already well entrenched in the company’s daily operations. Our trade began with bartering goods from Africa and India. Oman was considered part of East Africa; the sultan of Zanzibar and the sultan of Oman were brothers. Trade was simple between India and Oman even though they were on different continents. Our trade was based on trust and barter, and we used the wind to transport goods from one side to the other. The famous term trade winds originated from this relationship, blowing in one direction before the monsoons and in another direction after the monsoons with a three-month gap. My ancestors used to bring goods from India and barter them with goods found in Oman and Africa. We made our base in Oman because we wanted to avoid the three-month gap; being in Muscat saved us half the time. Oman was welcoming, and we made excellent friends here. Omanis are open-minded and understand other religions; for example, we are still Hindus. Our temples in Oman are even older than my family, dating back around 300 years. These were set up by people who were trading with Oman before us. Our ancestors used to buy dates from Oman. Oman had dates, dried limes and dried fish as exports. As vegetarians, we would not touch the dried fish and were left with dried limes and dates to trade with Oman. All dried limes were sold to Iran as it is an ingredient in their dishes. These two cultures are also deeply entwined because of this, and many people from Iran live here.
Similarly, India used to buy all of Oman’s date production as they were a necessary ingredient in chutneys and mouth fresheners. With Omani dates, one could barter for sugar, rice, spices from Africa, wood and other goods. The tribal leader of tribes in Oman, known as the sheik, would negotiate the price of dates from the crop. We would give them what they asked for and they would sell us next year’s crop. In a sense, we acted like a bank and built up strong levels of trust. At the time, Oman was expanding its empire all over Africa, Baluchistan and other areas, which often created unrest. In the olden days, we were trusted to negotiate and carry messages between the sultans and the sheiks without political motivation or agenda. Many treaties were signed with my grandfather as a witness; we are part of the country’s ancient history. Around 25 years ago, we changed our mindset from being a family-run company to a family-owned company. We have 100% non-family professional management handling all our clusters. Our generations come together on the family advisory board for strategic planning, including expansion, renovation, reintroduction or business renewal decisions.
How has Khimji Ramdas Group diversified over the years?
We are an old business. In the past, we used to bring whatever the country needed, starting with food commodities and expanding into building materials and luxury goods. We became adept at logistics, which became our fourth arm. We have a long trading history with US brands that we represent, such as Procter & Gamble, Philip Morris and Kellogg’s. Some of these relations go back three to five decades. When Procter & Gamble came to Oman searching for a partner to distribute their goods, they came to my grandfather’s office. At the time, there was no internet, and we had no idea who they were. They came to us with detergents for washing clothes and nappies and my grandfather said that we had no use for them as we hardly had water. They looked around the entire country but could not find another solid distributor. They came back to us and gave us goods with the promise they would take the products back if they did not sell. That is how our relationship began. Now, we represent around 500 global companies in Oman.
Due to our long-standing relationship with these brands, we have begun expanding regionally alongside them. For example, in India we have taken over Procter & Gamble and Kellogg’s distribution in Gujarat. In Saudi Arabia, we recently acquired Samsonite for distribution. We also have a travel arm in the UAE along with an online platform that sells travel packages to other travel agencies. We anticipate a significant boom in tourism in the next 10-15 years. We welcome this regional expansion because Oman is centrally located. It is a two- to three-hour flight to Bombay or Riyadh and a five-hour drive to Dubai. As a family business, we must ensure that the next generation has enough work and income to maintain the same quality of life that we are enjoying today. We do not want our business to slow down or stagnate; we aim for sustainable growth. We feel that we have reached a saturation point in Oman regarding business opportunities. Substantial growth will require further regional expansion.
Additionally, we recently invested in engineered flooring. We have a factory in Sohar that takes quartz crystals, turns them into a paste, adds dye to create desired colors, lays it on a mold and designs it to look like marble or other patterns. It is then baked and comes out stronger than granite. This 100% export-oriented business has gained popularity among interior designers in the United States and Europe as a sought-after product. This business has a lot of opportunity to grow as the quartz is locally available in Oman, India and the region.
What efforts does the company make to support the local community and foster economic development of citizens?
We have engaged in philanthropy for decades. In the past, the Omani way was to keep acts of charity discreet. Giving without expecting anything in return was considered noble, and it was a private matter between you and God. However, with social media there is a perception that large companies need to showcase their philanthropic efforts to gain recognition. While we do not seek attention, we decided to share information about our charitable initiatives so that people know what we are doing.
We have established key performance indicators for our corporate social responsibility efforts to ensure effective management and impact assessment. We are committed to maintaining a professional approach in these efforts, even though they may not generate profits. Instead of giving cash, we prefer to provide support as we are often unsure where money ends up or how it is used. As an unwritten family rule, Khimji Ramdas does not invest in profit-making ventures related to education and health. We view these areas as gifts that should be given freely without seeking financial returns. Every year during Ramadan we give away 10,000 cartons of necessities that people can use for the entire month to break their fast. This is done through the Ministry of Social Development as they already have a list of all charities. We also provided 10,000 school bags for needy children, including orphans and low-income families. The bags have the colors of the Omani flag and are from American Tourister. We started this program seven years ago.
Additionally, we are establishing a foundation. When it is complete, we plan to build hospitals and schools. While these institutions may generate revenue, the funds will be used for further corporate social responsibility activities. We allocate a percentage of our resources each year. We focus on specific wilayats – which are similar to states – to ensure effective and targeted impact. We have around 63 to 64 wilayats, each with 20 to 30 schools and three to four hospitals. We also support women empowerment programs in these wilayats. We choose different wilayats per year to ensure we have enough funding as covering them all at once would have a negligible impact. We focus on wilayats with no businesses where people work in different wilayats to earn income. Of course, we do not want to take 64 years to cover all our target areas. Instead, we hope that international players and corporations do their bit. We follow a structured approach and connect with the Ministry of Social Development to align with their plans to not duplicate efforts.