Khazaen Economic City Factory Setup: Steps & Mistakes to Avoid

Khazaen Economic City in Barka is a strong location for light and medium manufacturing that sells into Muscat, the Batinah coast and the GCC by road. The investors who lose money there usually lose it on sequence, not on the site: they sign for land before the company and activity are approved, assume utilities are ready, or plan staff without Omanisation and visa lead times. The safe order is company, then plot, then licence and permits, then building, hiring and production.

This guide is for foreign manufacturers, SMEs moving production and groups adding a GCC plant. It covers whether Khazaen fits your supply chain, the setup steps, the 2026 incentives and six mistakes we see most often.

What is Khazaen Economic City?

• Legal status: Royal Decree 44/2023 made Khazaen an economic city supervised by OPAZ and created two free zones inside it: one for light and medium industry and logistics, and one for business and trade.
• Who runs it: Khazaen Economic City LLC is the developer. Oman Logistics Company, part of Asyad Group, operates the city and both free zones.
• Size and location: about 52 million m² in Barka, South Al Batinah, on the expressway between Muscat and Sohar. Muscat airport is about 30 minutes away and Sohar Port about 2 hours.
• Customs on site: the Khazaen dry port opened in December 2021 on 100,000 m², with a capacity of 70,000 containers a year and customs clearance through the Bayan system.
• Facilities: a logistics and industrial park with pre-built units, a Food City with the central fruit and vegetable market, a truck rest area and labour villages (Khazaen business solutions).
• Momentum: total investment passed RO 800 million by October 2025. In the first half of 2025, 11 of the 19 new agreements were manufacturing projects, alongside pharma and food investments (Oman Observer).

For the free-zone side specifically, see our Khazaen Free Zone guide and the Khazaen Economic City zone page.

Mistake 1: Choosing Khazaen without testing your supply chain

Write down where your raw materials come from and where your finished goods go, then cost the route through each candidate site using real freight quotes.

Rule of thumb: pick Khazaen for domestic and GCC distribution and light-to-medium industry. Pick a port zone if most of your output leaves by container ship. Our Duqm vs Sohar vs Salalah comparison covers the port zones in detail.

How do you set up a factory in Khazaen Economic City? (step by step)

1. Confirm the zone and regime. Ask Khazaen whether your plot or unit is inside one of the two free zones or in the wider economic city. This decides your licensing route, customs treatment and tax position.
2. Send a project profile. Include your products, annual capacity, plot or unit size, power, water and gas demand, headcount and investment value. Keep the figures realistic, because they follow you into utility allocation and the environmental review.
3. Register the company. Most foreign manufacturers use an LLC or, for a single shareholder, an SPC. Register on the Oman Business Platform, selecting Khazaen Free Zone where it applies, and choose the exact industrial activity code.
4. Sign a preliminary agreement, then the lease. Under Khazaen's Project Area Rules, you must submit your investment application, company registration, licences and financial statements within 30 days of signing the tenure document. Do not commit to a final lease before the project is approved.
5. Get the environmental permit. OPAZ uses three categories: Category 3 (light) meets general conditions, Category 2 (medium) needs an Environmental Management Plan, and Category 1 (heavy) needs a full ESIA with final OPAZ approval. Khazaen advertises a 50% discount on environmental approvals.
6. Get design and building approvals. You need a Detailed Planning Approval for the plot design, then a Construction Permit. Fire protection must be approved by the Civil Defence and Ambulance Authority before operation.
7. Get the industrial activity licence. In the free zones this comes from the zone operator through OPAZ's licensing system. The licence must match both your commercial registration activity and the permitted uses for your plot.
8. Connect utilities, hire, commission and start trial production. Electricity is supplied through APSR and Mazoon, wastewater through Haya Water and solid waste through be'ah, all named in Khazaen's rules.

None of this has to be slow if you run the work in parallel. While the commercial registration is processing, have your engineer prepare layouts, your environmental consultant screen the process and HR plan the headcount. Each application still goes in order.

Mistake 2: Signing for land before your company and activity are approved

When a good plot looks scarce, investors are tempted to pay a deposit first. If the commercial registration then has the wrong activity code, for example a trading code instead of a manufacturing one, the plot application, licence and environmental file all wait for an amendment while rent may already be running. Ask in writing how rent is treated during the design and construction period, and which activity categories the plot allows. Processes involving chemicals, heat, dust or heavy loads are not allowed on every plot.

Mistake 3: Assuming power, gas and water are ready on your plot

Khazaen says developed land comes with water, electricity, telecoms and road access. "Connected" does not mean "enough for your production line". Before your engineers freeze the plant design, get written answers to these questions:

• What electricity load is guaranteed for this plot, and when will it be energised?
• What daily water volume is allocated? Can process wastewater go to the network, or must it be treated on site?
• Is natural gas available, at what volume and pressure, and who approves the allocation?
• What are the current connection fees and timelines?

Three cost lines most often break budgets: utility connection charges, on-site effluent treatment, and fire-fighting systems (pumps, sprinklers, water storage). If your process depends on gas for furnaces or kilns, confirm the allocation before ordering equipment, and cost an electric alternative.

Mistake 4: Planning staff without Omanisation and visa lead times

Khazaen's incentives page allows a foreign workforce of up to 65%, which matches the up to 35% Omanisation shown in the OPAZ FAQ. That is higher than in some other zones. Plan both sides together:

• Expatriate staff: each foreign worker needs a Ministry of Labour permit and an ROP visa. Under Ministerial Decision 602/2025, permit fees run from OMR 201 to 301 per worker for 24 months. Fees drop by 30% if you meet your Omanisation rate and double if you do not. Our work permit guide explains the process.
• Commissioning engineers: apply for their permits as soon as your licence allows, months before the machinery lands. Lines that sit idle because the supplier's technicians have no visa are a common and expensive failure.
• Omani operators and supervisors: hire them early enough to shadow the commissioning team, with a written training plan. Skills transfer is what keeps your Omanisation ratio stable.
• Housing: Khazaen's labour villages can cut accommodation costs and commuting time for shift workers.
• Owners: shareholders usually hold investor residency through the company. Larger investors can consider the Oman Golden Visa.

Mistake 5: Leaving incentives and trade deals unclaimed

Most incentives have to be applied for, and some depend on how your licence and investment are documented.

Khazaen's website also mentions a five-year profit tax exemption for industrial projects. That wording predates the 2025 zones law, so ask which exemption applies to your plot today.

Run your business case twice, once with the incentives and once without. Commit capital only if the plain version still works. Large multinational groups should also check Oman's 15% domestic minimum top-up tax. Ask your tax adviser how it interacts with a zone exemption.

Mistake 6: Building a budget from old figures

Khazaen does not publish a public price list for land or units. Older blogs and package quotes are often out of date, so ask for a written quotation for your specific plot or unit. A factory budget normally includes:

• Commercial registration, Chamber of Commerce membership and zone licence fees
• Land lease or unit rent per m² per year, plus service charges
• Design, construction or fit-out
• Utility connections and any on-site treatment
• Environmental studies (an EMP or ESIA for Category 2 and 1 projects)
• Fire protection systems and Civil Defence approval
• Work permits, visas, medicals and Omani payroll
• Accounting, audit and annual renewals

Khazaen has run promotional rent offers in the past. Ask what is available now, but do not build a payback calculation around a discount that may not be repeated.

Ready-built unit or your own plant?

Your Khazaen factory checklist before you commit capital

• You have compared Khazaen with Sohar, a Madayn city and one other zone using real landed costs.
• Khazaen has confirmed in writing whether the plot is in a free zone, and which uses are permitted.
• The company is registered with the correct industrial activity before any lease or deposit.
• Electricity load, water allocation, gas (if needed) and connection dates are confirmed in writing.
• Your environmental category is known, and the EMP or ESIA is underway before drawings are final.
• Your Omanisation rate is confirmed and permits for commissioning staff have been applied for.
• Every incentive is filed in the order your timeline needs it: tax and customs status before equipment ships, residency before key staff relocate, origin paperwork before the first export.

For more on the zones, see our free zones hub. Oman Register handles company registration, zone licensing, work permits and investor residency for manufacturers setting up in Khazaen and other zones.