Less than an hour’s drive from Dubai, the emirate of Ras Al Khaimah (RAK) is much less well known than its near neighbour. But, given Dubai’s much-reported woes, that is not something that unduly troubles RAK. Indeed, Dubai’s recent economic turmoil has underlined the extent to which RAK needs to forge its own destiny, albeit within the framework of the United Arab Emirates as a whole.

Small, but possessing a rugged and varied terrain (65 kilometres of coastline, as well as mountains, red desert, dunes and agricultural land), RAK is not endowed with as many natural resources as some of the other emirates, nor has it made the biggest splash with grandiose building projects. But it is doing a good job of attracting FDI and striving hard to develop and implement a long-term economic and industrial strategy that will compensate for its scarcity of oil wealth and ride out the booms and busts.

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Late mover

RAK was the last of the seven emirates to join the UAE, doing so in 1972. Outsiders are often unclear about the relationship between the individual emirates and the federal government; in short, the creation of the UAE (initiated and orchestrated in large part by its first president, Sheikh Zayed bin Sultan Al Nahyan) conferred collective security on each of its individual parts. Economically, it has allowed the less well-endowed emirates to benefit from Abu Dhabi’s tremendous oil wealth, which underwrites basic needs, including education and health.

RAK’s physical terrain, especially inland, is rugged and mountainous, and once had a reputation as a hideout for bandits. But it has also been known as a trading city for centuries – its strategic location on the Straits of Hormuz was as valuable an asset in the days of the dhows (which are still built in the old shipyards of RAK) as it is today. But even in the space of a decade, the emirate has changed almost beyond recognition; seven years ago, the camels had the desert to themselves. They still would, if the country had not made a concerted effort to build something out of nothing.

RAK is ruled by Sheikh Saqr bin Mohammad Al Qasimi, whom the Emiratis like to point out is the world’s second longestserving monarch, after King Bhumibol of Thailand. However, executive power is in the hands of the ruler’s son, the urbane, commercially minded and US-educated Sheikh Saud

For RAK, the strategy was always to make sure that the emirate stood out – not through the construction of headline projects so much as by creating and promoting a businessfriendly environment in which investors would feel they can thrive. Certainly, the structure of the UAE allows for that – and indeed encourages each emirate to develop its own commercial identity and character.

While a great deal of legislation is undertaken at federal level within the institutions of the UAE, RAK possesses the decision-making autonomy it needs to pursue its own destiny and is responsible for drafting its own economic laws and attracting investment.

Property development

RAK played at the same building-development table as the other emirates when the property boom was at its height, but not on anything like the same scale as Dubai; the emphasis in RAK was not on creating eye-catching architectural statements so much as building an environment in which expatriate workers would feel comfortable enough to live and work. This has meant transforming the coast from a wildlife-rich wetland to a new kind of habitat, comprising condominiums and golf courses, although RAK insists that proximity to nature remains a key selling point. The emirate has also invested to create the infrastructure necessary for its industrial development.

Work in progress A drive into town quickly reveals that RAK is far from being a finished project. In places it straggles somewhat, with seemingly ad hoc ribbon developments of low-rise businesses: bakeries jostling with beauty parlours and bookshops. There are, of course, also grander malls, air-conditioned and offering every possible accoutrement of modern living.

In the industrial zones, camels wander at will, seemingly oblivious (as only camels can seem) to the massive changes taking place around them as out of the sands rise factories, warehouses and industrial units. But if seven years ago the lift was at ground level, it is rising fast – creating opportunity as it does so. And change is apparent not only in the emirate’s physical appearance. If the industrial economy is to develop, so must the information and communication technologies infrastructure, logistics and auxiliary industries, including financial services such as banking and insurance.

We achieved in days [when investing in RAK] what would have taken months back home because of red tape and form-filling.

Islamic finance is a particularly thriving part of that, not only in RAK but across the UAE. RAK has its own bank – Rakbank – in which the government has a majority stake and which has some 340,000 customers (and assets worth nearly $4bn); and in total RAK hosts 29 UAE and six foreign banks.

RAK is also well positioned geographically for companies exporting throughout the Middle East and Gulf region, possessing the largest port in the UAE, Saqr Port, and its own international airport, mostly devoted to freight.

“For us,” the general manager of one European subsidiary tells fDi Magazine, “there was no single factor contributing to our decision [to locate here] – it was a combination of things: cheap electricity, flexibility regarding labour and strategic position in the GCC [Gulf Co-operation Council]. But, if anything [was most important], it was the assistance that RAKIA [the RAK Investment Authority] gave us when we were starting out. We achieved in days what would have taken months back home because of red tape and form-filling.”

On the human front, RAK might once have been regarded as a hardship posting but it no longer is: the usual components of expatriate life are all in place (including golf) and, while Dubai might have all the glitz, RAK is seen as ‘a nice place to be’. And, says the European manager, both Dubai and Abu Dhabi are an easy drive away when a visit becomes necessary, desirable or both.

Indeed, RAK is not only keen to attract the business visitor; tourism is also regarded as an important part of the mix. Hotel accommodation is coming on apace: Hilton has two establishments, one in the city, the other a spa and beach resort. Close to the industrial parks are hotels created with business travellers specifically in mind, while a seven-star hotel is scheduled for completion and opening this year.

A different experience

While it is apparent that RAK is borrowing some features from the Dubai model (in style if not in scale), the visitor experience is guaranteed to be quite different.

RAK regards its natural heritage, particularly inland, as an enormous asset. Where, for example, Dubai has an indoor ski slope, RAK possesses the splendour of the Hajjar mountains – although newcomers to the emirate will notice ‘Iceland’, a vast waterpark very visible from the Emirates Road, which promises to become invaluable, particularly for families and during the summer months. RAK already has facilities both for short- and long-term guests, many of whom are voting with their feet and buying into residential developments (largely villa accommodation close to the seafront, nodding at Arab vernacular architecture in style), not as speculators but as residents.

In all, RAK is rapidly becoming self-contained. The leadership is entirely aware that development needs to go beyond building malls and industrial parks. It has taken pains to ensure the provision of state-of-the-art healthcare services (three public hospitals with a total of 490 beds, but also specialist hospitals, including a secondary care hospital managed by Sonnenhof Swiss Health; the Sheikh Khalifa Specialist Hospital; and the Obaidallah Geriatric Hospital).

Education – at all levels – has also become a priority. RAK now educates 47,000 students in 100 schools and boasts further education facilities including universities offering local, UK, US and Indian curricula and a medical school, all of which the leadership regards as essential to the intellectual growth of the emirate.

Lean and clean

 While not possessing large oil or gas deposits, RAK is not without economic wealth. In fact, RAK is rich in valuable limestone deposits, which it exports as cement and building materials. Arguably, the absence of hydrocarbons helps drive the emirate towards sustainable policies, which have, if anything, been reaffirmed as the most appropriate by the economic crash of 2008 and 2009; this convinced RAK’s economic planners that it is taking the most prudent course of action by focusing on real industrial growth.

This industrial focus is not unique to RAK: UAE policy over the past two decades has been to reduce reliance on oil and to increase investment. Nowhere in the region was immune from the financial shocks of the past two years but, unlike Dubai, RAK did not borrow heavily in the boom times and thus has registered slowdown, not bust. The trick for RAK lies in diversification – not least, encouraging investment from a wide range of industries.

Is the strategy working? The steep ascent of RAK’s economy since Sheikh Saud’s appointment as deputy ruler is underlined by all the key indicators. GDP in 2004 was Dh393bn ($107bn); by 2008 (a peak year) it had risen to Dh962bn before dipping to Dh839bn in 2009.

Also, between 2004 and 2008 goods and services exports rose from 88.6% of GDP to 101.8%. Even more promising is the number of new companies, many of them from Europe and south Asia, registering in RAK to set up operations in its industrial parks.

Of course, the economic future is not certain anywhere in the world but RAK believes that, having unpinned its destiny from oil and other high-risk sectors, its prospects for growth are as strong as or stronger than comparable locations in the Gulf region. Concerns still linger, of course, over Dubai’s macroeconomy; while two years ago there might have been a temptation for a smaller emirate to let its economy rely on providing services and raw materials to its booming near neighbour, now RAK is happy to synergise with Dubai’s future where appropriate but to continue to plough its own furrow in general.

Inevitably, some investors will almost instinctively look askance at any destination in the Middle East on stability and security grounds, but the UAE has shown remarkable political resilience in what has been a difficult decade, demonstrating that business is its business. RAK is located a stone’s throw from both Iran and Iraq; intensification of US and EU sanctions has raised suspicions in some quarters that UAE facilities such as ports and business parks are being used as conduits for illicit business with Iran. RAK does do business with Iran – (for example, its flagship company, RAK Ceramics, has a factory in the Islamic Republic); however, its leadership firmly insists that it conforms absolutely with UAE laws concerning respect for sanctions.

RAK is seven years into its programme to up the pace of development and these are still early days. The emirate is not yet the finished article and in some respects is still forging its identity, which will turn ultimately on its success in attracting long-term investors willing to share some of the risks of nation building, but whose efforts will be valued and rewarded by a forward-looking and commercially minded government.

FACT FILE

Ras Al Khamah
 

Population: 241,000
 Area: 1683 sq km
 Coastline: 65 km
 GDP (2009): $228bn
 Time zone: GmT +4 hours

This report was sponsored by RAKIA. Reporting and editing were carried out independently by fDi Magazine