When it set out to woo investors, the Ras Al Khaimah Investment Authority (RAKIA) was not bound by any preexisting notions of the kinds of industry it wanted. What was important was to find companies that were willing to take an initial risk as pioneers in the industrial development of Ras Al Khaimah (RAK).
Investors who wanted to take a long-term view of prospects in the Gulf region and the wider Middle East were intrigued by the RAK offering – low or no tax, cheap industrial land and the services of an investment agency that had not only the blessing of, but enjoyed the active involvement of, the emirate’s Crown Prince, a man with a clear understanding of the benefits that business could bring to the region.
However, there are always potential drawbacks to being a pioneer, and many of the accoutrements of business and expat life – leisure facilities, suitable housing, business infrastructure – were only just beginning to make themselves apparent in RAK. But in 2010, all concerned have learnt lessons and the emirate is taking shape.
The following are a few of the companies that caught the crest of the wave of RAK’s push toward industrial development.
It is perhaps an irony that one factor that did not have a bearing on Arc’s decision to invest in RAK was the prevalence of sand. The familyowned French company is a glassware producer, with a $1bn annual turnover worldwide and employing some 12,000.
“While there is a lot of sand in Ras Al Khaimah, it isn’t the right kind. People sometimes think that that’s why we are here but in fact we import our sand from Egypt and Jordan,” says Guillaume Coquempot, Arc’s manager in RAK.
Arc made its investment in RAK in 2004 when the free zone was at an early stage and RAK was keen to bring in international-standard businesses. RAKIA is in fact an investor in what is essentially a joint venture between Arc and the government of RAK. Mr Coquempot says the hands-on involvement and interest of the investment agency definitely contributed to the company’s decision to set up shop in RAK – but there are others.
He says: “For the glassware industry, a key cost is also the price of energy. This is a very energyintensive business and that electricity is so cheap in RAK was very important, as was the price of labour. Being able to recruit our own workers definitely kept our costs down.”
Just as important, he says, was the assistance the company received with form-filling and liaison with the various government departments at the outset. “All the admin issues, such as permitting and visas, were cleared very easily and what could have taken months elsewhere – in France, for example – was a matter of days in RAK. We saved about three or four months by putting our operations here.”
From RAK, the company exports not only to the rest of the United Arab Emirates but “the entire Middle East, from Egypt to Pakistan.” Markets now being eyed by Arc include sub-Saharan Africa and south Asia.
Arc’s activities have doubled since they began in earnest in 2005. An operation that started out with 800 workers currently employs more than 1300 and is busy doubling capacity, with the aim of employing 2200 by the end of next year. The company’s total investment over six years, Mr Coquempot estimates, is in the region of $120m.
“We are not the biggest investor in Ras Al Khaimah but we like to think that we are one of the more important ones. We have a good relationship with RAKIA and we are very much here for the long term. To be honest, there’s no such thing as a short-term investment in the glassware industry – it’s a minimum eight- to 10-year programme.”
Mr Coquempot says that at the time the company was approached by RAKIA it had been looking for the right location to establish a Middle Eastern centre of activities.
Ultimately, the region delivered not only on cost but because, conscious of the benefits Arc could bring the emirate, RAK worked hard to deliver a straightforward and engaged working environment.
Zamil Steel is a another family owned business, albeit from Saudi Arabia as opposed to Europe. Like Arc, Zamil has a big play on the world stage and describes itself as the largest manufacturer of preengineered steel buildings in Asia, Africa, the Middle East and Europe.
Zamil’s operations are also located in the RAK industrial zone with offices, plant and workers’ accommodation blocks all on a single site, fenced in for security and largely surrounded by desert.
Plant manager Hassan Abu Rayash states that the RAK plant, established just three years ago, is one of its largest outside Saudi Arabia (it also has factories in India, Egypt and Vietnam).
He says: “The decision to set up in RAK came down to a combination of factors – the encouragement we got to make the investment, the regulatory framework and the tax status of the free zones. But the location also means we can export to Iran, Africa and Asia, and there is road access to the rest of the Gulf Co-operation Council.
“We like to serve the whole world. But because steel is a longterm investment, we need political stability and good logistics.”
Zamil does not have a steel mill but buys most of the steel it uses from the local market, with heavy steel imported from Russia, Europe and Turkey.
Original investment in the RAK plant was in the region of $50m. It was conceived to have a capacity of 40,000 metric tonnes a year of preengineered steel buildings, open web steel joists and floor decking. A second phase of construction equipped it with the capacity for producing some 12,000 metric tonnes of steel lattice towers a year.
The real dfferentiator [In Ras Al KhaImah] was the laca of red tape. This is a really lean and clean operation and setting up was much easier here than it could have been. Of course, a 0% tax rate was also welcome
In the past 12 months, Zamil has seen the advantages of being able to keep costs down, with the slowdown in the construction industry making 2009 a difficult year for the company after a vintage 2008.
Nonetheless, says Mr Rayash, in RAK the plant was able to continue without laying off any of its 500 employees. Like Mr Coquempot, Mr Rayash appreciates the cost-effective labour regime in place in RAK. The workers on the plant are the company’s “greatest asset”, he says, and one in which it is worth investing.
He insists that worker welfare, for both administrative and manual employees, is a prime consideration for the business and, while giving fDi Magazine a guided tour of the Zamil kitchens, canteens and living quarters, points out that an ethnically mixed workforce (south Asian but also Filipino) means the company must provide a variety of dietary options – down to the most appropriate kind of rice grain. Much of this is outsourced to local companies and prepared on company premises.
The Indian industrial company JBF has been producing in RAK for about the same length of time as Zamil. “We were looking for a Middle East project, having identified the region as a potential hub for global exports. We had looked at Kuwait as a possible location but then RAKIA made a proposal first. That was three years ago,” says JBF RAK’s president, Rohit Maindwal.
JBF’s produces the raw materials for packaging products and it describes itself as a world-scale producer of PET bottle-grade resins and films in various qualities, including packaging, optical, electrical and industrial-grade films. Its RAK plant, which employs some 600 people, has a capacity of 12,000 tonnes per day. Clients include big-name food retailers Pepsi-Co and Danone.
For JBF, the deciding factor was less the availability of power than the administrative ease of setting up operations in RAK – once again, a tribute to RAKIA’s active involvement on behalf of the companies it attracts and to its having succeeded in creating the one-stop shop that investors often find themselves sorely lacking.
“The real differentiator was the lack of red tape. This is a really lean and clean operation and setting up was much easier here than it could have been. Of course, a 0% tax rate was also welcome.”
To date, JBF has invested $250m into its operations in RAK but expects to increase its investment by a further $50m by the end of 2010, signalling both the company’s satisfaction with its original investment decision and its long-term view of the region as a market.
“Our focus is on the Middle East, the Arab League and north Africa,” says Mr Maindwal, “but we are also looking to increase our presence in Iran and Iraq where we see big growth prospects.”