If Ras Al Khaimah (RAK) is less well known than other emirates – namely Dubai and Abu Dhabi – this belies its recent achievements and the fact that it has just been named a Middle East City of the Future by fDi magazine. Diminutive in terms of area, RAK sits to the north of Dubai, a one-hour drive along the Emirates Road (depending on the extent of the traffic sprawl around Dubai and its immediate neighbour Sharjah) and is abutted in its mountainous east by the Sultanate of Oman.

Very much steering the growth of RAK is its crown prince and deputy-ruler, Sheikh Saud Bin Saqr Al Qasimi, son of Sheikh Saqr Bin Mohammad Al Qasimi, who celebrated his 60th anniversary as ruler in 2008. The Crown Prince, who studied at Michigan University and lived in San Diego for several years, takes a keen interest in foreign affairs and, while he has grand ambitions for RAK, is realistic about what is achievable and how.

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Lacking significant reserves of oil or gas, RAK has striven to develop the natural resources at its disposal, including voluminous lime deposits, which as a vital component of cement have played a key role in the real estate development of both RAK and Dubai.

But the kingdom is anxious not to become dependent on a single resource and is – literally – breaking new ground in its bid to become a major constituent part in the growth of the United Arab Emirates, and to attract the right calibre of expatriate managers and labour able to assist in the endeavour.

Eye for business

In his palace in Ras Al Khaimah, Sheikh Saud told fDi that he believes it is important for the country to be governed along sound business lines – and not to become an impediment to its own growth.

Certainly, the country is not displaying any conservatism on this front. In five years’ time, a glance at a present day map of RAK will prove woefully inadequate. Almost all of the emirate’s 65 kilometres of coastline are – or already have been – rebuilt, and what was once coastal marshland is rapidly being reclaimed and transformed into lifestyle-centric facilities for residents and recreational visitors.

No competition

One expatriate involved in the development of RAK says that it is important to understand the role the emirate plays in the larger context of the UAE. “RAK is not a competitor to, for example, Dubai. Nor is it a dormitory or satellite town for Dubai – it is too far away to serve that role, which in any case is served by Sharjah. But on the other hand it is dependent on Dubai to a degree. We can provide a home for businesses which wish to establish themselves in the Gulf but would simply be priced out of Dubai by high costs. In that sense there is a complementarily [relationship] between the two.”

In addition to the relaxed business regime created by the team at Ras Al Khaimah Investment Authority (RAKIA), he points to the lifestyle benefits, ease of transport within the emirate and vibrant expatriate community as major draws for businesses, and those running them. “I am inundated with CVs of professionals from Europe, South Africa, Australia and elsewhere wanting to live and work in RAK,” says one chief executive.

As with the other states of the UAE, one of the greatest attractions of RAK is its political stability. The seven emirates decided, in 1996, to create a permanent constitution with Abu Dhabi its capital, and Sheikh Khalifa Bin Zayed Al Nahayan, president and ruler of the emirates since 2004. In the emirates as a whole, federal legislation is created by a federal cabinet consisting of a council of ministers headed by the prime minister, and assisted by the Federal National Council (FNC) – a second chamber consisting of some 40 members drawn from across the emirates.

Driving development

While each emirate possesses its own local government institutions, each of which is able to pass local legislation, these can be overridden by federal law. The local ruler of RAK is Sheikh Saqr but much of the drive and enthusiasm for the emirate’s development has been provided by the deputy-ruler, Sheikh Saud.

Certainly, the crown prince has played a guiding hand in establishing a business-like regime for investment, and RAKIA lists a number of facilities available to investors as signs of its commitment on that front. Company registration is quick and straightforward, and government agencies and departments are helpful in providing all requisite licences for investors’ operations. Construction permits are generally available within one week of application. There is no tax on either corporate profits or personal income; no restrictions on the repatriation of capital; workforces can be recruited freely; raw materials can be imported free of duty for manufacturing and there is a 5% cap on customs duty for most imported goods – while certain other items are exempted.

Flush figures

In 2005, (the latest figures available) RAK’s GDP was estimated at AED9.24bn ($2.52bn) with (non-oil sector) growth in that period of 18.3%. Since that time, foreign trade has increased by some 100%, with the total trade worth AED10.38bn in 2006 – imports up to AED4.28bn, exports at AED3.65bn, and the value of re-exports at AED2.45bn.

Oil output

By the standards of the UAE, RAK’s oil output and reserves are almost insignificant – its reserves representing only 0.1% of the emirates’ combined total of some 98 billion barrels – and 0.6% of the UAE’s estimated 212,000 billion cubic feet of natural gas. It does manage to produce some 500 barrels a day from its Saleh field, the only significant hydrocarbon structure, and in recent months there has been something of a flurry of exploration activity.

But the government of RAK knows that it has to play to its strengths in order to maintain the speed of economic development. Prime investment opportunities identified by RAKIA include the industrial and manufacturing sector, warehousing, transport and distribution, tourism, real estate and construction, mining and quarrying, maritime services and industries, and general commerce.

On the industrial front, RAK plants manufacture a wide range of products – among them DVDs, steel, aluminium, glass and yachts – and the emirate is increasingly involved in the manufacture, assemblage and maintenance of oil-field drilling rig equipment as well as tanks and barges used in oil-field exploration.

Companies and activities representative of industry in RAK include the Indian car manufacturer Ashok Leyland, which has a bus manufacturing plant in the industrial zone. Also Indian – but with a very different product – is Dabur India, a manufacturer of Ayurvedic items including hair oil and other cosmetic products. Falcon Technologies produces DVD-Rs and CD-Rs, and the Austrian company Franke has a plant in RAK producing washing systems.

Limestone wealth

Out of these, perhaps RAK’s best-known industry is non-metal minerals, largely on the back of the emirate’s voluminous limestone reserves in the Hajar mountains, the largest in the UAE. These reserves, along with iron, copper and chromium, have provided valuable resources to the construction and other industries throughout the Gulf and beyond for several decades. In the UAE there are 13 cement companies – 12 producing Portland cement – with combined aggregate clinker capacities of 9.04 million tonnes a year, and a grinding capacity of 14.68 metric tonnes per year. RAK is home to four of those Portland cement companies, which are responsible for half of the total produce in the UAE. RAK also possesses the only white cement factory in the UAE.

Economic building blocks

Union Cement, which started production way back in 1971, is the oldest and largest of the plants, producing three million tonnes of cement a year. Gulf Cement produces two million tonnes, and RAK Cement, which produces a not insubstantial one million tonnes a year, is soon to start the production of fly ash cement – a favourite with builders on account of its versatility and the ease with which it can be vertically transported. Pioneer Cement Industries, a one-million-tonne-capacity plant and joint-venture between RAKIA and the Indian company Penna Cement Industries, was established in RAK’s Al Ghail Industrial Area in a record time of 16 months.

Therefore, given both the scale of its limestone deposits and the building boom across the region, it is no surprise that RAK’s glass and cement industry has also been growing. RAK Ceramics is the standard bearer for the quality of RAK entrepreneurship, boasting sales of some $400m a year, and exporting ceramic tiles and sanitaryware to 135 countries. With five plants in the emirate itself, producing a total of of 100,000 square metres (sq m) a day, RAK Ceramics has exported its expertise and now has production facilities in Sudan, Bangladesh and India.

Glass manufacturing is another industrial mainstay – and RAKIA has been extremely successful in attracting international-calibre glass companies to establish themselves in the RAKIA industrial zone. Household name Arc International is one of companies that has been drawn to RAK – and has established a factory producing its Luminarc tableware for supply to the Middle East, the Indian subcontinent and south-east Asia. Joining it is US-based Guardian, a joint-venture between the National Company for Glass Industries and the Al Zamil Group, which is one of the world’s major producers of fabricated glass and float glass. Guardian RAK invested $115m in RAK, employing 300 people and producing 700 tonnes of glass each day.

Another glass plant, RAK Ghani Glass, is a $22m joint-venture between RAKIA, the JS Group and Ghani Glass. When fully operational it hopes to be producing 45,000 tonnes of lightweight pharmaceutical-grade bottles for export to the Middle East and east Asia.

Steel strength

Steel manufacturing has also taken root in the industrial zone. Companies setting up in this sector include Japan’s Mitsui, which is establishing a steel rolling mill, Hanmaek Heavy Industries of South Korea, Zamil Steel from Saudi Arabia, Kirby Building Systems of Kuwait and Amana Contracting and Steel Buildings, which has a strong track record of designing, building and commissioning buildings throughout the region.

Yet increasingly, manufacturing of chemicals – including pharmaceuticals – has played a role in RAK’s economic development. RAK’s pharmaceuticals industry dates back 30 years and the emirate is home to the Gulf Pharmaceutical Industries – a regional industry leader which exports to other countries. Julphar runs seven plants – including a solid form plant, sterile antibiotics plant, oral penicillin plant, oral cephalosporin plant, an off-packaging plant, a liquid dosage form plant and a biotech production facility. The company has expansion plans and expects total sales of $612m over a period of five years and is well placed to take advantage of a market which, in the Middle East alone, is worth $8bn a year.

Into the free zones

Almost all of the foreign direct investors establishing a presence in RAK are taking advantage of its free zones. RAKIA allows foreign investors the opportunity of establishing a 100% foreign ownership in the free zones – and issues companies with licences to operate with local or Gulf Co-operation Council (GCC) partners – although foreign businesses based in the free zones and wanting to sell products in the UAE are obliged to do so through distributors, or agents licensed in the UAE.

A licence to grow

In the third quarter of 2007, RAKIA reported a 23% growth in the number of companies registered with it on the previous quarter. By this stage, 792 companies had registered with RAKIA in the previous two years in sectors including industrial products, building materials, steel fabrication, plastics and chemicals. These companies came from Europe, the GCC region, south-east Asia and the Indian subcontinent.

RAKIA’s intention is to make the application process for candidate investors as straightforward as possible – and has whittled it down to a three stage procedure whereby investors must:

  • present a project report;
  • submit an application form; and
  • await approval and review.

 

RAKIA is empowered to issue industrial licences (which will require feasibility and environmental impact studies and clearance from RAKIA prior to issue), commercial licences, licences for consulting and services (including management, finance, investment, legal issues, labour relations, economics, industrial development, and marketing) and general services (including logistical support, restaurants and food outlets, catering services, travel agencies, leisure and social activities, insurance, cargo and freight forwarding, accounting and auditing services – and a commercial-general trading licence, which allows for more than seven product lines).

Most businesses setting up shop do so using one of two forms of business entity. A free zone company is a limited liability company incorporated with RAKIA by more than one shareholder with a distinct legal entity. There is a capital requirement of AED250,000.

By contrast, a free zone establishment is 100%-owned by either a person or by a corporate body and enjoys the status of a separate legal entity. The capital requirement for such an establishment is AED150,000.

In total, there are three free zones operated by RAKIA. Within the free zone at Al Hamra, some 1.84 million sq m have been leased out to 111 companies, nearly 80% of which are in the manufacturing sector.

Rental demand

Within the Al Ghayl industrial park, some 3.7 million sq m out of a total of 21 million sq m are within the free zone – and 3.2 million sq m have been leased out to 84 companies. A further 4.1 million sq m have been reserved and are due, says RAKIA, “to be finalised shortly”.

Outside the free zones, foreign ownership is generally limited to a maximum interest of 49% under the federal commercial companies law, and it is possible to operate as general partners in any form of partnership.

Generally, the legal regime in RAK is straightforward and conducive to doing business. The legal system is the same within each of the emirates, with sharia law the basic source of legislation. But the body of civil law has grown apace on the back of economic growth and commercial lead, and now extends to all the essential bases including labour relations, maritime affairs, commercial transactions, intellectual property, trade agencies and so forth, and under this system, civil courts operate in parallel to shariah courts.

Of the greatest importance to commercial entities is federal law eight/1984 (concerning commercial companies), which regulates business and investment issues and defines different forms of commercial entity that it is possible to establish. An equally critical piece of legislation is federal law one/1979, which explains the procedures and conditions necessary for establishing industrial projects.

International role

Undoubtedly, the UAE, the Gulf states and the region generally are set to play a greater role in the world economy in the next few decades. Oil has assured the Gulf a place under the global spotlight since the 1970s. But it is also its position on the Persian Gulf – close to Europe, the rest of the Middle East and south Asia – which also demands international attention. As a logistics hub, RAK is not only blessed with its location, but has taken all necessary steps to exploit its natural advantages.

Port presence

RAK has two ports. Saqr Port, operational since 1977, possesses 12 berths – eight of which are deepwater – and each of these is 200 metres long and dredged to 12.2 metres at mean low-water spring tide. Vessels can also take advantage of its two roll on/roll off ramps, in addition to specialised berths for handling bulk cement and aggregate. Available storage includes five transit sheds with a total covered area of 40,000 sq m and a large storage area in adjacent yards, while refrigerated space is available along with reefer points.

The government has invested substantial sums into RAK’s Saqr Port in recent years, totalling $60m. Al Saqr is complemented by the relatively new Al Jazirah Port, just south of RAK City.

Freight rates are extremely competitive – the rate for freighting a six-metre container from factory locations in RAK to Europe, for example, is between $900 and $1400. From RAK to south Asia and the Far East the cost is between $300 and $450 – less than, for example, the equivalent cost of freighting from Italy to the UK.

While RAK’s maritime links are well established, the emirate has traditionally been let down by outdated infrastructure on other fronts. But it is taking firm action to address this. Opened in 2005, the Emirates Road has greatly reduced travelling time between RAK and Dubai. For the moment, congestion is all at the Dubai end of the route, although visitors to RAK are favoured in that Dubai Airport lies north of the main city on the road towards RAK.

Internally, the government is taking steps to ensure that there are sufficient roads, and that they are of an adequate quality, to accommodate anticipated industrial activity. A new road, for example, running through the spine of the emirate, will link its leisure, main residential and industrial areas through to the port.

Increasingly, however, RAK will be less dependent on Dubai for its air transport links (a relief, as anyone familiar with Dubai’s infamous traffic will testify) and the government is working to upgrade RAK International Airport – and to increase both passenger and air cargo capacity. In April 2007, work began on the renovation of the passenger boarding hall, and the arrivals hall is next in line for a refit. The airport handles 245,000 passengers a year, with 27 carriers using the airport, flying and arriving from destinations in the Middle East, central Asia, south Asia, Africa and the Far East.

Aviation masterplan

In 2005 RAK’s department of civil aviation initiated a masterplan for the airport’s development that included the creation and construction of a free zone and a business park in addition to increasing capacity and infrastructure. The airport free zone – a business park that seeks to attract aviation and aeronautics-related companies – has 60 companies registered, and hopes to double this by the time that the necessary land has been obtained for its establishment.

Expansion path

It is anticipated that the airport will be handling more than a three-fold increase in passengers in the next three to five years, and the chairman of the department of civil aviation, Sheikh Salem Bin Sultan Al Qasimi, believes that it will not be long before it is handling one million passengers a year.

The bid to do so will no doubt be expedited by the 2007 launch of RAK Airways – the emirates’ fourth carrier. RAK Airways started its operations in November 2007, flying a single leased aircraft. However, it recently signed a deal worth AED1.65bn for the purchase of four new generation 737-800NG aircrafts (a short- to-medium-range jet), and has included an option in the order for the purchase of a further two. Currently flying to Dhaka, Calicut, Chittagong and Beirut, it is seeking to add routes between RAK and cities in north-east Africa, the Middle East, and south-east Asia.

Clearly, the airline is taking a measured rather than bullish approach to its expansion. The emphasis on Bangladeshi destinations makes sound commercial sense on the back of the large number of Bangladeshi expatriates living and working in the emirate. But more destinations will follow, with a spokesperson from RAK Airways saying it is attempting to adopt a hub-and-spoke strategy – attracting potential passengers from throughout the region to take advantage of its routes and facilities.

Back on the ground, the RAK Transport Authority (RAKTA) is transforming the emirate’s taxi services by upgrading the fleet, which will be equipped with a GPS, GPRS, the latest electronic booking systems and call-centre services. RAKTA hopes to have some 1600 taxis on the road by end of 2009.

RAKTA knows that the emirate’s roads need some attention if the ride to success is going to be smooth, and hopes to resolve a funding deadlock between the local public works department and the federal ministry of public works in order to improve quality and provide, for example, the separate bus lanes which RAKTA believes are required. More exotic transport systems are also in the pipeline, with the possibility of a marine transport system being discussed, and even an aqua bus, which functions both on land and water.

Positive steps

Clearly, the emirate is taking positive steps to embrace and manage change. Increasingly, the wisdom of doing so will make itself apparent as the global economic situation runs its course. RAK is very much a part of the UAE and while it can position itself competitively within that structure it cannot chart a separate destiny.

Reduced demand for the products and services it provides will necessitate some belt tightening and may see a number of more ambitious projects put on hold – but in managing its growth successfully to date, the emirate has demonstrated the light touch and flexibility that will be required to weather any storms ahead.