The emirate of Ras Al Khaimah (RAK) has undergone a huge transformation over the past decade. This has been driven largely by Sheikh Saud Bin Saqr Al Qasimi, the ruler of RAK and a member of the Supreme Council of the United Arab Emirates.
Investors are enthusiastic about the region’s potential and there are good grounds for optimism. RAK has been awarded an A-rating by Standard & Poor’s and Fitch for the past four years, recording solid growth of between 8% and 14% during this period, quite an achievement when you remember that many countries were caught up in the global financial crisis.
Although it is only a 50-minute drive from the bright lights of Dubai, RAK’s more relaxed pace of life can make it seem a world apart. But this has not stopped it getting on with the business of attracting both major corporations and small and medium enterprises to its shores. It is even building a reputation as a comfortable base for people who work in Dubai and want to enjoy a quieter, more laidback lifestyle.
But make any comparisons with Dubai and many are quick to play down the differences. Although one investor told me they had invested here because “it wasn’t Dubai”, others are keen to promote the unified face of the UAE. “We are not in competition with Dubai, we are complementary,” says Dr Khater Massad, chief executive officer of RAK Investment Authority (RAKIA).
Sitting at the northern tip of the UAE, and bordering Oman, RAK is strategically located at the crossroads of Europe, Africa and Asia, in a position favoured by a number of companies looking to boost their standing in these regions. Fast-moving consumer goods producer Naturelle, part of Dabur International, has a base in RAK that employs 25-30 executives and 180 workers, mainly from the Indian subcontinent. It already had a base in Jebel Ali, Dubai, but needed to expand to meet the demands of a growing regional market.
“We had to be in the UAE, but not in a free zone, so we needed a local partner and entered the market in collaboration with RAKIA,” says A Subba Rao, unit head at Naturelle. “Right now, the centre of the world from where we are standing is here. For example, our hair products are specifically designed for Asian and black hair, so this is a very convenient location for us.”
In recent years, RAK has focused its efforts on economic diversification and attracting businesses in the manufacturing, services, real estate, construction and tourism sectors. Sheikh Saud’s input has led to a real push to woo foreign investors, driven partly by the creation of free zones, as well as partnerships between government and foreign investors. For example, RAK Hospital is a 50/50 joint venture between the emirate’s government and ETA Star Healthcare.
The roll call of foreign companies that have set up shop in RAK now includes the likes of the America’s Guardian Glass, Ashok Leyland of India and Switzerland’s Franke.
But the emirate is also keen to highlight its own home-grown successes. Historically, it is the industrial centre of the UAE, with three main industries: cement, ceramics and pharmaceuticals. Mr Massad points to the success of RAK Ceramics as proof that businesses can thrive here. He says: “In less than 15 years, RAK Ceramics became the biggest ceramics factory in the world in a single location.
“Ceramics is a product that is heavy but cheap, yet we are able to export to 150 countries around the globe. If RAK Ceramics is producing a relatively cheap and heavy product and still able to export to Panama, New Zealand, Australia and Germany, there is no reason why anyone else cannot manufacture anything here and export it the same way.”
Unlike many of its Gulf Cooperation Council neighbours, RAK lacks vast oil wealth. However, it is rich in raw materials such as clay and quartz. It also claims a natural advantage when it comes to the production of cement as the Al Hajar mountains (the highest range in the eastern Arabian peninsular) holds considerable deposits of high-quality limestone, the key raw material for its manufacture. The emirate is one of the largest producers of medicines in the UAE, playing host to leading pharmaceuticals manufacturer Julphar. It is also home to Masafi, the region’s leading brand of mineral water.
One of the real engines of growth in the emirate is RAKIA, which was established by Sheikh Saud in 2005. “We are interested in long-term sustainable industry,” Mr Massad tells fDi. “We would like to establish vehicle, food, pharmaceuticals and spare parts industries – industries that are long term and with products we can export. We are very keen to make sure that whoever sets up here will make money. We don’t want someone to come and lose money and close after two to five years.”
RAKIA has devised processes to make it easy for firms looking to locate in the emirate. “If somebody wants to build a factory, they can obtain all the licences they need in two days maximum,” says Mr Massad. “If somebody wants to establish a company in RAK, they can arrive at 10am and have the business licence by midday. They can even make their application online and have the licence and open a bank account before they set foot in the country.”
In 2010, RAKIA issued 1108 business licences, up by 27% on 2009 and a whopping 62% on 2008. During the period 2006 to the end of December 2010, it had issued 3679 licences: 1042 to consulting/service companies; 1028 to trading/general trading businesses; 659 to commercial companies; 628 to industrial firms; and 322 to media businesses.
The government paints an enticing picture of the emirate, but what is it really like for the businesses that have already set up over here? For Swiss firm Franke, which established its RAK base with 12 people in 2009, the strength of the country’s transport infrastructure was a key factor.
“Additionally, RAK had opportunities for purchasing space and for future expansion, and also gave us good access to its government,” says Alexander Pieper, the company’s director of operations. The firm is upbeat about the prospects for the future and now employs 30 people. “We see future inter-company opportunities from this location, as well as the chance to grow our business in the local market,” says Mr Pieper.
However, there have been certain challenges. “Electricity and telephone connections have been difficult and the internet can be very slow,” he says.
Some investors report being able to get up and running in about half a day, others describe a slightly longer process.
In April 2008, Novus Sealing gave the mandate to create a company in the Middle East, and the following January 2009, it opted for an empty-shell location, serviced only by a dirt road. The unit offered a modest power supply, which would service only its initial needs. Things moved slowly at first.
“We felt we were up against people and organisations who did not take kindly to being hurried, but we persevered,” says Sharon Darbyshire, the company’s commercial director for Middle East and north Africa. Higher-than-expected set-up costs and constant power outages -- requiring the company to run dedicated fibre optic cables to communicate effectively with the outside world -- were among the problems first encountered, and eventually overcome." Doors opened for business in May 2009.”
So why did Novus Sealing choose RAK? “In 2007, a survey was carried out in eight Middle East countries and end-users were questioned about what they required from a supplier,” says Ms Darbyshire. “We realised there would be considerable cost advantages to being based in RAK. From here, Novus can more than adequately serve the whole of the Middle East and north Africa, and from a personal point of view, it also fulfils our lifestyle requirements. We are now witnessing our company beginning to grow and all our hard work is paying off.”
For Daniel Hutmacher, managing director of Swiss International Chocolates – the only producer of handmade Swiss chocolates in the Middle East – the challenge has been assuring customers he can offer the same quality of chocolates as in Switzerland. When he was looking to establish his firm in 2007, he first considered Dubai. “This was impossible. It was cost, as simple as that,” he says. “Everything was just going through the roof. There was no space and no possibility of bringing in any expats at a reasonable cost.” Mr Hutmacher received professional help from RAKIA to set himself up in the emirate. “They are well organised and equipped as they provide a one-stop shop for setting up a business,” he tells fDi .
Some of the challenges investors report are common to other emerging markets. Several say the power supply has been an issue. “It is getting better but the way we are developing, we need more,” says one expat operating in the emirate. Another challenge has been poor suppliers, which tend to blame anyone but themselves for problems.
There are sometimes difficulties getting clients to pay, says another expat. Creating a workforce is generally given the thumbs up, although cultural sensitivities must be taken into consideration, particularly when devising ways of incentivising workers from diverse backgrounds to perform at the same level. Banking is regarded as straightforward but the general view is that it could be improved, particularly in areas such as electronic banking and transfers.
One thing that makes a big impression on visitors to RAK is its well planned road network and the lack of congestion. “I can go about my work easily without the stress of traffic and I always know how long it will take me to get anywhere,” says Dr Hamid Kayal, chief executive officer, CSEM UAE, who has been living in RAK for two years.
It has good road links with neighbouring emirates and Oman via the Emirates Highway and the coastal road. The planned UAE national Etihad railway is also set to pass through RAK by about 2016.
With 65 km of coastline stretching along the Gulf and the close proximity to the Strait of Hormuz, RAK’s seaports are a strategically important part of its infrastructure. In 2009/10, the government consolidated all five of its ports under the umbrella of RAK Ports, managed by Saqr Port Authority, an international team experienced in international standards and regulations.
RAK’s ports include RAK Maritime City, officially launched in May 2011 as a free zone maritime industrial park covering eight square kilometres of coastland. “What is different here is that firms with a factory or facility have direct water access,” says Capt Colin FG Crookshank, general manager, Saqr Port Authority.
Other ports are Saqr Port, which is adjacent to RAK Maritime City and the largest bulk commodity port in the Middle East; Al Jazeera, which focuses on dry docking and ship repair for small to medium-sized vessels; Al Jeer, opened in 2009 to handle livestock, leisure craft, dhows and general cargo vessels; and RAK Khor Port, located in the city centre, operating a passenger cruise liner terminal and providing warehousing and on-water ship repair services.
The international airport offers private aviation, cargo and passenger services. “There is a lot of cargo that has to go to Afghanistan for reconstruction, so I would like those involved in reconstruction to choose our airport as a hub,” Roland Blaney, chief executive officer, RAK International Airport, tells fDi.
“Other airports are struggling for space, but we’re not. We are ready to build new warehouses.” He adds: “We’ve got plenty of space to develop. In three years’ time, we could be looking at handling 10 times the volume of cargo and passengers of today.”
Sitting as it does in one of the world’s most volatile regions, it is only natural that some potential investors will be concerned about security. But people in RAK say they are enjoying the benefits of stable governance.
“We have seen many companies come from Egypt, Yemen and north Africa to establish here,” says Mr Massaad. “Growth is continuing. In the first six months of this year, RAKIA increased licensing by more than 27%, and we expect this trend to continue for the rest of the year. There are plenty of companies that are more than happy to come here.”