Profile:
Emirates: Ras Al-Khaimah
Emirates: Ras Al-Khaimah
Translated into English, Ras Al Khaimah means “top of the tent”, which is derived from its location in the northernmost part of the UAE. The name is becoming more than just a geographical reference as RAK, the fourth-largest emirate, continues to rise to an elevated position in the eyes of international investors. The government is embarking on an ambitious process of economic diversification and is targeting industry, tourism and real estate as the engines to power the emirate into the future. Its business-friendly policies have helped to secure a rapid increase in foreign inflows and the emirate has enjoyed a cumulative average growth rate (CAGR) of over 50% since 2003.
ISBN: 1-902339-23-8
ISSN (Online): 1757-8922
ISSN (Print): 1757-8914
TABLE OF CONTENTS
COUNTRY PROFILE
This section provides a quick look at some facts about the country, its population, economy, natural resources, education system, religion, culture, language, climate and geography.
POLITICS
The year 2008 marked the 60th year of rule by His Highness Sheikh Saqr bin Mohammed Al Qasimi, who has overseen RAK’s evolution from a subsistence economy to an industrial state of increasing political prominence, both within the region and internationally. As one of seven distinct emirates in the UAE, it plays an important role in politics at the federal level, electing six representatives to the UAE’s parliament. In addition HH Sheikh Saqr sits on the Supreme Council, fulfilling a crucial role in the formulation of the country’s foreign and domestic policies. At the same time, the emirate has a significant degree of autonomy and consequently drafted its own set of local economic policies that have largely been the product of a political vision focused on improving the business environment and attracting investment. The formulation of the e-government programme has been a crucial tenet of RAK’s drive for a more efficient governance style. Meanwhile, it has also been busy pursuing an ambitious diplomatic agenda in a bid to increase its international profile, including visits to Kazakhstan to bolster bilateral trade and continuing diplomatic efforts to resolve its dispute with nearby Iran over the Islands of Greater and Lesser Tunb and Abu Musa.
This chapter features interviews with HH Sheikh Saud bin Saqr Al Qasimi, the crown Ppince and deputy ruler of RAK; Kamal Nath, the Indian minister of commerce and industry; along with a viewpoint from Denise Lievesley, the president of the International Statistical Institute.
THE ECONOMY
RAK is continuing to push its programme of economic diversification and is emerging as a robust regional centre for investment, industry, trade and tourism. With limited hydrocarbons reserves – the oil and gas sector contributes around 3% of GDP – diversification of the economy has long been an integral tenet of the government’s development plan. The pace of progress on this front has quickened since 2003, when HH Sheikh Saud bin Saqr Al Qasimi became the crown prince and deputy ruler of RAK, accelerating many of the business-friendly policies that mark the emirate today. A major initiative towards diversification goals has been the creation of the RAK Free Trade Zone Authority, one of the fastest-growing trade zones in the region; the RAK Investment Authority and the Investment and Development Office, which in effect is a one-stop shop that facilitates the investment process. The favourable business conditions have not gone unnoticed by international creditors and investors, and the emirate has seen an influx of foreign investment both in and outside of free trade areas. The light industry sector has been one major beneficiary of these inward flows, with manufacturing companies now accounting for 13.5% of all registered establishments. Wholesale and retail trade continued to be the main component of the emirate’s GDP in 2007, contributing 14.5% of the total, reflecting a growing population and greater levels of disposable income. RAK’s natural resources, namely the large swathes of fertile land used for agriculture and significant mineral deposits used in the ceramics and cement industries, also make key contributions to GDP. The tourism industry, driven by a rising number of visitors, offers another chance for economic diversification, as does the real estate sector, which is built on the strong demand fundamentals created by RAK’s young and rapidly growing population. In the long term, land availability may become a future issue once major projects have been completed. But for now the emirate’s business-friendly policies should continue to attract investors at impressive rates. Since 2003 RAK has posted a CAGR of over 50% in operational surpluses and in 2007 GDP grew by 13% over the previous year.
In this chapter OBG talks to Sheikh Faisal bin Saqr Al Qasimi, the chairman of RAK Finance Department; Oussama El Omari, the CEO and director-general of RAK Free Trade Zone Authority; and Hassan Hamdan Al Alkim, the general-director of the Economic Development Department. Khater Massaad, the CEO of RAK Investment Authority (RAKIA); and Kevin Carey, the senior country economist of the Middle East and North Africa Department at the World Bank, offer viewpoints.
FINANCIAL SERVICES
Strong economic growth and high investment inflows over the past few years have bolstered the balance sheets of RAK’s financial institutions and lent strength to the growing financial services sector, which accounted for 7.2% of the emirate’s GDP in 2007. Continued momentum behind the overall economy should ensure this is no fleeting trend and with high GDP per capita and a population growth rate of nearly 5%, the potential for expansion of the sector remains strong. Currently there is a heavy focus on the retail segment, particularly in the banking sector, but the fundamentals of demand for more sophisticated products are strong. With RAKIA’s success in attracting companies and inward investment to the emirate, plenty of opportunities for corporate services are on the horizon. In fact RAK Offshore, an authority created in 2006 to provide the financial infrastructure needed to support increased economic activity, had registered almost 2000 companies by the end of 2008. Plans for further development of the authority envisage it as a centre for financial, logistical and insurance services, thereby creating a growing demand for offshore banking accounts, investment banking services and other financial products and services. The insurance segment, meanwhile, is still in its infancy, with penetration rates currently around 30%, in line with region-wide trends. However, the potential for growth is certainly there, especially as other emirates like Abu Dhabi and Dubai look towards compulsory insurance schemes. Of course, the financial services sector in RAK will face a year of challenges, like other economies around the world, but the development of the sector previous to the global credit crunch followed a cautious course and the fundamentals should be resilient enough to pull it through the crisis without a drastic re-think of strategy.
This chapter includes interviews with Sheikh Omar bin Saqr Al Qasimi, the chairman of RAK Bank and RAK National Insurance Company; and Khalil Saeed, the general manager of United Insurance Company; and a viewpoint from Ben Faulks, a credit analyst at Standard & Poor’s Ratings Services.
TRANSPORT
Long a centre of trade, RAK is unleashing a raft of integrated infrastructure improvements across nearly all transportation segments in order to accommodate the growing influx of tourists, expatriates and businesses. RAK International Airport will see $150m from the government over the next 20 years to improve both cargo and passenger facilities. The expansions are certainly needed – in 2007 there was a 28% increase in the number of visiting tourists; airport upgrades and expansions will eventually increase capacity to 1.5m passengers per year. Officials are also angling to increase the airport’s role as a cargo centre, given that the emirate has a solid road network and easy access to the entire UAE market and beyond. The roads will see significant improvement as well, with some $272m to be spent in the next 10 years in order to accommodate a sharp rise in vehicles and decrease driving times between the emirates. In another move to reduce congestion and better link cargo lines within the country, a UAE national railway network is in the final planning phase and the entire project should be completed by 2015. Trains will be an ideal way to transport raw materials around the emirate and will complement RAK’s heavy industrial base of aggregates and cement. The container transport potential of the railway is expected to attract a growing number of cargo companies, possibly putting a strain on the capacity of RAK’s ports, which already see brisk activity thanks to their location near the heavily trafficked Strait of Hormuz. Saqr Port, for example, the emirate’s main facility, is one of the biggest bulk and general cargo ports in the Gulf region and handled 30m tonnes of commodities in 2008, a number expected to rise to 32m tonnes this year. The Al Jazeera Port, which opened in 2003 and handles the majority of rock and aggregate shipments, is planning for increased activity and is looking to expand capacity by introducing a state-of-the-art dry dock. Indeed with capacity expansions across virtually all transportation segments, the logistics and warehousing business is expected to see rapid growth in the emirate and about 1.5m sq metres of new warehousing space is expected to appear within the next two years. Given the crucial connections between the transport sector and industry, a major component of the emirate’s economy, the government is likely to maintain strong support for the sector to ensure commodities, tourists and residents continue to move freely throughout RAK.
In this chapter OBG talks to Sheikh Ahmed bin Saqr Al Qasimi, the chairman of RAK Customs and Port Department; and Naser Salem Muradad, chairman of the board, RAK Transport Authority (RAKTA).
ENERGY
With unprecedented economic growth over the past few years, RAK’s main challenge now is to meet rising energy demand fuelled by ongoing development plans. Power generation is the responsibility of the UAE’s federal government and is controlled in the Northern Emirates by the Federal Electricity and Water Authority (FEWA). In response to soaring demand, FEWA has earmarked some $15bn for utility supplies projects in RAK and its neighbours. However, with energy-intensive industry moving to the forefront of the emirate’s diversification programme, FEWA’s plans are not sufficient to meet future demand and the RAK government has stepped in with plans for four power plants, with capacity totalling 740 MW, in a bid to address short-term supply concerns. Several other projects are on the drawing board and government officials expect to solve the energy problem within 3 to 5 years. With limited hydrocarbon reserves – the oil and gas sectors contribute around 4% of the economy – RAK will remain dependent on imports for the time being, but it is working to build up gas infrastructure through $100m worth of investment from the RAK Gas Commission (RAK Gas). RAK Petroleum is also expanding its exploration and production operations throughout the emirate and into concession areas in nearby Sharjah. Meanwhile, an overall gas shortage has prompted the government to look towards alternative sources, such as coal and solar power, and which is now cooperating with Indonesia and India to bring coal supplies to the emirate. Energy supply issues remain a hot topic in the RAK business world, but the government’s extensive plans to expand capacity will hopefully put such concerns to rest over the coming years.
This chapter features an interview with Terry A Newendorp, the chairman & CEO of Taylor-DeJongh.TOURISM
With the tourism infrastructure of RAK becoming strained by the steady rise in visitor numbers, the emirate is now looking to expand capacity to meet growing demand. In 2007 about 215,000 visitors passed through, marking a year-on-year increase of 28% in 2007. Similar results are expected for 2008 and in fact tourism officials are aiming to attract 2.5m visitors each year once new developments come on-line. At the moment hotel space is fairly limited: there are about 1800 rooms in RAK and occupancy rates have hovered around 93% in recent years. This will soon change, though, as some 20 hotels are set to be completed over the next five to 10 years. Business tourism is also an area of targeted development and RAK is in the process of boosting its meetings, incentives, conferences and exhibitions (MICE) segment through several projects, the largest of which is the construction of the RAK Convention and Exhibition Centre. The ongoing expansion of RAK International Airport will also significantly increase tourist capacity. Alongside these ambitious development goals, the emirate is also keeping its feet on the ground and the preservation of its unique heritage remains a main priority, ensuring that visitors will be continually drawn back to this culturally rich and geographically diverse place.
Included in this chapter is an interview with Hilary McCormack, the manager of RAK Tourism.
CONSTRUCTION AND REAL ESTATE
With a steady string of major infrastructure projects planned by the government and significant demand for tourism and real estate development, the construction sector is continuing to grow despite the global downturn and is expected to remain the primary economic contributor within the emirate. Work is underway to expand RAK’s ports and airports as well as upgrade the network of roads. Meanwhile, RAK’s young, growing population – nearly half of all residents are below the age of 19 – is creating the need for more residential space. The government has established two property development companies – RAK Properties and Rakeen – to encourage building and investment in both the real estate and tourism sectors, and numerous mixed-use residential, commercial and hotel development projects are in the pipeline. Considerable effort is also being directed towards public sector and social infrastructure, such as new schools, hospitals and research centres. The Ministry of Public Works and Housing has been at the forefront of this push for greater public services, initiating projects worth a total of $27.64m in 2007. RAK offers a number of development advantages over its southern UAE counterparts, such as greater availability of land, lower start-up costs and availability of key materials like cement – a major issue in the past – that are expected to attract investors and help the sector weather the difficult economic conditions of 2009. The most pressing issue the sector needs to overcome is utility shortage, which RAK is now tackling with several power plants that are due to come on-line soon. Nevertheless with all the projects planned by the government and private sector, there is enough work to keep the construction sector busy for the next 10 years.
Having been able to avoid the congestions and surging prices that have plagued some of its neighbours to the south, RAK ranks high in terms of both affordability and quality of life, and has thus seen increasing demand for residential property. In fact, the government expects the emirate’s population to rise from around 200,000 to 750,000 by the year 2020. There is currently an overall shortage of housing units and estimates show that about 15,000 units are needed in the next five years. RAK’s business-friendly investment climate is expected to attract a stream of private developers further encouraged by the success of their forebears – major developers currently in the market are achieving net profits of 15-20% on their projects. The emirate also offers the incentive of light bureaucracy, high transparency and the recent addition of a developer’s escrow law designed to increase investor confidence. While speculation in RAK was nowhere near as rife as in other emirates, it was not completely immune from the effects of the credit fallout. Demand has slowed slightly since the end of 2008, but overall the market fundamentals remain strong and the more financially solid developers will be able to weather the economic storm and perhaps emerge from the crisis in a stronger position in the market. As in other sectors, power and water concerns remain an obstacle in the short term but once the energy issue is resolved, the RAK real estate sector is expected to hit its full stride.
In this chapter OBG sits down with Abdullah Mohammed Al Sayyah, the general manager of Union Cement Company and chairman of the UAE Cement Producing Association; and Naser Bustami, the general manager of Stevin Rock and RAK Rock Company.
INDUSTRY
RAK has a long industrial history and in recent years healthy sector activity has accounted for a substantial amount of economic growth. Historically, the emirate has drawn from its rich mineral resources in limestone, gabbro and silica to provide the foundation for prominent cement, ceramic and glass industries. These core segments continue to drive the sector forward but the government is also pushing for diversification and a broader industrial base, mainly through regulatory incentives and capital injections by the RAK Investment Authority (RAKIA). The authority also operates a few highly successful industrial zones, including the 3m-sq-metre Al Hamra Industrial Zone, which is operating at 100% capacity, and the Al Ghail Industrial Zone, which began operations in 2007. Overall, RAKIA has witnessed a growth rate of 150% in the number of registered companies in 2007, matching a strong performance by the more established RAK Free Trade Zone Authority (RAK FTZA), which counts 5476 companies contributing a total of $2.72bn to the economy. The emirate’s location at the crossroads of Europe and Asia lends itself to attractive business opportunities that should help to develop the sector further and RAK FTZA hopes to double the number of registered companies in the next three years. The growth of industrial and free zones has been impressive given the significant free zone space throughout the UAE and while the emirate’s authorities are seeking to complement rather than compete with their neighbours, it is clear industrial land availability and prices are favourable in RAK. Short-term obstacles to growth remain, however, mainly in the form of utility supply shortages. The government hopes to address these issues through the construction of four new power stations amounting to over 500 MW, all due to be operational within three years, while also implementing a variety of solutions to meet industry’s power requirements in the short term. In 2009 the slowing global economy will surely present demand issues and challenges to RAK industry, but given its rapid growth and diversification over the past few years the sector looks well-placed to emerge from troubling economic conditions into a bright future.
This chapter features interviews with Yousef Obaid bin Essa Al Neaimi, the chairman of RAK Chamber of Commerce & Industry, and Russ Ebeid, the president of Glass Group, Guardian Industries Corporation.
HEATH & EDUCATION
Following a common regional trend, RAK is embarking on a series of projects to boost both the quality and public awareness of health services. The emirate is currently facing a shortage of beds, medical professionals and modern facilities, but efforts are under way to address these issues. To combat low capacity levels, three new hospitals are under construction while existing health centres and hospitals are being upgraded to introduce state-of-the-art equipment. A steadily increasing population combined with the expected introduction of mandatory insurance will put upward pressure on demand in the sector. Another major shake-up is expected to occur when a new regulatory system, postponed in 2009, comes on-line. Under the updated scheme, the public hospitals of RAK and the other northern emirates will be under the delegation of the Emirates Health Authority, a newly created body that should greatly improve the level of supervision within the health industry. The Ministry of Health has also been working to increase public awareness of non-communicable diseases such as diabetes and hypertension, common maladies in the Gulf region, through various successful campaigns. Meanwhile, the private sector is growing in importance as RAK seeks to offer potential investors and expatriates interested in the emirate healthcare of a top international standard.
The government has targeted education as an area of primary importance in a bid to diversify its economy and improve the quality of life of its citizens. In the past, students were mostly limited to the Higher Colleges of Techonology (HCT) – a government-operated network of schools across the UAE – and Ittihad University. The RAK Free Trade Zone Authority (RAK FTZA) has played a fruitful role in the expansion, as a growing list of international institutions have set up campus branches in it, significantly expanding competition in the higher education sector. Newcomers include India’s Bharati Vidyapeeth University (BVU) and Ecole Polytechnique Fédérale de Lausanne (EPFL), a Lausanne-based Swiss polytechnic institute. The emirate plans to eventually invest $1bn to build an education park to house international schools currently in the free zone, as well as future campuses. The country has become more adept at handling increased demand and strong support from Sheikh Saud bin Saqr Al Qasimi, the crown prince and deputy ruler of RAK, suggests that the emirate’s commitment to improving education standards will not flag in the foreseeable future.
In this chapter OBG talks to Humaid Mohammed Obaid Al Qutami, the minister of health, and Sheikh Nahayah Mabarak Al Nahayan, the minister of higher education and scientific research.
THE BUSINESS GUIDE
In cooperation with Morrison Menon Chartered Accountants, this chapter delves into taxation in the emirate and explains the new laws that are making RAK a more favourable business environment and further encouraging local and foreign investment. With the help of Strohal Legal Group, International Legal Consultants, the legal section of this chapter takes a closer look at recent changes to real estate regulation within the emirate, and also includes a detailed overview of foreign investment laws.
Featured in this chapter is a viewpoint from Theodor Strohal, the senior partner of Strohal Legal Group, International Legal Consultants.
THE GUIDE
The guide includes a comprehensive directory of RAK's top hotels and provides contact information for government offices, public institutions, foreign missions, law offices, accountancy firms, airlines, car rentals, hospitals and media outlets. A facts-for-visitors section offers useful tips for business travellers on topics such as etiquette, currency, visas, language, communication, dress, business hours and electricity.
