By contrast to most of its neighbours, RAK’s hydrocarbons sector makes only a minor contribution to the emirate’s GDP, averaging around 3% per annum. However, while RAK may not be rich in oil and gas reserves, it does have other mineral wealth to fall back on, in particular limestone, gabbro and silica that provide the raw materials for the successful cement, ceramic and glass industries that have developed over the years.
Added to those industries that depend on local resources for their livelihood, the state has also encouraged other segments in the manufacturing sector to set up shop in the emirate, part of a long-standing policy aimed at diversifying the economy that has resulted in industry contributing more than 8% to RAK’s GDP. Not only has this policy been successful, thanks to state incentives and the establishing of dedicated industrial zones, a number of manufacturers in RAK are now sectoral leaders in the region and beyond.
One such firm is steel producer RAK Steel. In early June, the company announced it was planning to lift its production capacity for deformed steel reinforcement bars to 750,000 tonnes, a 50% increase, through a $15m programme of investments. Already the second-largest producer of rebars in the UAE, the company wants to be in a position to take advantage of the recovery Ajay Aggarwal, RAK Steel’s chief executive officer, sees on the horizon.
There has been a gradual resurgence in construction activities across the UAE, with the continued growth in tourism and residential development projects in all the emirates supporting the need for higher production levels, Aggarwal told local media when announcing the expansion plans.
“RAK Steel has accordingly received a marked increase in demand and now we are running to full capacity; this has been a key factor that has motivated us to push through with our expansion initiatives,” he said. “In about two years, we expect the construction market to get back to pre-2008 levels and thereafter maintain a growth trend of around 5%.”
Beyond raising capacity of existing production lines, RAK Steel has also launched a preliminary planning process towards expanding its activities to become an integrated steel mill, part of a programme to meet the future demands of both the construction sector and the emirate’s developing industrial base as well as having a direct benefit for the company itself, Aggarwal said.
“It means we can be more cost-competitive and our dependence on outside raw materials will be reduced. The more raw materials you produce yourself, the more total costs will go down,” he said.
While RAK Steel is looking to boost output, a newcomer to the emirate’s industrial sector is planning to start production. Under an agreement signed between Hadeed Emirates Contracting and Middle East Specialised Cables Company (MESC) of Saudi Arabia at the beginning of June, a $40m cable manufacturing plant is to be set up in RAK. The plant, which will operate as MESC RAK, is expected to start production by the end of the year.
The decision to open the new facility in RAK was spurred by the industry and energy sectors in the UAE and the region, owing to the establishment of a number of mega-projects, said Saeed Al Karam, the general manager of MESC RAK.
“Accordingly, the facility is set to meet the demand of the domestic and regional industrial sector, reducing the time factor in delivering such ambitious projects,” Al Karam said.
Local firm RAK Ceramics, maker of tiles and sanitary ware, is also harbouring lofty ambitions, aiming to increase its market share in Europe, already its second-largest sales destination behind the UAE, by almost doubling sales to the continent in the next three years.
Though the global downturn had affected both the regional and international markets, Abdullah Massaad, the assistant chief executive of Rak Ceramics, said the company wanted to lift its exports to Europe by 2012 to 40% of total sales.
“Europe is a consistent market where the cost of production, day by day, is becoming more expensive and so the presence in Europe of manufacturers of ceramics will, day by day, be reducing. Here we can increase our market share,” he said in an interview with Gulf News on May 13.
Industries in RAK have had to contend with a number of problems in the past, especially a shortage of electricity to keep their plants powered up and a transport infrastructure grid struggling to keep pace with the expanding demand put on it by the growing economy. However, the government is moving to install additional generation capacity over the next few years, while a $5bn programme of improvements to the transport network, including a 400% increase in the cargo-handling capacity of the port of Mina Saqr, should see the flow of materials and finished products move more quickly. These developments will help put the final pieces in place to allow RAK’s industrial sector to expand further and faster in the coming years.
