With the emirate’s fiscal house in order, Ras Al Khaimah’s (RAK’s) government and the banking sector have provided a solid bedrock for recent expansion in the industrial and tourism sectors, two of the economic segments that saw growth in 2011.
The emirate is on steady footing to head into 2012, as well: last month Standard & Poor’s affirmed RAK’s “A/A-1” sovereign credit rating, citing “steady economic growth and the benefits of UAE membership”.
The National Bank of RAK (RAKBANK) also reported positive results for the first three quarters of 2011. Net profit stood at Dh906.5m ($246.57m) during this period, an increase of 24.2% year-on-year (y-o-y). Lending activity gained as well, and loans and advances increased by 13.7% y-o-y.
RAK was not completely untouched by political instability in the Middle East throughout the year, and debt issues in developed economies compounded to temper demand and raise operating costs for several industries. At RAK Ceramics, for example, political and financial instability elsewhere pushed costs up, the firm said in its third-quarter 2011 financial statement. These circumstances contributed to a net profit dip from Dh273.5m ($74.39m) to Dh181.8m ($49.45m) y-o-y.
Still, the world’s largest ceramics producer was able to post a moderate increase in revenue for the first three quarters of 2011 overall, from Dh2.56bn ($696.32m) over the same period of 2010 to Dh2.58bn ($701.76m) y-o-y. The company said it is optimistic that demand will pick up as a result of population growth, housing shortages and reconstruction in neighbouring areas. “Based on trends and expectations [in these areas,] the company expects to maintain its revenues and profits to the level achieved in 2010,” the company said in its third-quarter report.
RAK-based Gulf Cement, the UAE’s largest cement producer, saw similar results for the first three quarters of 2011. Its sales over that period rose Dh29.5m ($8.02m) from Dh452m ($122.94m) to Dh481m ($130.83m) y-o-y, according to the company’s third-quarter report. Between July and September, however, revenues actually increased y-o-y, from Dh139m ($37.8m) to Dh160m ($43.52m), a signal that demand may further increase as political circumstances continue to stabilise elsewhere.
Additionally, RAK’s industries stand to see increased demand from neighbours such as Qatar, which is preparing for the 2022 FIFA World Cup, and Saudi Arabia, which, as it is addressing an emerging housing shortage, could create a number of opportunities for RAK firms. The RAK Free Trade Zone (FTZ), one of the fastest-growing FTZs in the UAE, witnessed an uptick in license registrations in 2011, recording a 28% y-o-y growth in the first three quarters of 2011. The zone registered a total of 1953 companies over the entire year, exceeding registration of 1740 in 2010.
Outside of the industrial sector, another of the year’s success stories has been the growth of RAK Airways. After suspending operations in 2008 to wait out unfavourable market conditions, RAK Airways re-launched in October 2010 and is now aiming to compete with budget carriers on price and conventional carriers on service. The airline has built up its route map from two to 10 destinations since re-launch, with connections to the GCC, India, Pakistan and Sudan. The most recent addition, Kuwait, opened in November 2011.
In addition to air travel growth, the government is stepping up efforts to continue attracting more tourists to the emirate. Authorities aim to increase the number of visitors from about 600,000 in 2010 to 1.2m in 2013, according to the RAK Tourism Investment and Development Authority (RAK TIDA). To that end, the government has earmarked $163.4m for tourism development through 2012.
RAK TIDA, meanwhile, has been working to build partnerships with foreign organisations to attract new visitors. During 2011, RAK TIDA started coordinating with tour operators in Germany, Sweden and the UK. As part of these partnerships, regular charter flights operated between RAK and various northern European locations.
Indications so far are that these efforts are boosting visitor numbers. In October 2011, beach hotel revenues increased $1.7m y-o-y, RAK TIDA said in December. “The introduction of charter flights into RAK is proving to be a huge success in reaching our main objective of doubling our visitor numbers to 1.2m by 2013," said Victor Louis, the chief operating officer of RAK TIDA. “In light of the success from both our German and Swedish charter services, [in 2012] we plan to introduce more charter flights from more countries in Europe.”
In line with expansion in tourism, the emirate’s hospitality industry has also received a boost this year. To better handle the government’s growing investments in hotels, the emirate has also launched the RAK Hospitality Group, which is tasked with bringing the emirate’s total hotel rooms to 10,000 by 2016.
Although 2011 brought its fair share of challenges to the global economy, RAK has shown resilience even in the face of significant obstacles. A solid financial base, established industrial sector and growing tourism numbers all bode well. As the global economy leaves behind the grey patches of 2011, a number of opportunities are set to arise in these and additional sectors as well.