Ras Al Khaimah's continued growth benefits from its location and natural resources

Ras Al Khaimah holds a unique position among the seven emirates that make up the UAE. It has a rich and long history that revolves around trade, with its exports mainly driven by copper and pearl in the past. Making the most of its vast reserves of clay, limestone and sand found on the Hajar Mountains, RAK has built a flourishing manufacturing sector that has served as an engine for growth over the past two decades, and in recent years the emirate has also raised its profile as a tourist destination. Meanwhile, RAK’s expanding free zones have attracted more than 15,000 international companies to the emirate.

History

The area that comprises the modern-day UAE has long been home to civilisations, with archaeological evidence of some of these dating back thousands of years. Beginning in the 4th century BCE, the Dilmun civilisation, centred in what is now Bahrain, controlled the region from Kuwait to Qatar, with a related culture holding sway in the UAE and Oman.

The area around RAK later became known as Julfar, a name referenced by Arab writers around the time of the Islamic conquest of the Northern Emirates in the 7th century CE. Julfar subsequently moved near to modern-day RAK City, where it thrived, becoming a major regional trade centre in the 16th century. Julfar gradually lost prominence as the modern city of RAK developed, and by the 18th century this new city was linked to the Al Qasimi tribe to which the ruling family belongs.

The Al Qasimi tribe dominated trade in the lower Gulf in the 18th century, pitting it against the British East India Company and setting the stage for British military involvement. After bombarding the emirate in 1809 and 1816, British naval forces invaded it in 1819 to control the growing dominance of the Al Qasimi tribe. British occupation would have significant political and economic effects on the region. British forces occupied RAK for three years before the tribe’s leader signed a treaty establishing RAK as a protectorate in exchange for military protection in 1820.

The British signed similar treaties with a number of sheikhdoms in the region around the same time, leading to the creation of the so-called Trucial States, a political entity which was to endure until the withdrawal of the British from the region in 1971. Among other effects, Britain’s suppression of foreign attacks on the coast enabled RAK’s pearling industry to emerge as one of the emirate’s major sources of income and employment.

Pearling

Dating back centuries, the tradition of pearling has been as much a way of life and culture as a source of income. The UAE National Media Council writes that, “Pearling was never merely a trade or a means of subsistence for the population. It was an entirely integrated social system, which has left a rich heritage of traditions.” At its peak at the beginning of the 20th century, the Gulf pearling industry employed over 22,000 people and exported £1.7m worth of pearls, according to the UAE National Media Council.

Shortly after the First World War, however, the advent of Japanese cultured pearls and the global recession of the 1920s had a severe impact on the industry. One of RAK’s major trade partners, India, placed a high tax on Gulf pearls, making exports extremely expensive. These factors contributed to the collapse of the industry, leading to several years of economic decline in RAK.

Forming The UAE

By the mid-1960s, the UK was facing its own economic and political pressures and decided to end the treaty to protect Qatar, Bahrain and the seven emirates and withdraw from the region. The rulers of Abu Dhabi and Dubai, along with Sharjah, Ajman, Umm Al Quwain and Fujairah, formed a union and established the UAE in 1971. RAK followed suit in 1972, while Bahrain and Qatar remained independent.

Formalising the seven emirates into a country and preparing a constitution were key to helping catalyse an era of economic and political growth in the newly formed country. Sheikh Saqr bin Mohammed Al Qasimi, who ruled RAK from July 1948 until October 2010, led the emirate through this period and is credited with putting in place the systems and processes that have enabled it to develop from a small regional centre into a modern economy, as well as uniting various tribes.

Political Framework

RAK, like the other emirates of the UAE, is governed by a hereditary monarch. Sheikh Saud bin Saqr Al Qasimi has ruled RAK since 2010, following the passing of his father, Sheikh Saqr. The Supreme Council, a body made up of the seven rulers of the emirates, governs the UAE at the federal level. The country’s president, currently Sheikh Khalifa bin Zayed Al Nahyan, also serves as the head of the Supreme Council. The president is generally the ruler of Abu Dhabi, while the ruler of Dubai customarily serves as the vice-president and prime minister.

According to the UAE’s constitution, the federal government is mandated with oversight of foreign affairs, national defence, immigration, education and public health care. Most other issues are left to be handled by the local governments of the individual emirates. The Supreme Council is granted legislative and executive powers and ratifies all the laws in the country. The Council of Ministers, which is headed by the prime minister, acts as the executive branch. The prime minister, who also serves as the vice-president, proposes a Cabinet that has to be approved by the president.

The Federal National Council (FNC) is a 40-member advisory body that represents the interests of each emirate. In 2005 the government implemented reforms to give it more oversight. Under the changes, an electoral college, or representative group of citizens, elects half of its members, while the other half are appointed by the Supreme Council. The first elections were held in 2006. RAK is allocated six representatives in the FNC.

Demographics

RAK’s population has grown over recent years, rising from about 267,000 in 2009 to 413,000 in 2010, according to the RAK Department of Economic Development (RAK DED). This increase, however, is due to both natural growth and the introduction of new and more accurate data-collection methods. Population growth has risen by an average of 2% annually between 2011 and 2013 to 438,000, according to RAK DED’s “2014 Statistical Yearbook”.

Geography & Climate

RAK has a total land area of approximately 1700 sq km and is the fourth-largest emirate in the UAE, accounting for about 2.17% of the country’s territory on land. RAK borders the emirates of Umm Al Quwain, Fujairah, Sharjah and Ajman, as well as neighbouring Oman. Despite its relatively small size, the emirate boasts a varied landscape with 64 km of coastline, fertile plains and desert land, as well as the Hajar Mountains, which reach heights of up to 1900 metres. The weather varies over the course of the year, ranging from hot and humid in the summer (with highs often above 40°C) to cooler and drier in the winter months (with highs of 25-30°C).

Natural Resources

RAK is home to one of the world’s largest rock quarries, as well as high-quality deposits of limestone and clay, which underpin the emirate’s cement and ceramics industries. It is also home to some agriculture, with the plains around Digdaga producing fruit, vegetables, milk and poultry for the local market.

While the UAE has the world’s seventh-largest proven reserves of oil, equal to around 97.8bn barrels according to BP’s “Statistical Review of World Energy 2015”, the overwhelming majority, or around 92.2bn barrels, are in Abu Dhabi.

RAK’s reserves are more modest. DNO International, a Norwegian explorer and producer that merged with local energy firm RAK Petroleum in 2011, produced 12,000 barrels of condensate and 100m standard cu feet (scf) of natural gas in the emirate in 2012. As of the end of 2012, according to DNO, gross remaining recoverable reserves amounted to 13.8m barrels of oil, condensate and other liquids and 105.5bn scf of gas.

The New Economy

The establishment of the UAE coincided with the growth of the region’s hydrocarbons industry. Abu Dhabi was the first emirate to export oil in the early 1960s, followed by Dubai near the end of the decade. As RAK did not have similar oil reserves, it instead decided to pursue an industrial growth strategy that complemented the investment programmes being carried out in Abu Dhabi and Dubai. RAK DED reported total GDP rose by 7.6% in 2013, reaching Dh25.9bn ($7.05bn), or 1.8% of the UAE’s total GDP. RAK DED’s figures for 2013 also took into account free trade zone (FTZ) income for the first time, which boosted overall GDP to Dh30.95bn ($8.4bn).

RAK established the Union Cement Company in 1972 to make the most of its natural resources – the Hajar Mountains are a rich source of crushed rock and limestone for use in the production of building materials. Set up in the Khor Khwair Industrial Area, the Union Cement Company has grown to become a regional player with a total cement production capacity of around 4.8m tonnes.

Following RAK’s success with the Union Cement Company, Sheikh Saud established RAK Ceramics, a ceramic tile producer, in 1991. Since then the company has grown to become a conglomerate with a presence in 160 countries worldwide and is recognised as the world’s largest ceramics manufacturer. In 2014 Sheikh Saud sold 30.5% of RAK Ceramics’ shares to Cayman Islands-based Samena Limestone, which is a subsidiary of private equity firm Samena Capital.

Julphar, which is otherwise known as Gulf Pharmaceutical Industries, is RAK’s other globally recognised brand. It was established in 1980 by RAK’s ruler and has since become a global leader in the industry. Julphar has 12 production facilities, with the newest launched at a cost of $9.6m in Addis Ababa, Ethiopia in 2013. Julphar plays a major role in RAK’s health sector and is driving local investments, including a multimillion-dollar facility for the manufacture of insulin.

Catalysing Growth

RAK’s government has a number of initiatives designed to attract investment into the local industrial sector, including the RAK Free Trade Zone (RAK FTZ) and the RAK Investment Authority (RAKIA), both of which run dedicated free zones in the emirate. In 2000 the government set up RAK FTZ, which has a number of parks in the emirate, including the Business Park, Industrial Park, Technology Park and RAK Academic Zone. The free zone has become one of the fastest growing in the UAE and is home to more than 8000 companies from over 100 countries and 50 industry sectors. It offers companies 100% tax exemption, 100% foreign ownership, business-friendly laws and regulations, and access to RAK’s airport and seaports, as well as to transport and logistics facilities in neighbouring Dubai. RAK FTZ reported a successful year in 2013, when it signed 2900 new companies, up close to 30% on the previous year, and renewed 5100 licences for existing tenants. Natasha Ridge, executive director of the Sheikh Saud bin Saqr Al Qasimi Foundation for Policy Research, told OBG, “How do we get to where we need to be to become a competitive force and to strengthen the fabric of this city – these are the questions we ask ourselves daily.”

RAKIA was set up five years after RAK FTZ in order to manage and promote developments at the Jazeera Al Hamra and Al Ghail industrial parks, and the authority serves as a one-stop shop for establishing businesses. It has been undertaking a massive investment programme that aims to catalyse growth. RAKIA has also witnessed rapid expansion in recent years and is home today to some 7000 companies and manufacturers, a 22% rise over the 5718 companies operating in 2012. Another key player, the RAK Investment and Development Office (RAK IDO), is the central government office responsible for implementing development policies, managing the emirate’s credit rating, handling government investments and identifying investment opportunities.

In 2009 the emirate received an award for “Most Attractive Place in the Middle East for Foreign Direct Investment” from fDi Magazine, a publication that is part of the UK’s Financial Times Group. Aside from the ease of doing business, one major draw is that costs in RAK are significantly lower than in Dubai and Abu Dhabi. RAKIA, RAK IDO and the RAK FTZ provide additional benefits that support foreign investment. In 2014 RAKIA was chosen as “the best free zone in the Middle East” by the Global Banking and Finance Review, as well as “the best free trade zone in the GCC” by International Finance Magazine.

Credit Rating

RAK is considered an attractive and safe investment destination, and international credit ratings agencies Standard & Poor’s (S&P) and Fitch Ratings have maintained RAK’s “A” sovereign credit rating for 2015, pointing to a solid foundation for growth in the years ahead. In fact, its trade balance has become increasingly favourable, with RAK DED reporting exports more than doubling from Dh3.23bn ($879.2m) in 2009 to Dh7.07bn ($1.9bn) in 2014. S&P also cited the emirate’s limited direct reliance on hydrocarbons.

Tourism

Building on its established successes in industry, the emirate is now working to further diversify its economy. Tourism, in particular, has been singled out as a sector with growth potential. RAK has much to offer in this regard; it provides travellers with access to beaches, mountains and the desert, all within a 45-minute drive from Dubai International Airport – or, indeed, an even shorter drive from RAK International Airport, which is served by an increasing number of airlines.

Energy

Although the emirate has little in the way of hydrocarbons reserves, the local oil and gas industry has focused expansion on its two major upstream players: RAK Gas and RAK Petroleum. The two companies have interests in international exploration and production, and have been involved in improving domestic power supply, as well as the development of renewable energy. Utilities have seen new challenges as rapid population and industrial growth generate greater demand. The Federal Electricity and Water Authority continues to supply the majority of RAK’s utilities, although the RAK Electricity and Water Authority has been established to generate greater domestic capacity, alongside an increase in private sector involvement (see Energy chapter).

Outlook

With oil and mainly gas accounting for around 5% of GDP, the sharp drop in oil prices has little direct impact on RAK. It has a solid manufacturing base serving the UAE and beyond, and demand for RAK’s construction materials – a key pillar of the economy – is likely to remain firm. The incentives on offer in its free zones have helped to make it a major destination for foreign direct investment in the Gulf, while RAK also continues to benefit from its location on major trade routes in the Strait of Hormuz. Now the government has set its sights on further diversification by expanding into the education, health and tourism sectors.

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The Report: Ras Al Khaimah 2015

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