In a bid to attract new foreign investment inflows across a host of high-priority sectors, the government of Ras Al Khaimah launched a number of new initiatives for prospective and existing businesses in 2014. The RAK Department of Economic Development (RAK DED) recently announced plans to work with the UAE’s Ministry of Economy (MoE) to improve the emirate’s business environment, with the new agreement slated to streamline and de-centralise business licensing procedures, in addition to attributing new fee collecting responsibilities to RAK DED, highlighting the growing cooperation between federal and emirate-level governments.
At the same time, existing businesses within RAK Investment Authority’s (RAKIA) network of industrial parks are benefitting from services established to enhance communication between RAKIA’s executive management and park tenants, including the Tenants Committee, an online community portal and a client relations department. RAK Free Trade Zone (RAK FTZ), meanwhile, is shifting its strategy to focus on the quality of its tenants as it makes way for new companies from East Asia, in a bid to support healthy, sustainable long-term growth.
Preperation Of Projects
With few petroleum resources and a smaller population than Abu Dhabi and Dubai, RAK has benefitted from decades of growth in industry and manufacturing, and rising recent investment in its education, health care and tourism sectors. At the federal level, the MoE is responsible for preparing projects under the nation’s Vision 2021 development plan, including identifying the stages, legislation and proposals necessary to move major projects forward, in addition to conducting studies examining the activities across various ministries and sectors.
Until recently, the MoE granted final approval for all new business licences issued in RAK, with RAK DED, which is legally responsible for managing statistics and producing official RAK-specific data, coordinating with the MoE to carry out emirate-level licensing.
Free Zone Investment
The government has introduced several initiatives aimed at attracting new foreign investment in recent decades, including a network of FTZs and industrial parks, under the aegis of RAK Maritime City, RAK FTZ and RAKIA, which run a number of dedicated free zones in the emirate. RAK Maritime City, established in 2011, holds the government’s newest free zone, spanning an area of 8m sq metres, with plot sizes starting at 25,000 sq metres, and larger 40,000-sq-metre plots offering tenants exclusive berths and jetties. Free zone authorities hope to attract between 40 and 50 tenants active in the steel, petrochemicals and fabrication industries.
RAK FTZ was established in 2000 and has over 8000 businesses in 50 sectors from more than 100 countries. The FTZ holds four separate specialised clusters for the business, technology, industrial and education sectors. The zone has seen its occupied space expand significantly in recent years, with fDi magazine reporting a 24% increase in 2013, as nearly 3000 new firms established operations that year. “RAK FTZ is making a significant contribution that not only benefits RAK but also contributes to the economic development of the entire UAE,” Ramy Jallad, acting CEO of RAK FTZ and RAKIA, told OBG.
RAKIA was founded in 2005 to strengthen the investment climate in RAK and it has played a prominent role in the growth of the emirate. After several successful investments, the company’s key role was transformed and RAKIA began to concentrate on attracting regional and international businesses to RAK. Small, medium and large multinationals, as well as local and international corporations, have been drawn to the firm’s industrial parks.
The authority reports that over Dh1bn ($272.2m) has been invested in RAKIA’s parks to date, which has resulted in the development of 26m sq metres of land in the Al Hamra and Al Ghail industrial parks, with 95% of Al Hamra’s land leased as of 2015. Major clients include India’s Dabur, JBF RAK, Mahindra and Ashok Leyland; France’s Saverglass and Arc International; US firm Guardian Glass; Saudi Arabia’s Zamil Steel; UAE-based Falcon Technologies International; South Korea’s Posco; and the UK’s Vesuvius and Ahmad Tea.
Investor Incentives
Investors have been drawn in by a host of incentives that have given the emirate a major competitive advantage. In RAK, free zone tenants do not pay any corporate or income taxes, and foreign investors are permitted 100% ownership of their ventures and can fully repatriate profits. RAK’s free zones also offer much lower business costs than other UAE and regional free zones. Starter packages at RAK FTZ, for example, begin at Dh15,000 ($4100), compared to over Dh70,000 ($19,054) for a similar start-up package at the Jebel Ali Free Zone in Dubai.
As a result of these incentives and competitive advantages, both RAK FTZ and RAKIA received notable international accolades in 2014. fDi Magazine named RAK FTZ one of the top-10 free zones for small and medium-sized enterprises globally, while RAKIA was named “Best Free Trade Zone in the GCC 2014” by the London-based International Finance Magazine, as a result of its economic potential, strategies for FDI, transport links and cost-effectiveness.
New Agreements
Although the emirate’s free zones pride themselves on relatively quick and painless business licensing procedures, the government continues to move towards improving the operating environment for businesses, with RAK DED, RAKIA and RAK FTZ each launching initiatives to support these efforts in 2014. In July 2014 RAK DED announced it had been authorised to issue new licensing documents on behalf of the MoE, after reaching a landmark agreement with the ministry.
Under the new agreement, RAK DED is also authorised to collect fees on behalf of the MoE. Under the agreement, RAK DED will now receive applications for opening branches of limited liability, partnership and limited partnership companies, and will also send data on those companies to the MoE, including information on licensing and capital. The agreement also mandates RAK DED to collect fees and issue and amend documents for the businesses specified, using the e-Dirham online payment system, as well as transfer the income arising from these payments to the MoE, under the supervision of the Ministry of Finance.
The deal, which was signed by Mohammed Ahmed bin Abdul Aziz Al Shehhi, undersecretary of the MoE, and Ahmed Obaid Ahmed Alteneiji, general director of RAK DED, seeks to attract further investments into RAK via streamlined investment procedures, in line with Vision 2021’s goals of forging strong partnerships between public and private entities. It also marks an important step forward for federal and emirate-level government cooperation.
“We were the first emirate to implement a federal licensing system at the end of 2011, and our agreement in 2014 further strengthens our relationship with the MoE. Now businesses can go through all of their licensing procedures here, without needing to travel outside of the emirate, making RAK DED a truly one-stop shop,” Alteneiji told OBG. Under the agreement, RAK DED will charge Dh3000 ($817) to issue official documents to limited liability companies, Dh2000 ($544) for partnership or limited partnership entities, and Dh1000 ($272) for amendments. Firms opening a new branch will pay a fee of Dh1000 ($272).
Improvements
In May 2014 RAKIA launched a new platform for business leaders from within its network of tenants, called the Tenants’ Committee. The committee comprises leaders from within RAKIA’s Al Hamra and Al Ghail industrial parks, and acts as a platform for members to express issues and concerns to RAKIA’s executive management. RAK FTZ, for its part, is maintaining high service standards in the wake of rapid expansion, as the free zone stood at nearly 100% occupancy in 2014. Authorities are now working to allocating new land for development.
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