Emirates in UAE and most of the other countries in the region. The mineral resources that the Emirate possesses render it globally competitive in a few manufacturing industries. The contribution of the manufacturing sector to the Emirate’s GDP has grown at a healthy rate in recent years. Trade is an important contributor to the economy too. Besides, the Emirate also has the potential to be marketed as an attractive tourist location.
The government of RAK has been proactive in creating an infrastructure conducive to free trade and enterprise. While the robust infrastructure nurtures businesses in the Emirate, the government further gives impetus through a regulatory set-up, which encourages business investments. The regulatory and legal systems not only provide incentives for local investments, but also encourage foreign investments. Foreign ownership of business, regulated by Federal Commercial Companies Law, is generally limited to a maximum interest of 49%. However, foreign companies can set up fully-owned businesses in the free zone areas. Many of the foreign companies also operate in RAK through commercial agents. Only 100% UAE-owned companies can be registered as commercial agents. Companies also take the route of establishing limited liability companies in which though the foreign ownership cannot exceed 49%, the share of profits/loss can be up to 80%. Another feature favorable to the foreign investment is the step taken to allow foreigners to own and register properties in a few areas in the Emirate.
Like the rest of the Emirates, RAK too has been working to diversify its revenue sources. Over the last few years, RAK has worked to leverage its main strengths, viz., availability of abundant agricultural and mineral resources, and its vantage position in the Arabian Gulf towards this end. The three agencies – Investment & Development Office (IDO), Ras Al Khaimah Free Trade Zone (RAKFTZ) and RAK Investment Authority (RAKIA) – have been at the forefront of the government’s initiatives in this direction.
One obvious beneficiary of these attempts at revenue diversification has been the Emirate’s manufacturing sector. In addition to its existing cement and ceramic manufacturing companies, the Emirate has of late attracted quite a number of manufacuring companies in its two free trade zones. By the end of 2006, industrial units numbered about 600, or 25%, of the total of about 2,400 companies already registered with the RAKFTZ. RAKIA, on the other hand, has so far attracted steel manufacturing, food processing, diaper manufacturing, and energy equipment assembling units. Fully functional free trade zones are, therefore, likely to contribute gradually increasing share to the non-oil GDP of the Emirate in the medium-long-term.
Outside the free trade zones too, the sector has seen a spurt in activities. The number of manufacturing establishments in the Emirate has grown at a healthy rate over the last four years, with a corresponding growth in investments and workforce. Above all, the sector has also attracted a high level of fixed capital formation in recent years. Gross capital formation in the sector was the highest across all sectors in 2004, representing 15.0% of the total gross capital formation in the Emirate that year.
The labor force in RAK has a high proportion of expatriates, as in the case of most of the Emirates and other GCC countries. The immigration policies followed in the Emirate are relatively more liberal, in line with those followed elsewhere in UAE, underscoring the need of an expatriate work force to operate and develop a fast growing economy. This coupled with liberal labor laws adds to the industrial competitiveness of the Emirate.
Almost in tandem, the government has set in motion measures to improve its port infrastructure. The recent opening of the new container terminal at RAK's Saqr Port by KGL Ports International should give further fillip to the Emirate’s foreign trade. The Kuwait-based company is said to have invested US$70mn in the current phase, part of US$250mn investment plan to increase the capacity of the port. The port's capacity is likely to be enhanced from the current 350,000 twenty-foot-equivalent units (TEUs) to three million within five years. The Emirate is also improving its Ras Al Khaimah port facility with an investment of AED110mn. The second phase is likely to see construction of a 400-metre berth at a cost of AED28mn. The port plays an important role in the country’s exports and re-exports. It receives a large number of medium and large ships and dhows from neighbouring countries.
With Dubai witnessing a rapid increase in the prices of residential units, people may be forced to acquire residential units in other Emirates close to Dubai. RAK, with its proximity to Dubai and a good connectivity with the latter through the newly commissioned Emirates Highway, offers a very good alternative to staying in Dubai. The government has already opened the real estate sector to expatriates. A healthy demand for housing units in RAK during the coming few years can reasonably be expected, driving a robust demand for building and construction activities in the medium-term. Real estate projects worth over AED17bn (US$4.7bn) are currently in various stages of development across the Emirate. The projects span residential, commercial and tourism developments.
On the tourism front, a new 5-star beach resort has just been opened in the Emirate. The number of hotels in the Emirate is expected to reach 25 in the coming few years. Foreign investors are also likely to be allowed to participate in the industry’s development. The newly established Ras Al Khaimah Airways is likely to add to the government’s tourism push. The natural beauty of the Emirate, along with the improving tourism infrastructure, is likely to bring in tourists in increasing numbers moving forward.
With all these developments, the government of RAK would seem to have set about firmly on the path of diversifying the Emirate’s economy. Leveraging its geographic location at the entrance to the Arabian Gulf and its proximity to Dubai, along with its natural endowments, the Emirate is setting the perfect policy and infrastructure environment to achieve its goal.
