RAK: Growing appeal

The industrial sector in Ras Al Khaimah (RAK) has continued to post significant growth in recent years, thanks to a favourable business environment and prudent regulation.

Since hydrocarbons are in relatively short supply in the emirate, making up 5 % of GDP in 2010, according to the Department for Economic Development (DED), RAK has developed a highly competitive industrial base. Although developments in tourism and infrastructure – as part of the emirate’s economic diversification strategy – have taken centre stage since the downturn of 2008-09, industry has been gradually expanding its GDP contribution in recent years.

The sector, which includes steel production, mineral processing, limestone quarrying and manufacturing, now accounts for around one-third of RAK’s total GDP, which itself is forecast to grow to 8% in 2012, according to the DED.

The chief driver of industrial growth has been the steel and steel products industry, which the RAK Investment Authority (RAKIA) listed as the single-biggest segment in 2011. This is evidence that the emirate is now on top of the electricity supply problem it had seen in recent years. Whereas once persistent “power crunches” forced RAK Steel – largely owned by RAKIA – to reduce its output by 15%, RAKIA now operates its own power system, meaning that supply and demand, while sometimes tight, are now reasonably balanced.

This stability has meant that a range of new steel and steel-dependent operations have set up in RAK, the most recent of which include the world’s largest privately owned armoured vehicle facility, established in early April. One of the largest investments of its kind across RAK’s industrial free zones and owned by the Canada-based Streit Group, the new facility is divided into three consecutive phases, the first of which has now been completed at a cost of more than $21.7m.

New foreign investors in the steel segment also include Swiss-based mines and metals group UNIFICO, which is building a copper and gold smelting facility in RAK. Widely expected to be operational by the fourth quarter of 2013, with a total annual capacity of 500,000 tonnes of copper, the facility will use ore sourced from the company’s mines in Chile.

According to UNIFICO, RAK presented an obvious location choice, due to its deep-water port facilities at Mina Saqr, strong transport links with the rest of the UAE, as well as the array of facilities and business incentives offered by RAKIA.

Indeed, RAK’s industry environment is becoming one of the most attractive in the region. The emirate levies no income or corporate taxes and imposes no restrictions on repatriation of capital and profits, on hiring expatriate labour, or on foreign exchange movements. Furthermore, RAK permits industrial companies to be fully foreign owned.

This has not only attracted investments in areas of traditional strength, but has also broadened the range of industrial activities in RAK, to the effect that diversification has taken place within the sector itself.

For example, the emirate has continued to attract more specialised downstream firms, developing products with higher added value. In November 2011, local company Global Glass Solutions opened a $27.2m factory in RAKIA’s Al Ghail industrial estate, with an initial capacity of 360,000m sq metres of various types of glass per year, which the firm aims to increase to 1m sq metres per year within two years.

As well, newly established high-tech industry is boosting RAK’s share of non-oil exports, which according to the latest available figures, stood at $1.09bn in 2010, compared to $879m for the preceding year. Mid-2011, for example, saw Eternity Technologies set up the region’s largest industrial battery plant in RAK. Chiefly looking to overseas markets, Eternity Technologies ships 85% of its fuel cell products to the US, Europe and Asia, indicating that RAK’s growing reputation as a convenient and business-friendly location for industry is proving to be one of its competitive advantages.

Going forward, RAK looks set to increase not only the number of industries operating domestically, but also to continue widening the range of activities, making for a more diverse and more resilient economy. Moreover, diversification within the sector will create opportunities for associated activities of core industry, as well as more specialised processes. Improving infrastructure will also ensure that the emirate remains attractive to foreign investment and involvement.