RAK: Targeting small businesses

Small and medium-sized enterprises (SMEs) play a growing role in RAK’s economy, enjoying government support and benefitting from continued upgrades to the local infrastructure.

Indeed, SMEs play an important role in the wider economy’s overall growth: according to Belaid Rettab, the senior director of economic research and sustainable business development at the Dubai Chamber of Commerce, SMEs account for as much as 30% of the UAE’s GDP. For its part, the RAK government has supported the establishment of SMEs within the emirate through two separate governmental organisations, the RAK Free Trade Zone (RAK FTZ) and the RAK Investment Authority (RAKIA).

Established in 2000 by an Emiri decree, the goal of the RAK FTZ is to attract value-added and knowledge-based businesses. To entice these types of organisations, RAK FTZ offers a number of incentives, including corporate tax exemptions, a lack of foreign exchange controls and repatriation of 100% of capital and profits.

The government-owned organisation has registered more than 5000 companies from over 100 countries, including India, the UK and Egypt, and it continues to grow. During the first quarter of 2011, some 970 companies renewed their licences, up 37% from the same period last year. Similarly, 522 new companies registered with the organisation during the first three months of 2011, an increase of 17% over first-quarter 2010.

The vast majority of these companies – 95% as of early 2010 – are SMEs, according to the CEO of the RAK FTZ, Oussama El Omari. Officials have said in the past that the free trade zone focuses on the development of SMEs through the promotion of shared facilities. “We want to be an incubator for entrepreneurs that intend to develop and test their technologies,” El Omari told OBG.

SMEs can also take advantage of the services offered by RAKIA, which operates both free trade and industrial zones. Created by an Emiri decree in 2005, the organisation aims to reduce or remove barriers to starting a business in the emirate. RAKIA provides land, infrastructure, utilities and storage, as well as assistance with administrative needs such as business licensing, investment advice and visa assistance.

Between 2006 and 2009, the total number of businesses registered with RAKIA increased substantially, from 291 to 2478. Like RAK FTZ, RAKIA’s registered companies come from around the world. Around 30% originate from India, another 30% are from the UAE and the Middle East, while the rest are split among the US, Europe, East Asia and elsewhere.

The authorities have also addressed concerns that might keep small businesses away, such as recurring electricity and water shortages. Last April RAKIA announced the construction of a new water recycling and treatment plant at the Al Ghail Industrial Park. Set up jointly by RAKIA and Hitachi Plant Technologies, the Dh7.3m ($1.9m) plant is expected to be able to treat 2000 cu metres of wastewater per day.

The resulting water can be used for industrial purposes and farm irrigation, making it a valuable resource in a region where agriculture consumes up to 80% of water reserves, according to the Dubai-based Gulf Research Centre. In addition to increasing the water supply, the new system at Al Ghail will reduce the energy requirement for treating wastewater by more than 30%, according to Tadahisa Okabe, the director-general of the Japanese governmental organisation that funded the development of the facility.

A number of utilities projects – including expanding capacity and electricity grid upgrades – are being supported both by the RAK emirate and UAE federal government. Through these sorts of improvements and other government initiatives, authorities have made it clear that SMEs are a priority. Indeed, with their potential to expand the private sector’s role in the economy, promote innovation and entrepreneurship and create jobs, these enterprises have much to offer RAK.