Maximising growth potential: A strategic location and local resources have proven key to the emirate’s development

Ras Al Khaimah is one of the constituent emirates of the UAE, with the other six being Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quwain and Fujairah. Within this group, RAK stands out for its long and rich history that has invariably revolved around global exchange. While in the past trade was largely driven by copper and pearl exports, the emirate’s economy is now much more diversified, bolstered by cement and ceramics industries that draw on the natural resources of the Hajar Mountains. To this it has added a growing pharmaceuticals industry, rapidly expanding free zones and a burgeoning tourism sector, among other lines of business. While Abu Dhabi and Dubai continue to dominate the UAE’s economy, RAK’s compelling growth narrative has seen its profile rise in the domestic, regional and international arenas in recent years.

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 today’s 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 from which the current ruling family descends.

The Al Qasimi tribe dominated trade in the lower Gulf in the 18th century, making it a rival to 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 1820 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 protection from external forces in 1822.

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 culture and way of life 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 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 formed a union and established the UAE in 1971, along with Sharjah, Ajman, Umm Al Quwain and Fujairah. 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 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 into a modern economy.

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 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 constitution, the federal government is mandated with the oversight of foreign affairs, national defence, immigration, education and public health. 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 significantly over the past decade. According to the RAK Department of Economic Development, the population was 416,600 in 2012, up 39% from 2011 when it was around 300,000. This sizeable increase was due to both natural growth as well as the introduction of new and more accurate data-collecting methods. The figure for 2012 represents 5% of the UAE’s total population, which was about 8.2m. The government forecasts that the emirate’s population will reach 750,000 by 2020. UAE nationals account for around 70% of residents in RAK.

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 and Sharjah, 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 has the largest rock quarry in the Gulf, 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 Oil & Gas Journal data from early 2013, the overwhelming majority of these are in Abu Dhabi (around 94%). 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 cu ft 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 cu ft 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 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 Kwair Industrial Area, the Union Cement Company has grown to become a regional player with a total cement production capacity of around 4.8m tonnes. The RAK government, the Abu Dhabi Investment Authority and a number of private investors now own the firm, which announced a net profit of Dh48.59m ($13.23m) in 2012.

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 $1bn conglomerate with a presence in 160 countries and is recognised as the world’s largest ceramics manufacturer. RAK Ceramics is a major contributor to the local economy, employing over 12,000 people globally and generating revenues of Dh3.17bn ($863m) in 2012.

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. Total revenues rose 10.5% to $190m for the first half of 2013, with net profit up 5.5% to $31.82m. 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 also driving local investments, including a multimillion-dollar facility for the manufacture of insulin that opened in 2012.

Catalysing Growth

RAK’s government has a number of initiatives that are designed to attract investment into the local industrial sector, including most prominently 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, Aviation Park and Academy Zone. The free zone now boasts over 6000 client companies and has become one of the fastest-growing free zones in the UAE. 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 the transport and logistics facilities in neighbouring Dubai. RAK FTZ reported a 70% year-on-year increase in new company registrations in first-half 2013, with 1994 new firms joining its rolls; renewals were up 17% year-on-year as well, to a total of 2696, over the same period.

RAKIA was set up five years after RAK FTZ to manage and promote development in 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. According to RAKIA figures, it had issued a total of 5718 onshore licences by May 2012, in addition to 6223 offshore licences. The licences were broken down in the trading (37%), consulting/services (29%), commercial (14%), industrial (13%) and media (7%) sectors, and these were issued to investors from a variety of markets, including the UAE (12%), the Middle East (18%), India (28%), Europe (20%), Asia/ Southeast Asia (9%), the US (3%), Russia/the Commonwealth of Independent States (3%) and others (7%).

Another key player, the RAK Investment and Development Office (RAK IDO), is the central government office responsible for implementing economic development policies, managing the emirate’s credit rating, handling government investments and identifying strategic 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 lower than in Dubai and Abu Dhabi. RAKIA, RAK IDO and the RAK FTZ provide additional benefits that support foreign investment. International credit ratings agencies Standard & Poor’s and Fitch Ratings have maintained RAK’s “A” sovereign credit rating for 2013, pointing to a solid foundation for growth going forward.

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 the local airline, RAK Airways. But the emirate also offers visitors something more. As Crown Prince Sheikh Mohammed bin Saud Al Qasimi told OBG, “The combination of natural beauty and cultural history allows guests to experience a more traditional style of life that has become somewhat difficult to find elsewhere on the Arabian Peninsula. As we expand our tourism infrastructure, we are not merely trying to avoid disrupting the natural environment. We are actually seeking to showcase it.”

Outlook

The political stability of RAK and the greater UAE is a critical factor supporting recent growth. However, its dependence on trade and travel from Europe and Asia means it is exposed to some external risks. The eurozone crisis has had a significant impact, although RAK was not as badly hit as its southern neighbours.

Making the most of its natural resources, RAK has successfully established a thriving industrial sector that has served as an engine for growth over the past two decades. Its cement and ceramics firms have grown from local into regional and international players, while its business-friendly approach and the incentives on offer in its free zones have helped to make it a major destination for FDI in the Gulf. The government has now set its sights on diversifying the economy by leveraging the emirate’s natural assets – including beaches, mountains and desert – to build up the local tourism industry.