Mover and shaker: Encouraging economic growth with an eye towards social development

Over the past decade the emirate of Ras Al Khaimah has developed a reputation as an up-and-coming player in the Middle East and further afield. In 2011 RAK’s status continued to grow, despite political volatility elsewhere in the region and ongoing concerns about international financial stability. This is largely the result of a series of ambitious development programmes put in place over the past 10 years which have positively impacted a substantial number of areas, such as industry, trade, foreign investment, education and health care. The government, with Sheikh Saud bin Saqr Al Qasimi at the helm, is expected to continue to invest in all these areas in the coming years. This bodes well for both ongoing development and the emirate’s growing international reputation as a business-friendly, financially sound investment destination.

AN HISTORIC PAST: RAK has been an economic centre off and on for thousands of years, due to its geographic location, which sits near a number of ancient trade routes between Europe and East Asia. The earliest of a series of archaeological finds in modern-day RAK and the UAE dates back to the third millennium BCE, when the area was home to an ancient civilisation active in fishing, copper smelting and trading. Other excavation activities in the emirate have uncovered remnants of a number of major Sassanid-era (224-651 CE) settlements, in addition to wooden houses constructed during the Qahtani empire, which was active during the 8th and 9th centuries.

In 1819 the British took control of the Northern Emirates. After three years of occupation, Sheikh Sultan bin Saqr Al Qasimi, the leader of the influential Al Qawasim clan (and Sheikh Saud’s ancestor) that had controlled the area since the early 18th century, signed the General Maritime Treaty with Britain, establishing RAK as a protectorate in exchange for protection from the Ottomans, who were threatening the region.

From the mid-1800s through the late 1960s, RAK was a member of the Trucial States, a group of British-aligned sheikhdoms in the Gulf that included all of the emirates and part of present-day Oman. RAK’s location was primarily used for controlling shipping routes to and from India during this time.

THE MODERN ERA: In 1972 RAK joined the recently formed UAE – the other six emirates (Abu Dhabi, Dubai, Ajman, Sharjah, Fujairah and Umm Al Quwain) had come together only a short time before – signalling the beginning of a long period of development and modernisation. Sheikh Saqr bin Mohammed Al Qasimi, who had been in power in RAK since 1948, oversaw the emirate’s accession to the new nation, and is credited with transforming RAK from a rural, agrarian society into the economically dynamic emirate it is today. When he passed away in October 2010, the sheikh was in his early 90s and had been in power for nearly 60 years, making him the world’s longest-serving ruler.

Though Sheikh Saud formally succeeded his father in 2010, he had been in charge of the day-to-day operations of the emirate since 2003, when he was appointed crown prince and deputy ruler. Previously he served as chief of the Ruler’s Court and chairman of the RAK Municipal Council. Since 2003 Sheikh Saud has worked to roll out an ambitious reform agenda, with a focus on attracting foreign investment, building up major local industries and improving inhabitants’ quality of life, primarily by investing in large-scale health and education initiatives. He has also worked to boost transparency in both government and the private sector.

ONE FOR ALL: The seven emirates that make up the UAE are administered from the federal seat in Abu Dhabi, which oversees a handful of key sectors, including national security and defence, currency and fiscal policy, labour relations, foreign affairs, immigration, education standards and communications policy, among others. Outside of these key areas, each individual emirate is free to undertake new developments and policies as it sees fit. RAK has used this autonomy to invest heavily in industry, education and health care.

At the national level the emirate is represented by Sheikh Saud, who sits on the Supreme Council – the presiding federal body – alongside the rulers of the other six emirates, including Sheikh Khalifa bin Zayed Al Nahyan, the ruler of Abu Dhabi, who is also the UAE’s president, and Sheikh Mohammed bin Rashid Al Maktoum, the ruler of Dubai, who acts as the country’s prime minister and vice-president.

The UAE’s government is organised into executive, judicial and legislative branches. The executive branch comprises the Supreme Council and the Council of Ministers, or the cabinet, which is overseen by the prime minister and two deputy prime ministers, with membership made up of the UAE’s 22 government ministers. The legislative branch is overseen by the Federal National Council (FNC), which is made up of 40 representatives, half of whom are elected by the Electoral College – a group of prominent citizens – and half of whom are appointed by the Supreme Council. The number of representatives each emirate sends to the FNC is a function of its population and size. RAK and Sharjah, for example, each send six representatives (three elected and three nominated by the ruler), while Abu Dhabi and Dubai send eight and the remaining four emirates send four.

Though the FNC has been active since the UAE was founded in the 1970s, until the mid-2000s the ruler of each emirate appointed all representatives for his respective area. This changed in 2006, when the UAE staged its first-ever public election. Around 6000 prominent Emiratis made up the Electoral College in the first contest. During the nation’s second round of national elections, which took place in late September 2011, this number jumped to 129,274 (see box). Due to the infancy of electoral politics in the UAE, the FNC currently remains an advisory body, though its powers have grown in recent years. In December 2008, for example, the Supreme Council introduced a package of constitutional amendments that increased the FNC’s reach and powers considerably. These included an amendment that extended representatives’ terms from two years to four years and another that broadened the FNC’s purview to include international agreements and treaties. The FNC is expected to continue to gain powers in the coming years.

LEADING LOCAL DEVELOPMENT: While RAK is a major player on the national stage, the emirate’s rising international reputation is primarily the result of the local government’s policies and development programmes. The biggest firms in RAK, for example, are located in industrial areas operated by RAK Free Trade Zone (RAK FTZ) and the RAK Investment Authority (RAKIA), both of which were created and are overseen by the government. RAK FTZ, which was established by royal decree in May 2000 and remains 100% government-owned today, is home to more than 5000 firms spread throughout four separate industrial parks. In 2011 the entity saw 2033 new company registrations in total, up 17% on the 1740 firms registered in 2010. In particular, RAK FTZ has worked to attract small and medium-sized enterprises (SMEs) in several sectors. RAKIA, set up by royal decree in 2005, operates two industrial parks and a variety of business entities in the emirate. A handful of RAK’s largest firms are based in RAKIA-operated areas, including RAK Ceramics, the largest ceramics producer in the world with an annual output of 117m sq metres. RAK Ceramics exports to over 150 countries. Furthermore, RAK boasts the largest rock quarry in the Gulf region, as well as high-quality limestone and clay deposits, which help contribute to the ceramic sector’s dominance.

In addition to the industrial areas, the authority oversees RAK Offshore, a one-stop shop for setting up a business in the emirate. In 2008 and 2009 RAKIA made a number of major investments in foreign markets – including Georgia, Indonesia and India – though since late 2010 it has been working to divest itself of most of these holdings and focus on investments at home. Both RAK FTZ and RAKIA have become major points of investment and trade between RAK and a wide variety of foreign entities and governments in recent years, strengthening international cooperation and trade relations. In 2012, for example, Michael Corbin, the US ambassador to the UAE, visited RAK FTZ and Maritime City, among other centres of investment, in an effort to highlight the importance of RAK-US trade relations.

LOCAL PRIORITIES: Like the UAE as a whole, RAK’s economy has remained well insulated against the long-term negative effects of the 2008-09 international financial crisis, unlike parts of the EU and the US. With this in mind, the local government has continued to invest heavily in social reform programmes at home. In addition to launching a number of new universities in recent years, the government’s ongoing higher education improvement programme includes initiatives aimed at boosting the quality of education in the emirate in an effort to better prepare local students to compete in the job market (see Education chapter). The Sheikh Saud bin Saqr Al Qasimi Foundation is also helping to develop and foster research collaboration in both RAK and the UAE as a whole, while the RAK Centre for Advanced Materials is poised to become a regional leader in high-tech science for both the UAE and the region. Similarly, in conjunction with the federal Ministry of Health, RAK has been investing heavily in a project to improve the emirate’s health care facilities (see Health chapter). RAK’s e-government initiative, launched by Sheikh Saud in 2003, has also benefitted from government support in recent years.

CHALLENGES: While RAK has accomplished quite a lot over the past decade, the emirate faces a number of ongoing challenges. As the industrial sector has grown, the local power network has been strained, which has been a major issue for energy-intensive manufacturers and other industrial concerns. In an effort to overcome this issue, the Federal Electricity and Water Authority (FEWA) is in the midst of a Dh1.4bn ($381.1m) project to develop the electricity infrastructure in the Northern Emirates.

The emirate’s booming industrial sector also faces growing competition from other industrial areas within the UAE and throughout the region. While RAK FTZ and RAKIA have both grown substantially in recent years, increasingly they vie for foreign investors with well-funded industrial areas in Abu Dhabi and Dubai, for example. The UAE dominated fDi Magazine’s 2011-12 “Free Zones of the Future” study, with 15 of the top 25 free zones located in the country. RAKIA’s industrial park took second place, while RAK FTZ took fourth.

OUTLOOK: Despite these challenges, RAK is expected to continue to take on a prominent role in the UAE for the foreseeable future. Government-led economic liberalisation has resulted in a thriving industrial sector, which has in turn boosted RAK’s reputation both at home and abroad. A number of ongoing social reform programmes are expected to turn the emirate into a major regional player in the areas of higher education and health care in the coming years. Similarly, as internet penetration rates continue to improve throughout the UAE, RAK’s e-government project will have a growing impact. All this should help ensure RAK remains a key part of not just the UAE’s economy, but also a vital piece of the economic framework of the region.