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Ras Al Khaimah: Developing a Sustainable Economy


24 Mar 2009

Oussama El OmariOussama El Omari, CEO of the Ras Al Khaimah Free Trade Zone, discusses opportunities presented by the global financial crisis and sustainable growth of the RAK economy.

An overview of the RAK Free Trade Zone

The Ras Al Khaimah Free Trade Zone was established in May 2000 by Emiri Decree. Jebel Ali had been running in Dubai for 12 or 14 years as a successful free zone so we decided to look at Ras Al Khaimah; what it should be doing and what vision it can adopt. So in 2000 we visited different parts of the world to see successful free zones and what free zones should do for the economy and the community.  We concluded that the free zone was not supposed to be the typical industrial enclave and so we set it up as part of the economy. We took the decision that the free zone should be mini sites and every site supports the infrastructure – so we put one free zone in the city, one in the business park and we put one site next to the port. This means companies which need the port, the airport or whether it is office services in the business park or the city, or storage for manufacturing, we can situate companies in the right place for the facilities they need. So far have over 5,000 companies and the breakdown is 10 percent industrial and manufacturing and 90 percent are services and consultancy. We have seen increased business activity in the Emirate and because we are connected to Dubai with a state of the art highway, we get a lot of companies using this as a connection. A lot of companies are finding costs in Dubai are very high and so they have started relocating to RAK because we are offering a better service and a more affordable cost where they can make better profits.

Do you have many international companies?

Yes we have companies from 48 different countries – about 30 percent from India, 30 percent from the GCC and Iran and the rest from Europe and North America.

What are the foreign ownership laws?

The Emirate has implemented a free zone law that allows you to own 100 percent of your company, it allows you to recruit your own staff directly, it allows 100 percent ownership of the property, zero tax and the right to repatriate your capital. There is no income or wealth tax and it gives a lot of incentives to companies.  We also lease warehouses, land and offices and we can even provide opportunities for companies to set up outside the Free Zone if their type of industry requires that. For example, in the hotel and hospitality industry Group Orascom were allowed to buy a piece of land to develop a hotel, which is now operating.

Have companies moved to you from Dubai to cut their costs or have you also been affected by the global downturn?

In our case we see an opportunity because we adopted the free zone for cost cutting and shared services. For example, in the offices we have a business centre which is supported by Cisco. We have lots of companies using flexi-desks, flexi-offices and shared offices, so companies now come to us with the crisis and Dubai’s high costs. In the prime areas it is $150 per sq ft whereas in prime areas in Dubai it is $20,000.  Then again in Dubai you have the issue of traffic, the cost of living and rent and this caused lots of companies to start thinking about looking for somewhere else and here they find our costs  80 percent less than Dubai.  The crisis came at the end of last year and companies started looking at their costs, their industry and IT and putting these things together in what we call the campus of the back office. So in our way we see it as an opportunity; we have companies cutting costs in this crisis and we help to try and make sure they can compete and therefore survive.

Have the numbers of new companies coming in remained the same as last year?

Yes; in the month of February it was 120 which is the same as last year, so we are maintaining our registration of companies and set up.  There are factors which are keeping us above the crisis because we are coming up with a lot of innovative ideas. An example, which is very important for us, is we have set up business centres in Dubai and Abu Dhabi. We tell companies that if you want to come here and you want to distribute products in the region, we can give you a warehouse in RAK which is one hour away from Dubai where you can store your products, but if companies want to hold meetings they can use our office in Dubai. So we have a platform for them in Dubai and Abu Dhabi.  This doesn’t exist anywhere else and no one else is doing this. So our innovative approach has really impacted on the decision for companies to come and use our cost effective services which can help sell their products.

Which development projects are you undertaking?

We are working on a 38 hectare property called Navigator Business Campus. We are setting up the back office programme and the investment is half a billion dollars. We are working on this in phases because we can see there is a need. We have just finished the feasibility study and we are commissioning a detailed engineering plan and we have learned from Dubai – people live in one area and work in another and it costs them a lot of money to commute.  What we are doing with this $500mn investment is to develop a campus, so everything is in one place.  People will not commute, so they are going to work on one side and live on one side, have a school and it is going to help the businessman do business in a very cost effective way.  We have another one at the airport and we are working on a feasibility study on a maintenance and repair operation next to the airport with an investment of about $160mn. We also need a lot of city hotels which can support our clients when they come so they do not have to stay in resorts and conduct business expensively. So we are building cost effective hotels to meet his need.

Are you undertaking infrastructure projects?

Yes there is a big agenda for infrastructure projects - this is one of the things that the government has taken up. The roads and port require more than $5bn of development and the Government is looking at private equity partners to come and join the government to develop this.  The airport is also a huge development and the Government is interested in recruiting an operator on a long term basis.  There is also a lot of infrastructure investment needed  for roads and power. The government plans to invest heavily in infrastructure and power generation.  One of their latest investments is in Indonesia where they have bought coal mines and plan to build a rail line to transport the coal to the port for export. This is part of RAK Government’s plans to source coal power for a power plant it is building in the emirate. So we are looking at $10bn of investment within the next five years in fundamental infrastructure – port, airport and road expansion. If we are going to keep up the same pace of attracting investment then these are the priorities which need to be invested into in the future.

Will the tightening of liquidity affect the government’s ability to attract private equity?

The government in RAK has no problem in funding infrastructure projects but some of the projects, like the port, require operation so they would like to encourage private equity to come in as well. But the funding will come from the government.

How well placed do you think the UAE is to withstand the financial crisis?

The UAE is a wealthy country and it has sovereign money. The government is going to inject and stimulate the economy by keeping real estate projects going so I see the UAE as a country that is going to survive this crisis; there is liquidity available and it is just a matter of time.  There are a lot of large projects in real estate, particularly in Abu Dhabi, and they are going ahead with a lot of these. I think Dubai is also getting itself together to kick start the economy. Abu Dhabi has lots of projects in place and they will still go ahead. RAK is the same and is geared up to go ahead with developing infrastructure. I certainly don’t think it will face the same crisis as in Europe and North America.

Have you had to scale back or postpone any of your projects?

With RAK, we are developing the economy. We did not really get involved in speculative sales so lots of the projects we did not develop until we had clients, were bringing in businesses and until we were doing business here. We did not adopt projects that were being sold off plan which resulted in the whole sub-prime crisis and which has happened in Dubai. In our way, we are  developing  projects based on the market so it is market driven . We attract good companies and then we build infrastructure for them so it is a more sustained economy, it is not based on speculation.

I see that the financial crisis, especially in the Middle East, is not going to affect the economy as much as Europe and North America. But we have seen a whole programme of financial stimulus and the government has started injecting money into the banks and the banks start building confidence to lend money. We see things can be turned around in six months, a maximum of one year. As an investment agency we see positive things, we are trying to lower  costs and be more competitive and within the next year things will go back to normal and business will go on.



Source: Cityscape Intelligence