The emirate’s coastline stretches for about 64 kilometres along the Gulf and is backed by a fertile hinterland, with a separate enclave in the heart of the Hajar Mountains. Both parts share borders with the sultanate of Oman. Ras al-Khaimah also possesses several islands in the Gulf, including the Greater and Lesser Tunb, whose ownership is contested by Iran, which has occupied them since 1971. The emirate’s name literally translates as ‘head of the tent’.

In October 2010, Ras al-Khaimah’s ruler Sheikh Saqr bin Mohammed al-Qasimi passed away aged 92, following a long period of illness. He had governed since 1948 and, at the time of his death, was the world’s longest-serving ruler. His son, Sheikh Saud bin Saqr al-Qasimi, is now head of state. He has been a reforming figure in the emirate since becoming crown prince in June 2003. Sheikh Saud played a key role in the development of Ras al-Khaimah Investment Authority (Rakia) and the other government bodies that lie at the heart of the emirate’s diversification ambitions. His efforts have given Ras al-Khaimah a reputation of being business-friendly.

Economy

Like the other northern emirates, Ras al-Khaimah leans heavily on the federal government in Abu Dhabi to cover the costs of infrastructure, education, healthcare and other social services. This frees up the emirate to do what it wants with the money it earns, secure in the knowledge that most basic amenities will be provided for.

Ras al-Khaimah’s economy, which was founded on quarrying and supplying construction materials to the rest of the region, has rapidly diversified in the past decade.

The emirate’s gross domestic product (GDP) doubled from $2.1bn in 2001 to $4.3bn in 2009, with the financial services and real estate sectors contributing the strongest growth. A new airline, Rak Airways, was set up in 2006. The following year, property developer Rakeen Development was established with plans to create Al-Marjan Islands, a cluster of four artificial islands. A series of new university campuses were built and free zones were created to attract international investors. The growth was reminiscent of the development model being pursued in Dubai, albeit on a far smaller scale.

Yet the economic landscape has become more complicated in the past few years, and unfortunately Ras al-Khaimah’s successes have been followed by problems. Rak Airways was temporarily forced to ground its small fleet of aircraft in late 2008 due to financial difficulties. The flagship institute of the education programme – a campus of the US’ George Mason University – was shut in May 2009, with the US partner also citing financial difficulties.

A bigger issue, however, was the recession in Dubai. This began in late-2008 and effectively shut off one of the key markets for Ras al-Khaimah’s construction materials industry. Companies such as Stevin Rock, Rak Rock, Union Cement Company and Guardian Zoujaj International Float Glass Company have formed the basis of the emirate’s economy for many years, making use of the plentiful limestone and other raw materials stored in the Hajar mountains. While they are no longer the emirate’s main source of employment and revenues, these firms still play a critical role in the economy.

With all these problems coming in quick succession, the question now for the emirate and its new ruler is how quickly it can adapt to what is a far more complex economic environment. The evidence to date suggests Ras al-Khaimah is acclimatising well to the challenging conditions. With a local population of just 241,000, the economy depends on exports and innovation for growth and it is susceptible to shocks. But it has also proved adaptable.

Revenues among some key local companies have fallen sharply, but most have managed to stay profitable by shifting their focus to other Gulf markets. Rak Airways resumed flights in October 2010, with a focus on cities in Asia most useful to the emirate’s expatriate labour force. Drug manufacturer Gulf Pharmaceutical Industries (Julphar), which was the first of its kind in the region when it was set up in 1980, has also been growing steadily over the past few years.

The emirate has been helped by several internal and external factors as it has grappled with the tougher economic conditions, not least the relatively broad-based economy it has managed to create. The financial sector is also increasingly important. Even as the construction firms have been struggling, National Bank of Ras al-Khaimah (Rakbank) has continued to grow strongly. It made AED1bn ($272m) profit in the first three-quarters of 2012. “The whole emirate is run in a very business-like way,” says Charles Seville, a director in the sovereign group at US ratings agency Fitch Ratings, who conducted a fact-finding visit to the emirate. “It’s a bit like a conglomerate. One part might be doing badly, but another part will pick up the slack. The original basis of the economy was quarrying, but that’s now quite a small contributor to the budget.”

Ras al-Khaimah has also been helped by the relatively cautious and prudent nature of the development plans it has followed. This has meant that it has been far more successful than Dubai at keeping its debt levels in check. Although public debt levels had risen as high as 32 per cent by the end of 2009, they have now edged closer to 20 per cent. The government has also been more cautious than Dubai in its involvement with real estate projects. It may have decided to develop artificial islands, such as Al-Marjan Islands, but it sold the land to developers rather than getting directly involved in taking on the risk of development, as Dubai did with government-owned developers such as Limitless and Nakheel.

Ras al-Khaimah is also keen to establish itself as a tourism destination. It has increased its hotel capacity in recent years, with the UAE’s first Waldorf Astoria expected to open in the emirate in early 2013. Tourist arrivals rose by 40 per cent in 2011, according to government figures, and are forecast to exceed 1 million in 2012.

Ras al-Khaimah’s GDP totalled $4.3bn in 2009 and accounted for 1.4 per cent of the UAE economy.

Free Trade Zones

Rak Free Trade Zone

Established in 2000, Rak Free Trade Zone has one of the best reputations of the free zones in the UAE. Low set-up costs, efficient processing, long-term support and a range of location options have led to the zone licensing more than 6,000 businesses.

Maryam al-Mursheddi al-Shehhi, deputy director general of Rak Free Trade Zone, says there are several reasons for its success, but believes the original approach taken by the organisation – to set up multiple zones in central locations – was critical. “Some countries are establishing zones 200km away [from the city]. We believe that is the wrong concept. We asked the ruler by decree to assign for us a few sites. One of those sites that is very important is right in the middle of the town of Ras al-Khaimah, one is next to the port, one is next to the airport and one is on the way to Dubai,” she says.

In this way, new businesses coming to the emirate are much better located for both their own interests and the economic interests of Ras al-Khaimah, says Al-Shehhi. “The emirate really needed services; there were no engineering companies, no consultants, no designers, nothing to support the development of new projects. So we built the business park right in the heart of town. We can use the hotels, as well as the conference and exhibition centre. Clients have access to everything they need, including the Ruler’s Court and the different government departments,” she says.

Fast-tracking the licensing procedure was also a key component in the strategy. “We were able to provide a consultancy professional licence within a day. That really gave us a name and, within three or four years, we had licensed 4,000 companies,” says Al-Shehhi.

In addition to helping set up a company, Rak Free Trade Zone provides ongoing support to businesses, usually small- and medium-sized enterprises.

“We have established a programme called ‘mazeed’, which means ‘additional’ in Arabic. We don’t just license the facility; new businesses need a lot more help than that. We help with distribution, getting orders and finding buyers,” says Al-Shehhi.

Rak Free Trade Zone invests in offices and facilities around the world, which firms can use. This raises awareness of Ras al-Khaimah in other markets, both those close to home such as Dubai and Abu Dhabi, and those further afield such as the US, Germany, Turkey and India. “It means we are right next door. This gives us an edge,” says Al-Shehhi.

The authority is focused on four key sectors for growth: education; aviation; energy; and healthcare. It has approval for a further 70 hectares of land at the airport. “We want to turn the airport around as we did in the city and other industrial areas and make it more active. We have already recruited one of the biggest airline-related [companies] in the US,” she says.

Education developments, which already have support from the UK’s Bolton University, are in the planning. The authority is also focusing on renewable energy industries.

Tel: (+971) 7 204 1122

Email: info@rakbc.com

Website: www.rakftz.com

Rak Investment Authority

Rak Investment Authority was established in 2005 as a vehicle to stimulate investment and encourage new, diverse businesses. As such, it develops and manages industrial parks in the west and south of the city in Al-Hamra and Al-Ghail. Rak Investment Authority offers facilities, advisory services and equity participation. By 2009, it says it had secured more than $2.5bn in investments in its industrial parks alone and had issued licences to more than 2,500 firms.

The organisation also offers a partnership service to companies that want to operate onshore and need a local business partner. Companies it has worked with include the US’ Guardian Glass, France’s Arc International, Switzerland’s Franke, Japan’s Mitsui, US Becker Industries and India’s Ashok Leyland, among others. Rak Investment Authority is a good example of how free trade zones are stimulating diversity in the UAE. It also employs local staff, improving skills and creating opportunities for nationals. “More than 45 per cent of our manpower is national, mainly women,” says Al-Shehhi.

Tel: (+971) 7 206 8666

Email: info@rakinvestmentauthority.com

Website: www.rak-ia.com

Transport and Logistics

Saqr Port

Saqr port is the biggest in Ras al-Khaimah. In March 2010, Saqr Port Authority was made responsible for all the ports in the emirate and it now runs Rak Maritime City, Al-Jazeera Port, Rak Khour Port and Al-Jeer Port.

Saqr Port Groups general manager Colin Crookshank says, “This now gives the Saqr Port Group the unique opportunity to offer… niche operations at all our ports. These will include bulk cargo handling, general cargo handling, marine industrial park, livestock, recreational, marina, cruise, lay-by and ship repair, dry docking, ship breaking, land and warehouse rental.”

Tel: (+971) 7 205 6000

Website: www.saqrport.ae

Ras al-Khaimah International airport

Following a turbulent period in 2008, Rak International airport is now building up its flights and operations again. A further boost is set to be given to the airport by the expansion of Rak Free Trade Zone, which will be developing 70 hectares over the coming years.

Tel: (+971) 7 2448111

Email: administration@rakairport.com

Website: www.rakairport.com

Accommodation

If the rising contribution to GDP is anything to go by, Ras al-Khaimah’s real estate sector is faring better than most emirates’ in the current climate. As demand is driven by local residents and businesses, the knock-on effects from Dubai’s economic downturn have been limited. The habit of using residential property for business activity has, however, had a detrimental effect on commercial office space. The UK-based property consultancy CB Richard Ellis says residential property leases are 15 to 20 per cent cheaper than those for office space.

Healthcare

The emirate is home to two private hospitals, Rak Hospital and Al Zahrawi Hospital. Rak Hospital is a joint venture of Dubai’s ETA Star Healthcare and the government of Ras al-Khaimah, and is accredited by the US’ Joint Commission International.

Tel: (+971) 7 207 4444

Website: www.rakhospital.com