Speaking in April, Sheikh Mohammed bin Rashid al-Maktoum, ruler of Dubai and vice-president of the UAE, set out his vision of where the UAE is aiming to be. “We do not want to be first regionally or in the Arab world. It is not just talk – we are serious about being first globally,” he said.
His words were aimed at ushering in an era of sustained, co-ordinated development across the seven emirates. They are also intended to pave the way for the acceleration of development in the five northern emirates – Sharjah, Ajman, Ras al-Khaimah, Umm al-Qaiwain and Fujairah – that have been overshadowed by Dubai’s commercial expansion and the oil-rich federal capital, Abu Dhabi.
Development plans have been drawn up to stimulate economic growth, human and infrastructure development, while modernising regulatory systems and making government and municipalities more efficient. This includes reviewing local laws to raise public administration standards.
Education, healthcare and employment are all priorities, as are clamping down on illegal labour, improving social care, and creating jobs for nationals. There are also plans for upgrading infrastructure, accelerating investment and overhauling the justice system.
Fujairah, with a population of about 130,000, has industries including oil storage for the shipping industry (bunkering), a port and aggregates. DP World manages the Port of Fujairah, integrating it within its UAE network (see feature, page 69). In addition, the emirate wants to attract more than 1 million tourists a year and expand its hotel cap-acity by 4,000 rooms.
In June 2007, Dubai Investments launched Al-Taif Investments, a company with capitalised assets at AED 500m ($136m). Al-Taif is 40 per cent owned by the Fujairah Investment Establishment and is building a portfolio of acquisitions and finance projects at home and abroad, attracting foreign investment to Fujairah. “As well as tourism, the governments of Fujairah and Abu Dhabi are pushing industrial development, taking advantage of Fujairah’s location outside the Strait of Hormuz,” says Riad Bsaibes, chief operating officer of Ras al-Khaimah-based Amana Contracting.
“Oil and refining industries are being established, with a long-distance pipeline to Abu Dhabi and investment in bunkering. Tank farms are being established for crude oil. Fujairah will become a logistics hub for oil and petrochemicals products.”
Ajman, with a population of 275,000, is holding a conference in April 2008 to draft a development masterplan. The second Municipal Works Conference will highlight the challenges it faces and develop strategies for managing Ajman’s affairs.
Improving local services and privatising municipal departments are at the top of the agenda, along with reducing pollution, con-serving water and exploring alternative energy. Environmental issues are critical to Ajman, which has set a target to reforest 10 per cent of its land mass. It has also launched an AED8.5m road maintenance programme at Ajman Industrial Area.
In Sharjah, Saudi-Emirati joint venture property developer Snasco is marketing the Sharjah Investment Centre (SIC), offering storage, logistics, light industry, hotels, leisure and a commercial centre. Talal al-Sorayi, deputy chairman of Snasco, says 75 per cent of the first phase of its AED1.3-1.7bn project has been sold.
Sharjah Airport is expanding its passenger and cargo handling facilities. The Civil Aviation Department has created Sharjah Aviation Services to develop the AED350m project. On completion, it will handle 8 million passengers a year.
Sharjah has a population of 750,000, many of whom commute to Dubai. The population is expanding by 10 per cent a year. The cost of property in Dubai makes Sharjah an attractive commuter town, even though the gap in costs is narrowing. This has led to increased pressure on roads, and an urgent need to upgrade public transport.
There has been talk of extending Dubai’s planned metro into Sharjah. “This would be highly desirable,” says an industry source. “Both emirates urgently need multimodal transport. It is simply impossible to build all the roads needed to keep pace with demand.
“There is talk about an intra-emirate rail system. Frankly, it should have happened 20 years ago. Rail freight, in particular, is an attractive option for emirates such as Ras al-Khaimah and Fujairah, which export cement and aggregates by road to Abu Dhabi and Saudi Arabia.”
Confirmed construction projects in Sharjah are estimated at more than AED30bn. UK consultant Halcrow alone is involved in government-backed civil engineering schemes worth about AED20bn covering roads and drainage schemes, including a AED600m contract to upgrade Sharjah’s main north-south and east-west arteries.
Umm al-Qaiwain’s economy is built on traditional industries, such as date farming
and fishing. It has a population of only 75,000. Other industries include a plastics factory
and cement manufacturing. However, development is accelerating, driven by property giant Emaar Properties.
Emaar’s AED12bn, 2,000-acre Umm al-Qaiwain Marina project is a waterfront com-munity at Khor al-Beidah with schools and shops, villas, hotels and leisure outlets, and a network of canals. It plans 1,200 resort rooms, 6,000 villas and 2,000 town houses. The government estimates Umm al-Qaiwain has attracted AED40bn in new investment in the past two years. In 2006, Australian consultant Urbis completed an urban framework plan designed to meet tenfold population growth to 750,000 in 20 years. Its centrepiece is a central business district.
Saudi Arabia’s Al-Rajhi Investment Group is building an AED2bn desalination plant through joint venture company Imdad. It is expected to begin production in 2009. Imdad is also looking into electricity production out of Umm al-Qaiwain.
Al-Rajhi also holds a 50 per cent stake in Al-Salam City, an AED30bn real estate venture spearheaded by local property developer Tameer.
Ras al-Khaimah (Rak), the northernmost emirate, has the UAE’s third-largest levels of project investment relative to gross domestic product, at $25.9bn. Confirmed projects exceed AED75bn, says Mohammed Sultan al-Qadi, managing director of Rak Properties. The property developer is building two mega-projects: the AED10bn Mina al-Arab and the AED500m Juffar Towers. Mina al-Arab is a waterfront development with upscale homes and 11 hotels, nine five-star properties and two eco-hotels.
Mina al-Arab will be completed by 2010, and has signed deals with hotel groups Intercontinental, Hilton, Rotana and Millennium.
“We have already sold 50 per cent of Mina al-Arab and 70 per cent of Juffar Towers,” says Al-Qadi. “The split of buyers is 30 per cent speculators, 40 per cent home buyers and 30 per cent buy-to-let. Property prices are escalating. Returns on investment are above 20 per cent. Some buyers will see more than 70 per cent.”
Real estate company Rakeen is developing the $1.6bn Rak Financial City, with 750,000 square metres of offices, apartments and hotels. It is also building Al-Marjan Island, a 2.7 million sq m development valued at $1.8bn, due for completion in 2009.
“Ras al-Khaimah is focusing on construction, tourism and investment,” says a Rakeen spokeswoman. “The industrial area in Al-Ghail has 2,500 plots awaiting manufacturers and close to 1,500 are booked. There is an immediate need for living space, shopping and leisure for 15,000 new families.”
Ras al-Khaimah has an industry-based economy featuring a port, cement companies, steel manufacturing facilities, Rak Ceramics and Julphar Pharmaceuticals. Khater Massaad, chief executive officer of Rak Investment Authority, is targeting new free zone investment from foreign companies seeking full ownership, underpinned by tax and duty concessions.
Ras al-Khaimah Investment & Development Office has signed a contract with the US’ Argentum Development to develop a hospitality trade and training zone in the emirate. The AED10bn venture will provide training for nationals aiming to work in restaurants, hotels and tourism on a 90-acre campus.
Amana Contracting says Rak has attracted about 140 business ventures, including glass bottles, truck building, commodity and polystyrene factories, representing more than $1bn in foreign direct investment over the past two years.
“Ras al-Khaimah Investment Authority is pursuing foreign investment, offering the advantage of low-cost land,” says Bsaibes. “It is a low-cost alternative to Dubai. We expect growth of 40-50 per cent in our projects in the northern emirates in 2008.”
Accelerated growth presents challenges, not least in employing nationals and ensuring infrastructure growth keeps pace with demand. One contractor tells MEED he adds ‘no poaching’ clauses to its staff contracts to reduce turnover.
Improving education is another critical objective for all emirates. Dino Varkey, senior director operations at Gems Education, which operates private schools in Abu Dhabi, Dubai and Sharjah, is urging the federal government to introduce UAE-wide benchmarks.
“Education in the northern emirates is where Dubai and Abu Dhabi were 15 years ago,” says Varkey. “There will be growing demand from expatriates moving into the new property developments. We open our first school in Ras al-Khaimah, with a US-based curriculum, in 2008.
“Within 15 years, Gems hopes to have 20-25 schools in Ras al-Khaimah, Ajman and Fujairah, each with up to 2,500 students.”
There are also fears that when the mega-projects become operational by 2010, power, water and wastewater systems of the northern emirates will be pushed beyond their current capacity. Bsaibes says northern governments may take their lead from Abu Dhabi, inviting foreign investors to build power and water plants as equity partners.
“There are questions about the availability of contractors and capital in the northern emirates,” says a senior executive. “Dubai and Abu Dhabi can pay prices that persuade contractors to deliver on time. The northern emirates, which have less access to capital, are the weakest link in the chain.”
key challenge: Securing the capital and contractors to deliver development projects in a highly competitive market
Table: UAE economic indicators by Emirate
Gross domestic product (AED million)
Source: Economy Ministry; IMF staff estimates