Appealing Scenery

Sep. 12, 2018

Ras Al Khaimah today is marshaling those factors that best extend its economic ascendancy. The Emirate's welcoming investment environment enables a diversified economy in the absence of hydrocarbons. Yet, while it holds just 0.6% of proven reserves, it is reportedly keen to increase capacity.

The Tools for the Job

The Emirate enjoys a strategic location in the Arabian Gulf, opening up a rich commercial vista on the economies of the Middle East. The government has been notably proactive in laying the groundwork for both local and foreign investment by making sure that the requisite infrastructure and investment environment essential to business are in place. In addition to RAK International Airport, the Emirate has four seaports, a maritime free zone, and a clutch of marinas at its disposal, as well as an efficient highway network. Meanwhile, relatively cheap yet effective utilities and human resources curb operational costs.

And the Domino Effect

Ras Al Khaimah's growth is characterized by major infrastructural plans that serve several vital economic sectors. Thus, as construction flourishes, the infrastructure of a burgeoning tourism sector is being put in place. Simultaneously, encouraging macro prints have led to a thriving real estate sector. Ras Al Khaimah's primary manufacturing involves non-metal minerals, chiefly cement, ceramics, glass, and construction materials. It is fortunate to have rich reserves of limestone, essential to the cement and building materials industry. Additionally, the Emirate exploits iron, copper, and chromium deposits. Four Portland cement companies operate in Ras Al Khaimah with a recent combined clinker capacity of 4.5mtpy, half of the UAE total, and a cement capacity of 6.0mtpy, which is just over 40% of the total.

Conducive Business Environment

Dr. Abdulrahman Alshayeb Alnaqbi, the Director General of the Ras Al Khaimah Department of Economic Development (RAK DED), notes that in 2017, RAK ranked 45th in World Bank Doing Business report and 87th in the Starting a Business index. Added to expedited official procedures in setting up a business is the ready availability of land. And once established, in terms of commercial operations, apart from proximity to regional markets, RAK provides a 5% cap on customs duty for the bulk of imported goods used by resident businesses. RAK Chamber data reveals business license issuances are dominated by firms active in commerce, services, construction, and manufacturing. The vibrant climate of free enterprise is facilitated by a well lubricated financial services sector.

Financial Services Sector

Ras Al Khaimah has a national bank, RAKBANK, and all banks in the UAE are supervised by the Central Bank of the United Arab Emirates (CBUAE). Moody's foresees the Gulf Cooperation Council (GCC) overall experiencing stability in 2018, underpinned by welcome financial fundamentals. Robust capitalization will be facilitated by sufficient loan-loss reserves that yield a resilient loss-absorption capacity. Moody's expects non-oil economic growth to remain modest but recovering to 2.6% this year assuming that Brent oil prices stabilize at the upper end of Moody's USD40-60 /bbl band. Readers will recall that as of January 1, 2018, VAT became a reality in the UAE which, along with OPEC production cuts throughout 2018 , may dent non-oil growth according to the rating agency.

Promising Sectors

In Ras Al Khaimah, manufacturing, including that taking place in free trade zones, accounts for 36% of the Emirate's GDP, ahead of wholesale and retail trade (8%) and the quarrying industry (9%). Ras Al Khaimah's primary manufacturing involves non-metal minerals, chiefly cement, ceramic, glass, and construction materials.

Just Check the Scenery

Notwithstanding, it is tourism that holds an economic beacon for tomorrow. Boasting mountains, desert, and pristine beaches, tourists are discovering the charms of a thus far less-visited destination. Around two dozen new hotels are set to materialize shortly, and the industry is also open to foreign participation. In fact, growth in tourist arrivals to Ras Al Khaimah approached 11% in 2016 and 20% in 2017, in stark contrast to the global average of 3-4%. The Ras Al Khaimah Tourism Development Authority (RAKTDA), established in 2011 to champion the tourism sector, is working to a three-year strategy that envisages employing 15,000 people, and thus being a major catalyst of socio-economic advancement. It foresees hosting 1 million visitors in 2018 and generating revenues of USD653.4 million.

The Outlook

It is telling that a recent poll shows that virtually 100% of residents and citizens consider life in Ras Al Khaimah both safe and sustainable. This is a view shared by international ratings agencies. Ras Al Khaimah enjoys a rating of 'A' from both S&P and Fitch. The former agency foresees the Emirate continuing to record fiscal surpluses and maintain a low manageable debt level. Its 'A/A-1' rating indicates that economic performance (GDP growth of 1.5% in 2017) is set for gradual improvement to 2021 with GDP growth averaging at 2.5% for the period. This will be fueled by a regional upswing in domestic demand and flush capital spending among other Emirates and by firmer oil prices. S&P projects an average fiscal surplus of 2% of GDP in the 2018-21 period with a state budget surplus of 1.5% of GDP in 2018, up from about 1% in 2017. Gross consolidated debt is forecast sliding to approximately 17% of GDP by 2021. Meanwhile, Moody's has a stable outlook for Ras Al Khaimah's economy to 2021, underpinned by a robust fiscal position and the dynamics of the broader nation.
In short then, the Emirate of Ras Al Khaimah is well placed to sustain a stable economic growth trajectory, while tapping into growth sectors proving highly successful elsewhere in the nation.