MAKING IT RIGHT

Ras Al Khaimah 2017 | INDUSTRY | REVIEW

With more than 150 industrial companies bringing AED5 billion in investment since 2000, Ras Al Khaimah's industrial sector is one of the strongest and most diversified in the UAE and the region.

With cement and ceramics leading the way forward, Ras Al Khaimah's industry and manufacturing are helping to maintain the Emirates enviable growth rate. Though slowing construction in the region and around the world has taken a toll, creativity and diversification in all industries have ensured steady growth for many manufacturers.

The Ras Al Khaimah ceramics industry is one of the most well developed in the world. Lead by RAK Ceramics, this sector adds a sizable chunk to the Emirate's GDP and represents a jewel in its manufacturing crown. As the industry leader, RAK Ceramics boasts a global workforce of around 15,000, 8,500 of whom live in Ras Al Khaimah. In 2015, RAK Ceramics had AED310.3 million in profit, representing growth of 10.2%, on revenue of AED3.08 billion. With availability in 150 countries, newly acquired 100% ownership in its UK, German, Iranian, and Indian subsidiaries, and annual production exceeding 110 million square meters of tiles and 5 million pieces of sanitaryware, RAK Ceramics is well positioned to capitalize on expected growth trends in the broader market. According to industry experts, the global ceramics market is expected to reach USD125.32 billion in total sales by 2020 and almost double total tile output from almost 12.3 billion sqm in 2013 to 21.8 billion sqm by 2020. Profits were up 10.8% in the first quarter of 2016 and company executives are confident that growth can continue at a robust pace so long as corporate strategy remains focused and dynamic. In an exclusive interview with TBY, Abdallah Massaad, Group CEO of RAK Ceramics, laid out his vision for the future. “As a company, we have always pursued market diversification,” Massaad said. “Our strong presence in the UAE is driven by innovation, new products, reliability, and quality and we are gaining an increase in market share over our competitors. As a global company we have to work harder to maintain our strong worldwide distribution network to mitigate the potential impact of a downturn in one particular region.” As RAK Ceramics continues to implement the Value Creation Plan it unveiled in 2014, refocusing on its core profit areas and divesting itself of burdensome holdings, Massaad and his management team are optimistic about the future. Though RAK Ceramics has faced some challenges recently with softening demand, it is confident that its global and highly diversified presence and well-executed corporate strategy will translate into continued growth.

The softening demand, spurred by slowdowns in construction in the GCC and Europe, has not only affected Ras Al Khaimah's ceramics manufacturers, but taken a toll on every industry in the construction supply chain. Cement producers and ceramics raw material producers have been among those most affected, and some firms have seen flat growth or shrinkage in 2015 and the first part of 2016. Ceramin, a raw materials provider for RAK Ceramics and a concrete producer in its own right, saw volumes remain stable but had revenues slide. As with RAK Ceramics, Ceramin is looking to expand its diversification as a means of catalyzing growth. In a recent interview with TBY, Chetan Kanth, General Manager of Ceramin, explained his mindset, noting “What happens in bad times is that companies start looking at new things and when things get better you will have a more diversified portfolio of products and services.”

Raw materials producers Stevin Rock and RAK Rock, which have been owned by the Ras Al Khaimah government since 1996, have responded in a likewise fashion, forging ahead by redoubling their commitment to product and market diversification. By adopting a dynamic approach, Stevin Rock and RAK Rock have won major contracts in the UAE, India, Madagascar, and Qatar with well-regarded international partners. Their policy of diversification has been so successful that for the past four years almost 25% of their total production has been exported to markets outside the UAE. In an exclusive interview with TBY, Naser Bustami, General Manager of Stevin Rock and RAK Rock, discussed the companies' plans for expansion, noting that the firms plan on spending AED150 million and AED30 million on building a new rock crushing plant and expanding their harbor facilities. As these projects come online, Bustami sees Europe as the next step in the firms' expansion. “Our new target is London, and we want to supply materials that are cheaper than the UK's own domestically produced materials,” said Bustami. “We are building a new deepwater berth for the purpose, which will help us halve sea transportation costs to London.”

Free Zones

One of main pillars of Ras Al Khaimah's industrial strength is its free trade zone, the Ras Al Khaimah Free Trade Zone (RAKFTZ). RAKFTZ hosts more than 8,600 businesses spread across 50 sectors and originating from more than 100 countries. Businesses operating in the free zone are subject to tax-free operations, enjoy 100% foreign ownership, infrastructure and real estate amenities, marketing assistance, and proximity to international transportation hubs. The RAKIA industrial park offers hundreds of acres of warehouse space and plots of various sizes. The plots start from 1,000sqm but the zone can accommodate plots of 100,000sqm or larger, and up to 60% of the plot's total area is available for development. A preexisting road infrastructure is already in place in much of the park, and utilities and telecommunications services are easily available. With RAK International Airport and Saqr Port only a short distance away, manufacturing firms of all stripes have found the park a key factor in their success. One such firm is Kirby, which was drawn to RAKIA by its generous and highly competitive incentive schemes, according to James Minato, Senior General Manager Middle East & Africa. In an exclusive interview with TBY, Minato explained Kirby's view of the UAE and Ras Al Khaimah's manufacturing and industrial environment, noting, “The UAE is a country that promotes, harbors, and nurtures all kinds of growth.” Though Minato acknowledged that there had been some slowdown in the country and the region, he was undeterred and noted that he and his team “are optimistic and project growing demand.”
Saqr Port, Ras Al Khaimah's largest port and one of the busiest in the region, has an array of state-of-the-art infrastructure in place. With eight bulk-handling berths, 14 mobile cranes, three container-handling births, one general purpose berth, two mobile ship loaders, three dockside mobile loaders, and a fleet of fork lifts and mobile harbor cranes, Saqr Port handles more than half of the more than 60 million tons of cargo that moves through Ras Al Khaimah's ports annually.

Pharma

Pharmaceutical manufacturing has been an important piece of Ras Al Khaimah's industrial composition since 1980, when its first pharmaceutical firm, Julphar (Gulf Pharmaceuticals) was established. As populations across the region continue to age, the Emirate's pharmaceutical industry is poised to capture sizable growth. With growth in healthcare spending expected to be nearly 9.5% annually in the MENA region alone until 2019, Ras Al Khaimah's pharmaceutical firms are all but assured a greater slice of the pie.

The largest generic pharmaceutical producer in the Middle East and North Africa (MENA), Julphar is particularly well positioned to capture this value. With annual insulin manufacturing capacity of roughly 40 million vials, distribution to more than 40 countries, annual sales revenues of AED1.47 billion, and more than 3,000 employees, Julphar is an industry powerhouse that helps bring economic wealth and diversification to Ras Al Khaimah. Furthermore, Julphar's position as a leading generic drug provider is key to maintaining a fiscally sound and sustainable healthcare system; a recent report from Taha Consultancy found that by switching from name brand drugs to equally effective generic drugs, healthcare providers could save as much as AED2.3 billion a year. Ras Al Khaimah's strong presence in the drug market has the potential to mean big savings for consumers and increased profits for manufacturers.

Up and Comers

Though construction materials and pharmaceuticals have been the traditional mainstays of Ras Al Khaimah's economy, new industries are taking note of the Emirate's strategic location and business-friendly environment. Its competitive incentive scheme, sensible regulatory environment, and world-class infrastructure have attracted a wide variety of new firms. TBY recently sat down with Seema Mathur, Managing Director of Packtech Plastic Industries—one of the many firms that have moved to Ras Al Khaimah in the last few years—and discussed what made the Emirate so attractive. “We chose Ras Al Khaimah because of the development in the industrial sector; it has good connectivity, port facilities, and an international airport, which has been a great advantage for sourcing labor and trade exchanges,” said Mathur. “The Emirate's leaders have also had a visionary approach toward companies in the SME sector.”

As manufacturers flock to Ras Al Khaimah, SMEs that operate specialized manufacturers with highly technical requirements and global ambitions are recognizing the benefits of basing their operations in the Emirate. One such firm is Spatial Composite Solutions, a manufacturer of aircraft training simulators. In an exclusive interview with TBY, Joseph J. McKeever, CEO of Spatial Composite Solutions, explained why Ras Al Khaimah made sense for his business, observing that the location “is an appealing manufacturing hub because it is halfway to the Far East markets, English is spoken, and there is no corporation tax.” In the coming years, expectations are high that manufactures will continue to be drawn to the Emirate, contributing to the development of the country and region.