SOLID BACKBONE

Ras Al Khaimah 2017 | INDUSTRY | FOCUS: MANUFACTURING

Manufacturing accounts for 53% of non-oil trade in Ras Al Khaimah, making it a key driver of the Emirate's economic development. Its diverse pool of manufacturers helps the market maintain its resiliency amidst a landscape of turbulent commodity prices.

Going back to 1989, then ruler HH Sheikh Saqr bin Mohammad Al Qasimi, Member of the Federal Supreme Council and Ruler of Ras Al Khaimah, had an ambition to create a more manufacturing-driven economy. The most important of these was the realization that the Emirate could better utilize its raw materials, which resulted in the establishment of RAK Ceramics in 1991. The company became the largest producer of ceramics in the world in just two decades.

This impressive success paved the way for further industry-friendly policies. The World Bank was invited to the Emirate to conduct a study on foreign investment avenues available to the Emirate, and in 2005 a conference was organized called Live and Invest in Ras Al Khaimah to show the findings to the world of investors.
In 2005, Ras Al Khaimah's biggest economic drivers were building and construction, which accounted for one-fifth of GDP, with livestock and agriculture accounting for 10%. GDP per capita between 2001 and 2006 rose from AED35,000 to AED52,000, illustrating the wealth that was created by strengthening the manufacturing sectors.

Today the wider benefits have been made self-evident by the drop in oil prices and the subsequent devastating effect that has had on the economies of some oil-exporting countries. Ras Al Khaimah's economy, in comparison, has been given a robust baseline by its diverse manufacturing strength.

Developing manufacturing industries has been labeled one of RAK's “thrust” areas to cultivate economic growth, and is being backed by smart policy. For example, the Emirate charges no duty on imports of any raw materials that will be used for manufacturing, opposed to the 5% capped duty on almost all other imports. That percentage translates directly into higher profit margins for manufacturers in RAK's free zones, which enjoy the full repatriation of capital. RAK Free Trade Zone, now home to almost 9,000 companies, has been tailored to cater for the needs of manufacturing businesses, with a recently expanded Technology Park that is largely dedicated to light manufacturing, and Industrial Park in the same site that caters for heavy manufacturing. The Technology Park is the largest of the four parks and now encompasses 30 million sqft.

RAK has made large efforts to brand itself as the manufacturing Emirate. Although it may have a poorer logistics network compared to its neighbors, such costs are offset with discounted costs for licensing and setting up a business. Hovering just over one-third of the price, the average cost for setting up a company in RAK is around USD4,600, while in Abu Dhabi and Dubai that figure is around USD13,600.

Over 2015, manufacturing establishments accounted for 8% of new licenses issued in RAK, with 366, although traders far outstripped that figure, with 42% of the total. Rating agency Fitch's latest report noted that manufacturing is one of three sectors—the others being construction and tourism—that are driving economic growth of 4.5-5% through 2017, which helped the agency reaffirm the Emirate's A credit rating with a stable outlook.

The sector is well diversified, made up of light manufacturing, ceramics, building materials, automotive, machinery, pharmaceuticals, defense equipment, glass, and security equipment. Three companies lead the way in terms of international exposure. Those are Ashok Leyland, Julphar, and RAK Ceramics—all leaders in their respective sectors with a combined revenue of AED4.998bn over their last full respective financial years.
Looking ahead, all three companies have told TBY that they are planning to expand their capacity. Ashok Leyland's RAK, a JV between Ashok Leyland and the RAK Investment Authority (RAKIA), is due to increase its capacity from 2,000 to 6,000 vehicles a year, adding another 300 employees to its books. While Julphar continues to develop markets, having already expanded through Bangladesh and Ethiopia, the former venture is taking over RAK Pharmaceuticals from the other sector heavy-hitter RAK Ceramics. The ceramics manufacturer is in turn looking to expand and strengthen operations in Iran and India.