JEDDAH, 20 March 2005 — Businesses, especially manufacturing-based, have thrived in Ras Al-Khaimah, the fourth largest of the seven emirates in the United Arab Emirates (UAE), mainly owing to a facilitating infrastructure, regulatory and legal set-up.
The government of RAK has been proactive in creating an infrastructure conducive to free trade and enterprise. The RAK free zone was established for this purpose, and the existing industrial zones are being expanded. The free-zone areas allow 100 percent foreign ownership. The emirate also has two ports, Saqr port and Al Jazirah port giving it a competitive advantage in trade, according to a report prepared by the Kuwait-based Global Investment House (GIH).
While the robust infrastructure nurtures businesses in the emirate, the government further gives impetus through a regulatory set-up, which encourages business investments. Major incentives include favorable tax and customs duty environment, the absence of restriction on repatriation of capital and profits, and the availability of cheap land, apart from the free zone. As in the case of most of the countries in the region, there is no corporate or personal income tax in RAK, except for the oil and gas based companies and foreign banks. There is also a favorable legal system in the emirate, more or less in line with the other emirates in the country. However, when most of the individual emirates have adopted a federal court system, RAK and Dubai maintain independent judicial systems. Steps have been taken in RAK for quick implementation of regulatory requirements including government assistance to obtain all legal, commercial and environmental licenses for genuine investments. It takes less than two days to register a company in RAK, the GIH report said.
The regulatory and legal systems not only provide incentives for local investments, but also encourage foreign investments. Foreign ownership of business, regulated by Federal Commercial Companies Law, is generally limited to a maximum of 49 percent. However, companies can open 100 percent foreign-owned branches in RAK and can set up fully owned businesses in the free zone areas. Many of the foreign companies operate in RAK through a commercial agent to tender their products. Only 100 percent UAE-owned companies can be registered as commercial agents. These registered agents are given exclusive right to market and sell a specified product in at least one emirate. Companies also take the route of establishing limited liability companies in which though the foreign owning cannot exceed 49 percent, the share of profits/loss can be up to 80 percent.
Another feature favorable to the foreign investment is the step taken to allow foreigners to own and register properties in a few areas in the emirate. Certain residential developments in Dubai and RAK have taken the lead in deviating from the general rule in the Gulf Cooperation Council (GCC) of foreigners being not permitted to own land, in turn being forced to lease or rent them for the purpose of doing business.
The labor force has a high proportion of expatriates, as in the case of most of the GCC countries. The immigration policies followed in the emirate are in line with that in the rest of the UAE, relatively liberal, reflecting the need of an expatriate work force to operate and develop a fast growing economy.
The emirate already has highly competitive cement, ceramic and pharmaceuticals industries; with the latter being export oriented to a major extent. A relatively open culture and favorable business environment have attracted more investments in the emirate lately.
Total industrial investment, which stood at AED3.05 billion at the end of 2003, is one of the highest in the UAE. This indicates the optimism exhibited on the prospects of industrial growth in the emirate. RAK’s economy is unique in that it has minimal dependence on oil, unlike some of the other emirates and most of the other countries in the region.
The emirate is also picturesque and has moderate climate in winter, giving an opportunity for it to be marketed as a tourist location. Further, the mineral resources that the emirate possesses renders it globally competitive in a few manufacturing industries like cement, in turn making manufacturing relatively more significant for the emirate.
RAK was the last emirate to join UAE in 1972. RAK is blessed with a strategic location in the heart of the Middle East and on the world’s trade routes. It also has a robust infrastructure supporting the economy.
