RAK free zone entices companies with low costs

Ras Al Khaimah Free Trade Zone is ramping up its warehouse and office space to keep up with rapidly rising demand from businesses drawn by the emirate's lower costs.

Ras Al Khaimah is aiming to become the centre for companies to base their back offices in the UAE as it promotes its low business and living costs.

Peter Fort, the chief executive of Ras Al Khaimah Free Trade Zone (FTZ), said the emirate was ramping up its warehouse and office space in response to rapidly rising demand from new clients.

“A lot of companies are squeezed and the easiest way to deal with that is the bifurcation of the front and back office,” he said. “So what we’re seeing is a lot of interest for companies to relocate to a lower cost location.”

Mr Fort, a former investment banker with Morgan Stanley in the Middle East, has been fine-tuning the free zone’s strategy since being recruited last year by Sheikh Saud bin Saqr, Ruler of Ras Al Khaimah, to help accelerate the emirate’s development efforts.

Home to about 7,500 companies across four free zone parks, the FTZ accounts for a sizeable chunk of the emirate’s overall GDP and registered growth of close to 30 per cent in new clients last year. This year’s growth is likely to be tempered by high occupancy levels constraining availability of supply.

But the positive trend remains the same. Underpinning the surge in business interest has been the emirate’s relative cost advantage to its pricier neighbours, Dubai and Abu Dhabi.

The FTZ’s marketing literature claims costs of living are 25 to 50 per cent lower than the UAE average across property, recreation and entertainment, consumer items and education. Rent in the free zone is also generally cheaper than its competitors. Several officials in Dubai have already voiced their fears about the emirate’s competitiveness being undercut by rising costs for companies, after average property prices reached 22 per cent last year.

RAK FTZ’s management is also becoming more selective about the types of companies it would like based there. In contrast to previous years, it is focused more on attracting medium and large companies over smaller ones. It is also casting its net farther, sending delegations to talk to business people in South Korea and Malaysia in recent months, for example.

“We are focusing on quality over quantity,” Mr Fort said. “We are being more specific in enforcing the need for our clients to be active in our facility, not dormant.”

The free zone was moving in closer alignment with Sheikh Saud’s vision of generating economic multipliers for the emirate, said Mr Fort.

Historically, the FTZ’s mainstay has been industrial companies, reflecting the prime role industry plays within the overall economy – accounting for about a quarter of RAK’s GDP. But that focus is also changing.

“We continue to support the historical strength of Ras Al Khaimah, which is industry,” said Mr Fort. “But in parallel we are focused on enhancing some of the other sectors, in particular the services and educational sector.”

E-commerce companies and consultancies are among the service providers already based in the FTZ. It also has seven educational institutions including a branch of India’s Birla Institute of Technology and Abasyn University.

But Mr Fort sees an opportunity to develop the FTZ’s educational offering, especially within the field of vocational training for medical staff such as nurses and hospitality workers. There is a dearth of nurse training facilities in the UAE, with most staff trained abroad. RAK has a growing presence within the hotel industry, with several five-star hotels offering cheaper rates than parts of the UAE.

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