RAK ups the pace as it looks to develop free-zone trade

Low rents and light-touch regulation are finding favour with companies as Ras al Khaimah sets it sights on competing with major free zones in the region.

Ras al Khaimah is staking its claim to become a leading free-zone operator as the emirate takes on established enterprise hubs in the region.

And some manufacturing plants are already taking it up as RAK builds a business model based on light-touch bureaucracy and low rents in a bid to compete with centres such as Jebel Ali Free Zone (Jafza).

Jafza is the oldest free trade zone in the UAE and one of the largest in the world, handling 11 million containers each month and contributing about 25 per cent to Dubai's GDP.

The 48 square kilometre space is home to more than 6,400 companies and in the past four years increased its revenue at an average of 34 per cent annually. It is that success that RAK wants to emulate.

The RAK Investment Authority (RAKIA), which manages the three investment zones in the emirate, said it had generated almost US$3 billion (Dh11.01bn) in foreign investment and attracted 6,500 businesses in the past five years.

Now the investment body is trying to attract more companies and foreign money into the emirate as it focuses on domestic economic growth.

While the majority of free-trade zones in the region offer similar benefits including 100 per cent foreign ownership, zero customs duty and no income tax or corporate tax, RAK is trying to lure new companies by offering low rents and "light-touch" regulation.

One big-name RAK convert is Ashok Leyland, India's second-largest lorry maker, which launched the emirate's first vehicle manufacturing plant last month.

"Ras al Khaimah is flexible and costs were significantly lower," said Bhimasena Rau, the resident director of Ashok Leyland in the UAE.

"When choosing the plot at the final detail level, the RAK authority were very accommodating, rules permitting."

The vehicle plant has plans to expand its operations over the next few years and Mr Rau said RAKIA was willing to wait for Ashok to grow organically.

Another company enticed to RAK is Spatial Composite Solutions, a maker of replica aircraft cabins for crew training, which moved its plant to the emirate to take advantage of low land lease rates.

"The main driver [of moving to RAK] was because of what was going in the real estate market," said Joseph McKeever, the chief executive and owner of the company. "Generally in the UAE, industrial rents had begun to taper off and go down and I feel that people in … [RAK] are more in tune with that."

He said transferring the company's operations to the emirate had enabled it to negotiate a rent that was "substantially lower" for a "much larger area", without disclosing what the rent was. The company has maintained its trade licence with Jebel Ali's free trade area, however.

As well as a lower rent, Mr McKeever said the emirate's more relaxed regulation was another plus, citing his company's $2.6 million deal with Oman Air signed in March.

He said that in this case, RAK had been "more sympathetic" over rules specifying that a manufacturing plant in a free zone supplying materials outside the UAE must prove the ultimate destination to avoid paying duty.