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Governments in the Gulf region will remain under pressure and the trend of weaker economic activity is set to linger in 2017. Despite the push to reduce reliance on oil revenues, meaningful diversification will not happen in the short term. However while rates of eight sovereigns in the region (Bahrain, Iraq, Kuwait, Oman, Qatar and Saudi Arabia, the emirates of Abu Dhabi and Sharjah were trending down - with Bahrain and Saudi Arabia both suffering a cut and the outlooks on Oman and Sharjah revised to ‘negative’ from ‘stable’- the rating agency of Standard & Poor’s (S&P) has affirmed its rating for RAK at A/A-1, saying the northern emirate’s relatively diversified economy should protect it against the regional economic slowdown.
With little direct reliance on oil and gas, S&P expects RAK to maintain a fiscal surplus and low debt levels in the years ahead. The economy’s main pillars are supplying materials such as stone, mica, glass and ceramics to infrastructure projects around the GCC; and ports and free trade zones serving the local region and other nearby markets such as India (30% of RAK’s foreign direct investment comes from India)
Robust government revenues have led S&P to increase its estimate for the budget surplus for 2016-18, from 2.5% to 2.8%.
A census conducted in late 2015 showed the population to be 100,000 smaller than previously thought, which has boosted estimated GDP per capita for this year to $26,300 ($19,500 was previously forecast).
RAK’s strong performance will give comfort for the authorities as they embark on a major tourism push. Hotel capacity was doubling in 2011-15 to reach 4,600 hotel rooms, occupancy held steady at around 60% over that time.
RAK aims to attract 1m visitors by end-2018, and 2.9m by 2025. It needs to increase the number of hotel rooms from 5,000 to 20,000 over that period to accommodate the extra arrivals. At least 17 new hotels are in the pipeline.
There have been signs of growth in the emirate’s industrial sector too. Recent data from the RAK Media Office showed that RAK accounted for 30% of all new industrial licences in the UAE in Q1 2016, putting it second only to Dubai, which registered 50% of the total.
This was mainly due to the fact, that RAK government has been focused on upgrading the emirate’s infrastructure and business prospects.
Economic experts forecast more funding for projects in the future. Spending including net equity investments were rising 33% (in line with the budget) in 2016, primarily on the back of capital spending projects carried over from 2015 that were delayed by the introduction of new approval procedures. Key capital spending items included a new rock crusher for Stevin Rock and RAK Rock, expansion of Saqr Port, restoration of a hotel property, infrastructure investments in the Rakia FTZ and a community development on Al-Marjan Island. All this should help RAK’s clutch of export-focused industries, led by companies such as RAK Ceramics, RAK Cement and Gulf Pharmaceutical.
The opening of Sheikh Khalifa Specialty Hospital in February 2015 was another significant boost to local quality of life. The 248-bed facility, the largest specialist hospital in the Middle East, is operated and managed by South Korea’s Seoul National University Hospital. Before it opened, cancer patients had to visit Al-Ain for treatment. Now impressive treatment facilities are available in RAK – another very important piece of infrastructure that’s been well received in the population.
While the culture among RAK nationals (who account for about half the population, with many Pakistani, Indian and Afghans in the expatriate half) remains conservative, the emirate’s trading tradition makes it more outward-looking than Bedouin and tribal communities in parts of Abu Dhabi. Locals maintain their sense of national identity is stronger than other Emirates. Other new projects are on the agenda. RAK is looking to award a contract to expand the international airport, expanding the terminal’s capacity from 1.5m/yr passengers to 3.5m/yr. That could enable it to attract still higher volumes of tourists to Marjan Island and other destinations in RAK.