Industrial revolution

Ras Al Khaimah is fast becoming the industrial hub of the UAE. Claire Ferris-Lay talks to Dr. Khater Massaad, CEO of RAK Ceramics, the world's largest ceramic manufacturer, and advisor to the emirate's Crown Prince and Deputy Ruler.

When His Highness Sheikh Saud bin Saqr Al Qassimi, the Crown Prince and Deputy Ruler of Ras Al Khaimah asked Dr. Khater Massaad to conduct a geology survey high up in the Hajjar mountains in the late 1980s, Massaad didn't realise quite how fruitful the emirate's natural resources would become.

Unlike UAE's capital city Abu Dhabi, Massaad didn't strike oil, but he did discover vast amounts of limestone and clay. Today the small company he set up to utilise that discovery, RAK Ceramics, is the world's largest ceramic manufacturer and its business model is studied by MBA business students at Georgetown University in Washington DC.

"I [first] met Sheikh Saud through a Swedish friend who was the CEO of Gulf Explosives. [When] I met him again, I was leaving Fujairah [and] he gave me the assignment to study geology and clay... With my brother and colleagues we did a survey of the various sites and discovered clay [which we knew] would be highly profitable," he says.

Following the discovery of the deposits, Sheikh Saud persuaded the Lebanese-born geologist to stay in the emirate, where he established RAK Ceramics in November 1989. The small factory was strategically built close to Dubai. When production first began, the factory was producing around 4,000 sq m of tiles per day.

"He [Sheikh Saud] asked where I wanted to be and I told him the closest to Dubai so we could be close to the market," he recalls. "I remember it was desert, and he sent the guys over from the municipality and the land department and asked me how much land I wanted... so these guys came and put two sticks with two red flags and told me ‘this is your land'. I hired a builder, levelled the land and started hiring people."

Eighteen years later and Massaad is still living in Ras Al Khaimah and has been promoted from project manager to CEO. In 1998 the firm went public with a total investment capital of $250m, and today RAK Ceramics employs nearly 9,000 staff across manufacturing plants in RAK, China, Bangladesh, Sudan, India and Iran. Today RAK Ceramics produces 115 million sq m of ceramics every year and supplies ceramic tiles as well as a wide range of sanitaryware to 135 countries.

"To be honest, I never imagined it would be as big as it is today," he admits. Today it's the biggest factory in the world... In 1991 we started with one production line... today we are talking about 115 million sq m per year, [which] corresponds to one and a half times the consumption of the UK, 75 percent of the consumption of Germany [and] half of the consumption of India," he says proudly.

Booming emirate

Ras Al Khaimah is rich in natural resources. In addition to RAK Ceramics, the emirate produces more than 75 percent of the UAE's total cement production and is also home to Masafi, one of the biggest bottled water suppliers in the Gulf. So in addition to real estate and tourism, one of the main drivers of Ras Al Khaimah's economy is industry, a strategic approach adopted by Sheikh Saud after he was appointed Crown Prince and Deputy Ruler in June 2003.

Following the success of RAK Ceramics, Massaad earned Sheikh Saud's trust and was in 2003, appointed his personal advisor, which also meant that he has been instrumental in the Crown Prince's vision for Ras Al Khaimah.

In 2005 Massaad was appointed CEO of the Ras Al Khaimah Investment Authority (RAKIA) with the task of marketing the emirate worldwide. To date RAKIA has attracted around $2bn worth of investment to its three zones; one freezone (RAK FTZ), one 28 sq km industrial zone and RAK Offshore. Like similar setups in the Cayman Islands and Guernsey, RAK Offshore allows people to register non-resident offshore companies.

In the last four years RAKIA has registered around 1,800 companies, 250 of which are either operating or under construction. Much of the freezone growth has been instrumental to the emirate's 50 percent GDP growth. Having established factories in various countries for RAK Ceramics, Massaad said he was well-qualified when it came to setting up processes for other companies to register in the emirate's freezones."Sheikh Saud said to me ‘you have invested in Bangladesh, China, Sudan and Iran so you know the problems and the complications of setting a factory up overseas so you have to remove all of these complications for an investor who is coming to RAK.'"

He also studied successful models in Singapore and Hong Kong. "RAKIA is a one-stop shop if you want to set up a company. You come to RAKIA, you can have your license by the afternoon and you can have your land and start construction tomorrow... its absolutely hassle free," he says convincingly.

The favourable business conditions have not gone unnoticed by international investors. In January 2008 Ras Al Khaimah was assigned ‘A' grade ratings by international credit ratings agencies Standard & Poor's and Fitch Ratings. According to the Oxford Business Group, light manufacturing now accounts for 13.5 percent of all registered establishments in the freezones.

Massaad says he is now targeting manufacturers from Europe and India, who are struggling amid rising taxes and the poor economic climate. "We are focusing on the European countries, as well as India. Today in Europe you have many companies that are not capable [of survival] with... taxes and regulations, so we are planning to tap those companies, who by relocating to the UAE can live again."

Power struggle

While the economic downturn has, of course affected Massaad's plans, there is another significant impediment to Ras Al Khaimah's dream; it's diminishing power supplies. Reliant on the Federal Electricity and Water Authority, the emirate regularly experiences blackouts in power, which has left ambitious real estate developments empty and uninhabitable and factories struggling to keep up with demand.

At RAK Ceramics, Massaad has been forced to install its own gas-supplied generators, which he says are enough not to halt production at current production levels. "There is definitely a shortage of power. RAK Ceramics has been suffering from a shortage of power for the last ten years [so] we use our own generators," he says. "We don't have blackouts," he adds.

Although two new gas-fired power stations, which will supply an additional 110MW of power, are due to come online in the next two years, Massaad is looking at other interesting alternative for the rest of the emirate's demanding power needs: coal.

In March, RAKIA announced it would build a second coal-fired power plant in the emirate in the next two years. The first plant, scheduled for completion in 2011, is expected to produce 1,000MW and will need more than 7 million tonnes of coal per year.

The coal will be supplied by mines owned by RAK Minerals & Mines Investments, a joint venture between RAK Ceramics and Trimex, an Indian minerals firm, who has invested in coal mines in Indonesia and Thailand.

But Massaad doesn't plan to let the small task of a diminishing power supply get in Ras Al Khaimah's way of industrial supremacy. When asked about the emirate's future, he smiles and says: "Charles Darwin said the most adaptable species will last so we at RAK, we have to adapt ourselves."