RAS AL KHAIMAH, DUBAI "WANNABE"?

C O N F I D E N T I A L SECTION 01 OF 03 DUBAI 000166

SIPDIS

DEPARTMENT: NEA/ARPI BAGWELL AND MASILKO

E.O. 12958: DECL: 4/27/2018
TAGS: ECON EINV ETRD BTIO PGOV ENRG AE
SUBJECT: RAS AL KHAIMAH, DUBAI "WANNABE"?

REF: A. ABU DHABI 405, B. 07 ABU DHABI 1927, C. DUBAI 101

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CLASSIFIED BY: Paul Sutphin, Consul General, Consulate Dubai,
DOS.
REASON: 1.4 (b),(d)




1. (C) Summary. Unabashedly stating Ras al Khaimah (RAK) plans
to become the UAE's "second Dubai" Dr. Abdul Rahman Al Naqbi,
Director General of the Chamber of Commerce and Industry, said
the small emirate (roughly 250,000 people) has big plans for its
future. Under the forward-leaning and eclectic leadership of
Crown Prince (and de facto ruler) Sheikh Saud bin Saqr al
Qassimi, RAK hopes to mimic Dubai's tourist, real estate
development and industrial successes - albeit with far fewer
resources and Dubai itself 50 miles away. RAK has announced a
range of ambitious plans to add 300 kilometers to its existing
65 kilometer shoreline in residential/commercial developments,
create an international financial city, develop eco-tourism
attractions, increase heavy and light industry development, and
has even toyed with the idea of a spaceport. But whether the
"second Dubai" will end up a reality or remain a 'conceptual
construct' (Dubai developer-speak for a pipe dream) is a
different story, largely dependent on infrastructure and money.
End Summary.

Iconic islands, eco-tourism and Seussian buildings

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2. (U) Mimicking Dubai's artificial island building, the year
and a half old Rakeen (a quasi-governmental development company,
owned by the RAK government, RAK airways and RAK properties)
plans on expanding RAK's 65 kilometer shoreline by roughly 300
additional kilometers. The first project, the USD 1.8 billion
coral-shaped Murjan Islands, has almost completed land
"reclamation"; after development, the islands will contain 10
major hotel sites, 50 large villa sites, apartments, a marina,
shopping village and water theme park. Subsequent land
reclamation projects slated for RAK include Dana Island and Noor
City.


3. (C) According to Dr. Imad Haffar, Rakeen's Chief Operations
Officer, it's not just islands that are on the development
horizon. Hoping to lure eco-tourists, RAK plans to take
advantage of its natural topography and develop a mountain
retreat, the Jebal Al Jais resort, as well as a desert hideaway,
the Banyan Tree Resort (Comment. RAK and the Emirate of
Fujairah are rapidly razing many mountains to provide stone for
the new islands in the emirate and in Dubai, leaving one to
ponder just how much of a mountain retreat will remain. End
comment.) Extending beyond tourism, RAK also hopes to duplicate
the successful Dubai International Financial Centre (DIFC),with
its planned US $800 million RAK Financial City, an "iconic" 12
building complex (Comment: Unlike DIFC, however, the RAK
Financial City does not appear to be putting in place the
financial infrastructure needed for a successful financial free
zone. For example, it has not put any draft regulations up for
public comment. And unlike the precise and handsome forms of
the DIFC, the RAK financial city design uses curvy, undulating
brightly-colored buildings. The oddly familiar shapes appear to
mimic drawings of "iconic" children's author Theodore Geisel,
aka Dr. Seuss, but perhaps after one green egg too many. End
comment.) The RAK Gateway City, a new 400 million square foot
self-sustaining "eco-city", plans to rival Abu Dhabi's Masdar
initiative.

Combined with heavy to light industry

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4. (C) Plant building at the existing Al Hamra Industrial Park
is in full swing. According to G.S. Raju, General Manager of
Guardian RAK, when Guardian RAK broke ground in Feb 2006, it was
one of the first 20 to 30 registered industrial companies in
RAK, with only one or two neighboring facilities under
construction at the Al Hamra location. Today, bulldozers and
almost completed factories surround the glass plant. Raju states
there are roughly 170 to 180 industrial businesses currently
registered with the RAK Investment Authority. (Note: Guardian
RAK is U.S.-based Guardian Industries' multi-partner joint
venture float glass manufacturing plant, and at $167m represents
the largest US private manufacturing investment in the UAE.)


5. (U) RAK has big plans for the rest of the emirate as well.
It contracted with China Harbour Engineering Company, LLC in
early 2008 to dredge a marine channel with a 2.5 kilometer long
harbor to provide the Hulayla Industrial Park Free Zone with
direct water access. The zone is located near Mina Saqr Port

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and concentrates on light to medium industry. RAK's largest
endeavor, the inland 28 square kilometer Al Ghayl Industrial
Park is still mostly in the master plan stage. However,
according to the RAK Investment Authority, it has already leased
out 372 plots to 84 companies (or 3.2 million of the 3.7 million
square meter free zone).

But what will it run on?

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6. (C) RAK's ambitious development plans hinge on the
availability of water and, particularly, electricity, which is
in short supply in RAK. RAK does not have its own power
generation facilities; instead, it depends solely on the Federal
Electricity and Water Authority (FEWA),which has been unable to
keep up with the rapidly growing power demand in the northern
emirates. While RAK Chamber of Commerce and Industry Director
General Dr. Abdul Rahman Al Naqbi acknowledged that adequate
power supplies are a key challenge for the emirate, he also
dismissed the problem, citing vague plans to build a power plant
near the Mina Saqr Port. When Dr. Haffar of Rakeen was asked
what the planned power plant would use for feedstock, he
nonchalantly cited gas, and if that wasn't available, it would
burn crude oil. (Note: Although RAK has some gas reserves,
they are insufficient to meet power demands. Prices have grown
dramatically over the last few years and availability is
limited. RAK, along with some of the other emirates have
flirted with Iran for gas supplies, but Iranian domestic
shortages are also limiting that country's willingness to
export. End Note.)


7. (C) Power supply is already a problem. Existing
manufacturers such as Guardian RAK have been forced to generate
all or some of their own power for operations. During an April
10th meeting, Guardian's Raju speculated that many of the new
plants in the industrial zones are unaware of the power
shortages and that they would have a rude awakening when they
try to connect to the FEWA grid. Raju related how FEWA had
originally promised 18 megawatts of power to Guardian, but then
reneged on the commitment. After high-level RAK and US mission
intervention, Guardian ultimately received only 4 megawatts from
FEWA. As of April 1st, Guardian received notice from FEWA that
it would only be receiving 2 megawatts per day going forward
(though as of April 10th, FEWA was still supplying 4 megawatts
daily; for full details on Guardian Glass power issues see
reftels A and B). Furthermore, Guardian has been unable to
access water from the RAK authorities and has resorted to
purchasing needed supplies from third party providers (Guardian
is currently assessing the financial feasibility of running a
proprietary desalination facility). A director at the Dubai
based Centre for International Development & Commerce related a
similar tale about a completed Kuwaiti plant that hasn't been
able to start-up operations due to electricity shortages.

Crown Prince Sh. Saud - The Man at the throttle

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8. (C/NF) The driving force behind RAKs' plans is Sh. Saud bin
Saqr al Qassimi, the Emirate's highly intelligent, highly
ambitious Crown Prince and its de facto ruler. (Note: The
Ruler, the elderly Sh. Saqr, has not been seen in public in
several years and is reportedly suffering from Alzheimer's
disease.) Educated at University of Michigan and a
self-professed "good friend" of the United States (he speaks
idiomatic American English and has two children attending
university in California),Saud is big-picture thinker with
interests ranging from developing Iraq to automotive technology.
Self-consciously clean-shaven (the only UAE ruler so),Saud
makes no bones about his desire to see RAK run (not walk) the
same path as Dubai. He is well aware of the infrastructure
challenges RAK faces, but has told the Consul General he must
"look beyond the problems of today into tomorrow" even while
sounding him out on US views on theoretical future RAK gas
purchases from Iran.

Comment: If You Build It, They will. . . Need Power

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9. (C) Dubai has successfully followed the "Field of Dreams"
development theory -- "If you build it, they will come". Dubai's
success in this regard can partially be attributed to the
availability of necessary infrastructure. However, even
relatively affluent Dubai is beginning to strain to meet
rocketing power demands (reftel C). For the resource-poor
emirate of RAK, power supply is already a major issue, and the
apparent lack of real concern and planning on how to provide

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more is unsettling. RAK has neither the oil income of Abu Dhabi
nor the trade and tourism revenues of Dubai to fund
infrastructure requirements. The recently assigned Fitch and
Standard & Poor's sovereign credit ratings of 'A' might be
enough to help RAK raise needed infrastructure funding in the
bond markets. However, RAK would likely need to pay a premium
to issue under current international market conditions
(following on Dubai's recent successful issuance, RAK might have
more success issuing dirham denominated debt, though they would
probably pay more than Dubai).


10. (C) Even with immediate funding, power and desalination
plants are long lead-time investments, and are unlikely to be
completed in time to meet current development demands. Nor does
RAK does have enough oil or gas to provide the feedstock for its
power generation needs. Once the funky buildings are built and
the plants are done, the lights will need to be turned on and
power-less factory and building owners will not patiently wait
for a power plant to come online. End comment.
SUTPHIN