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 DUBAI 00000166 001.2 OF 003 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 -------------- -------------- ¶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 -------------- ¶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 DUBAI 00000166 002.2 OF 003 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? -------------- ¶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 -------------- --- ¶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 -------------- -------------- ¶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 DUBAI 00000166 003.2 OF 003 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