Identifier
Created
Classification
Origin
10DUBAI13
2010-02-07 10:44:00
CONFIDENTIAL
Consulate Dubai
Cable title:
UAE's RAS AL KHAIMAH: OPEN FOR BUSINESS, BUT STRUGGLING TO
how-toVZCZCXYZ0000 RR RUEHWEB DE RUEHDE #0013/01 0381044 ZNY CCCCC ZZH R 071044Z FEB 10 FM AMCONSUL DUBAI TO RUEHC/SECSTATE WASHDC 0054 INFO GULF COOPERATION COUNCIL COLLECTIVE
C O N F I D E N T I A L DUBAI 000013
SIPDIS
DEPARTMENT FOR NEA/FO
NEA/ARP BMCGOVERN
INR/NESA
E.O. 12958: DECL: 2020/02/07
TAGS: ETRD KIPR EFIN ECON PREL AE
SUBJECT: UAE's RAS AL KHAIMAH: OPEN FOR BUSINESS, BUT STRUGGLING TO
GROW
REF: 09 DUBAI 447
CLASSIFIED BY: Justin Siberell, Consul General; REASON: 1.4(B),(D)
C O N F I D E N T I A L DUBAI 000013
SIPDIS
DEPARTMENT FOR NEA/FO
NEA/ARP BMCGOVERN
INR/NESA
E.O. 12958: DECL: 2020/02/07
TAGS: ETRD KIPR EFIN ECON PREL AE
SUBJECT: UAE's RAS AL KHAIMAH: OPEN FOR BUSINESS, BUT STRUGGLING TO
GROW
REF: 09 DUBAI 447
CLASSIFIED BY: Justin Siberell, Consul General; REASON: 1.4(B),(D)
1. (C) SUMMARY: Ras Al-Khaimah's (RAK) effort to grow its economy
by offering incentives to international investors has attracted
primarily small-scale traders, including from Iran, and thereby
drawn scrutiny from UAE federal authorities concerned about illicit
Iranian activity in the country. On a recent visit to the Emirate
by Consulate Dubai officers, RAK authorities insisted adherence to
UAE and international export control measures to control illicit
trade and denied strenuously facilitation of illicit Iranian trade
or the notorious arms trading Bout brothers, as alleged in reports
circulated in Washington, D.C. by lobbyists employed by a deposed,
former Crown Prince of RAK (ref a). The Head of RAK Customs has
requested USG training to build local Customs capacity. DHS/ICE
and regional EXBS officers followed up with RAK's request in early
February. END SUMMARY.
-------------- -
RAK AIMS TO INCREASE PROFILE IN UAE AND BEYOND
-------------- -
2. (SBU) In a December 23 meeting, H.H. Sheikh Faisal Bin Saqr Al
Qassimi, Chairman of RAK's Free Trade Zone and son of the Ruler
told Consul General and CG Dubai Econoff that RAK is working hard
to carve out a niche within the UAE economy, long dominated by
neighboring emirates Abu Dhabi and Dubai. With a total population
of 300,000, of which 50 percent are Emirati nationals (highest
concentration in the UAE according to RAK Government Officials),
and located at the northern edge of the UAE facing the Persian
Gulf, RAK's economy has traditionally been driven by industrial
activity that exploits the limestone-rich Al Hajar mountains
separating RAK from Oman. Stones from RAK are exported throughout
the Gulf as foundation for off-shore developments such as Dubai's
Palm Islands. Other stone-related industries also prosper in RAK
-- RAK Ceramics is the world's largest ceramics company; while six
cement plants are currently in operation in the emirate.
3. (C) But RAK aspires to more than producing rock and cement.
RAK's leaders chafe at their traditional dependence upon Abu Dhabi
and believe that the Emirate's northern location, just beyond the
Straits of Hormuz, offers advantages for traders and merchants
heretofore unexploited. Sheikh Faisal said that RAK has had to
seek comparative advantage in order to compete with Dubai and Abu
Dhabi and does so by offering investors the "fastest and most cost
effective platform" to set up a business in the UAE. He said it
takes just three days to register a company in the RAK Free Trade
Zone, which compares favorably to longer wait times in Dubai and
Abu Dhabi. Costs associated with establishing a business in RAK
(registration, office space, housing, etc.) are estimated to be 50
percent less than Dubai and Abu Dhabi. As a result, he said, RAK
has seen a large rise in small company registrations, in particular
first-time foreign company registrants to the UAE. Foreign
investors are attracted, in particular, by guarantees of 100
percent ownership of their companies, permanent "tax holidays", and
a fast and easy path to obtain coveted UAE residence visas for
staff. Sheikh Faisal conceded that many new RAK registrants view
RAK as simply a low-cost "back door" to doing business in Dubai and
Abu Dhabi, and the Emirate is therefore developing strategies to
orient such companies towards doing business locally. A failure to
do so, he said, would feed opposition among traditionalist RAK
citizens who already oppose the government's aggressive
business-oriented strategy.
-------------- --------------
INDIAN COMPANIES LEAD IN FREE ZONE, IRANIANS NO LONGER WELCOME
-------------- --------------
4. (C) Oussama El Omari, CEO of the RAK Free Trade Zone told CG and
Econoff that at the end of 2009, seven thousand companies had
registered in RAK's Free Trade Zone. Indian companies comprise the
single largest component, mostly small traders and merchants.
Meanwhile, Iranian investment in RAK had declined significantly in
the last year. He revealed that the UAE Federal Government's
increased scrutiny of all new Iranian investors and the overall
sensitivity to possible illicit Iranian activities has led to the
decline. Omari said that even existing Iranian business owners are
finding it difficult to operate in RAK because of increased
scrutiny from federal authorities, which is a significant change
from RAK's previously aggressive courting of Iranian business.
According to El Omari, to date, 162 U.S. based companies have
registered in RAK's Free Trade Zone. (Note: Commerce attachC) has
not been able to confirm this figure. End Note.) El Omari noted
that RAK authorities would like to see more U.S. companies
established in the Emirate, especially since the slow down in
Iranian investments has left a noticeable gap in foreign direct
investment.
--------------
MINIMAL CONTAINER HANDLING A LIMITING FACTOR
--------------
5. (C) Sheikh Faisal noted that RAK's lack of a robust container
handling capability at its key Saqr port was limiting growth
potential. He said that while a major port operation remained a
long-term objective for RAK, the relative proximity of Dubai's
world class container port at Jebel Ali made it hard to justify
significant expenditure on port activities. Additionally, RAK
would need to attract new manufacturing to generate the additional
container business to make an expanded port viable. Unfortunately
RAK does not have major projects in the short and medium-term to
attract large international firms that would require a robust
container business. Saqr port, which serves primarily as a bulk
cargo facility to move RAK's stone and cement exports, currently
handles approximately just three to four thousand containers a year
compared to over 11 million in Dubai's Jebel Ali port. Dr. Khater
Massaad, CEO of RAK Ceramics, told CG and Econoff that RAK
Ceramics, the largest ceramics producer in the world, does not
utilize RAK's major port for the 30 to 40 thousand containers it
ships per year. Dubai's Jebel Ali, he said, offers superior
handling service and available routes across RAK Ceramics' export
markets.
--------------
RAK CUSTOMS AUTHORITY LACKS RESOURCES
--------------
6. (C) Mohammed A. Al Mehrezi, Director General of RAK Port and
Customs Department told CG and Econoff that although his Department
lacks resources, in particular adequate levels of trained Customs
inspectors and other personnel, RAK Customs is effectively
upholding strict security and export controls as outlined by UAE
federal regulations. When questioned whether sufficient control
was being exercised over RAK's Free Zone and dhow ports to ensure
illicit items were not transiting the Emirate, in particular to
Iran, Mehrezi asserted that RAK's ports were more tightly
controlled than Dubai. "At least we have a fence around our ports"
he said, making reference to the curb side (and unfenced) dhow
wharfages in both Dubai and Sharjah.
7. (C) Mehrezi explained that RAK authorities have been unable to
retain significant numbers of skilled customs personnel due to wage
disparities between individual emirates of the UAE and the UAE
federal government. Mehrezi said that a RAK customs official could
quadruple his salary by moving to Abu Dhabi or Dubai to do the same
job. He said that the poorer emirate of RAK does not have the
resources to compete with higher salaries elsewhere and is
therefore unable to maintain staff continuity. In 2009, over 70
RAK Customs officers out of a total of 250 resigned in order to
take higher paying jobs in Dubai and Abu Dhabi. (Comment: In late
2009, UAE federal salaries were increased by 70 percent, a move
seen as bringing the federal salary structure into line with that
of Abu Dhabi emirate. The raise only exacerbated the wage
disparity problem in the far flung emirates like RAK. End
Comment.) Mehrezi lamented that while RAK has invested in costly
and time consuming training for customs officials, Dubai and Abu
Dhabi Customs Authorities have been poaching their staff as a
result of being able to offer higher pay packages. He said that it
has become increasingly difficult to operate as result of this
personnel attrition, and made a case for federalizing Customs
workers, a move that would lead to comparable skills and pay across
the UAE. (Comment: While a federalization of customs
responsibilities has long been rumored, Abu Dhabi and Dubai customs
authorities exercise significant independence and seem to have
little interest in unification. End Comment.)
8. (C) Mehrezi was open to CG's proposal of assistance in arranging
training for RAK Customs personnel. Mehrezi followed up the
December 23 conversation with a request in early January to
establish a training program. In response, Dubai-based DHS/ICE
attachC) and Muscat-based EXBS officer are meeting Mehrezi in the
first week of February to discuss developing a cooperative training
program. DHS and EXBS are already working closely with Dubai
Customs on a variety of training programs. Expanding these
programs to RAK will give us greater visibility on the flow of
goods into and out of RAK, helping either to substantiate or refute
claims made by a former (deposed) RAK Crown Prince that RAK has
emerged as a center for illicit Iran trade in the UAE (reftel).
-------------- --------------
RAK CERAMICS: BOOMING, BUT NOTHING TO DO WITH MISSILES
-------------- --------------
9. (C) Consulate officers visited the offices of RAK Ceramics,
established in 1989 and now the largest producer of ceramics in the
world. The company was founded by current RAK Crown Prince Sheikh
Saud bin Saqr al Qassimi and is effectively run and controlled by
Dr. Khater Massaad, a Lebanese-origin Swiss citizen. RAK Ceramics
exports ceramic products to 135 countries, including the United
States. Factories are operating in Iran, China and Sudan. When
asked by CG whether there was any truth in allegations that RAK
Ceramics' Iran facility may be involved in producing high-tech
ceramics for Iran's missile programs, as alleged by the former
Crown Prince (reftel),Massad became visibly angry and said, "we
make tiles, toilets and sinks and don't want any trouble...the idea
that I would have anything to do with Iran and weapons is totally
false and outrageous." When asked why the former Crown Prince
might allege such things in his folio about RAK circulated on
Capitol Hill, Massad said he couldn't understand why he would
denigrate RAK's most successful company that brings more money into
the Emirate than any other business. He said that the former Crown
Prince "never supported RAK Ceramics" during his time as Deputy
Ruler, even denying RAK Ceramics the energy it required to grow
operations. Massad believed the former Crown Prince is hoping
either to be returned to RAK and cut in on government-related
revenue, or bought off by Abu Dhabi to stop making his (false)
claims. Massad said he planned a counter-campaign to clear his
name, using a "lobbyist" in Washington (nfi).
--------------
NO BITE ON THE BOUT BROTHERS
--------------
10. (C) CG raised the allegation of RAK facilitation of the
activities of the arms-trading brothers Victor and Sergei Bout,
another among the claims made in the former Crown Prince's folio,
with Sheikh Faisal and Oussama Al Omari of the RAK Free Zone as
well as with Khatar Massad of RAK Ceramics. All either denied
knowledge of the brothers entirely, or said they were unaware of
any information that would corroborate the former Crown Prince's
allegations, including that the Bout brothers continue to maintain
interest in a diamond business based in the RAK Free Zone. Sheikh
Faisal offered to direct access to the diamond facility if desired,
and asked for any specific information of concern to the USG about
RAK, which he pledged would be investigated and acted upon.
--------------
COMMENT
--------------
11. (C) This recent visit to Ras al Khaimah was intended to build
Consulate Dubai's understanding of the nature of business activity
ongoing in the emirate and to develop, where possible,
relationships that will help us continue to build that knowledge.
In that regard, developing a training relationship with RAK Customs
provides a potentially valuable avenue for cooperation in an area
where concerns have been raised about trade with Iran and lax
export controls. RAK's strategy to take a larger piece of the
economic pie in the UAE may appear on its face to be
overly-ambitious and difficult to implement, but the poor,
neglected emirate has little choice but to think big if it is to
employ its growing youth population and wean itself from the
limited, though reliable, hand outs traditionally provided by Abu
Dhabi. END COMMENT
SIBERELL
SIPDIS
DEPARTMENT FOR NEA/FO
NEA/ARP BMCGOVERN
INR/NESA
E.O. 12958: DECL: 2020/02/07
TAGS: ETRD KIPR EFIN ECON PREL AE
SUBJECT: UAE's RAS AL KHAIMAH: OPEN FOR BUSINESS, BUT STRUGGLING TO
GROW
REF: 09 DUBAI 447
CLASSIFIED BY: Justin Siberell, Consul General; REASON: 1.4(B),(D)
1. (C) SUMMARY: Ras Al-Khaimah's (RAK) effort to grow its economy
by offering incentives to international investors has attracted
primarily small-scale traders, including from Iran, and thereby
drawn scrutiny from UAE federal authorities concerned about illicit
Iranian activity in the country. On a recent visit to the Emirate
by Consulate Dubai officers, RAK authorities insisted adherence to
UAE and international export control measures to control illicit
trade and denied strenuously facilitation of illicit Iranian trade
or the notorious arms trading Bout brothers, as alleged in reports
circulated in Washington, D.C. by lobbyists employed by a deposed,
former Crown Prince of RAK (ref a). The Head of RAK Customs has
requested USG training to build local Customs capacity. DHS/ICE
and regional EXBS officers followed up with RAK's request in early
February. END SUMMARY.
-------------- -
RAK AIMS TO INCREASE PROFILE IN UAE AND BEYOND
-------------- -
2. (SBU) In a December 23 meeting, H.H. Sheikh Faisal Bin Saqr Al
Qassimi, Chairman of RAK's Free Trade Zone and son of the Ruler
told Consul General and CG Dubai Econoff that RAK is working hard
to carve out a niche within the UAE economy, long dominated by
neighboring emirates Abu Dhabi and Dubai. With a total population
of 300,000, of which 50 percent are Emirati nationals (highest
concentration in the UAE according to RAK Government Officials),
and located at the northern edge of the UAE facing the Persian
Gulf, RAK's economy has traditionally been driven by industrial
activity that exploits the limestone-rich Al Hajar mountains
separating RAK from Oman. Stones from RAK are exported throughout
the Gulf as foundation for off-shore developments such as Dubai's
Palm Islands. Other stone-related industries also prosper in RAK
-- RAK Ceramics is the world's largest ceramics company; while six
cement plants are currently in operation in the emirate.
3. (C) But RAK aspires to more than producing rock and cement.
RAK's leaders chafe at their traditional dependence upon Abu Dhabi
and believe that the Emirate's northern location, just beyond the
Straits of Hormuz, offers advantages for traders and merchants
heretofore unexploited. Sheikh Faisal said that RAK has had to
seek comparative advantage in order to compete with Dubai and Abu
Dhabi and does so by offering investors the "fastest and most cost
effective platform" to set up a business in the UAE. He said it
takes just three days to register a company in the RAK Free Trade
Zone, which compares favorably to longer wait times in Dubai and
Abu Dhabi. Costs associated with establishing a business in RAK
(registration, office space, housing, etc.) are estimated to be 50
percent less than Dubai and Abu Dhabi. As a result, he said, RAK
has seen a large rise in small company registrations, in particular
first-time foreign company registrants to the UAE. Foreign
investors are attracted, in particular, by guarantees of 100
percent ownership of their companies, permanent "tax holidays", and
a fast and easy path to obtain coveted UAE residence visas for
staff. Sheikh Faisal conceded that many new RAK registrants view
RAK as simply a low-cost "back door" to doing business in Dubai and
Abu Dhabi, and the Emirate is therefore developing strategies to
orient such companies towards doing business locally. A failure to
do so, he said, would feed opposition among traditionalist RAK
citizens who already oppose the government's aggressive
business-oriented strategy.
-------------- --------------
INDIAN COMPANIES LEAD IN FREE ZONE, IRANIANS NO LONGER WELCOME
-------------- --------------
4. (C) Oussama El Omari, CEO of the RAK Free Trade Zone told CG and
Econoff that at the end of 2009, seven thousand companies had
registered in RAK's Free Trade Zone. Indian companies comprise the
single largest component, mostly small traders and merchants.
Meanwhile, Iranian investment in RAK had declined significantly in
the last year. He revealed that the UAE Federal Government's
increased scrutiny of all new Iranian investors and the overall
sensitivity to possible illicit Iranian activities has led to the
decline. Omari said that even existing Iranian business owners are
finding it difficult to operate in RAK because of increased
scrutiny from federal authorities, which is a significant change
from RAK's previously aggressive courting of Iranian business.
According to El Omari, to date, 162 U.S. based companies have
registered in RAK's Free Trade Zone. (Note: Commerce attachC) has
not been able to confirm this figure. End Note.) El Omari noted
that RAK authorities would like to see more U.S. companies
established in the Emirate, especially since the slow down in
Iranian investments has left a noticeable gap in foreign direct
investment.
--------------
MINIMAL CONTAINER HANDLING A LIMITING FACTOR
--------------
5. (C) Sheikh Faisal noted that RAK's lack of a robust container
handling capability at its key Saqr port was limiting growth
potential. He said that while a major port operation remained a
long-term objective for RAK, the relative proximity of Dubai's
world class container port at Jebel Ali made it hard to justify
significant expenditure on port activities. Additionally, RAK
would need to attract new manufacturing to generate the additional
container business to make an expanded port viable. Unfortunately
RAK does not have major projects in the short and medium-term to
attract large international firms that would require a robust
container business. Saqr port, which serves primarily as a bulk
cargo facility to move RAK's stone and cement exports, currently
handles approximately just three to four thousand containers a year
compared to over 11 million in Dubai's Jebel Ali port. Dr. Khater
Massaad, CEO of RAK Ceramics, told CG and Econoff that RAK
Ceramics, the largest ceramics producer in the world, does not
utilize RAK's major port for the 30 to 40 thousand containers it
ships per year. Dubai's Jebel Ali, he said, offers superior
handling service and available routes across RAK Ceramics' export
markets.
--------------
RAK CUSTOMS AUTHORITY LACKS RESOURCES
--------------
6. (C) Mohammed A. Al Mehrezi, Director General of RAK Port and
Customs Department told CG and Econoff that although his Department
lacks resources, in particular adequate levels of trained Customs
inspectors and other personnel, RAK Customs is effectively
upholding strict security and export controls as outlined by UAE
federal regulations. When questioned whether sufficient control
was being exercised over RAK's Free Zone and dhow ports to ensure
illicit items were not transiting the Emirate, in particular to
Iran, Mehrezi asserted that RAK's ports were more tightly
controlled than Dubai. "At least we have a fence around our ports"
he said, making reference to the curb side (and unfenced) dhow
wharfages in both Dubai and Sharjah.
7. (C) Mehrezi explained that RAK authorities have been unable to
retain significant numbers of skilled customs personnel due to wage
disparities between individual emirates of the UAE and the UAE
federal government. Mehrezi said that a RAK customs official could
quadruple his salary by moving to Abu Dhabi or Dubai to do the same
job. He said that the poorer emirate of RAK does not have the
resources to compete with higher salaries elsewhere and is
therefore unable to maintain staff continuity. In 2009, over 70
RAK Customs officers out of a total of 250 resigned in order to
take higher paying jobs in Dubai and Abu Dhabi. (Comment: In late
2009, UAE federal salaries were increased by 70 percent, a move
seen as bringing the federal salary structure into line with that
of Abu Dhabi emirate. The raise only exacerbated the wage
disparity problem in the far flung emirates like RAK. End
Comment.) Mehrezi lamented that while RAK has invested in costly
and time consuming training for customs officials, Dubai and Abu
Dhabi Customs Authorities have been poaching their staff as a
result of being able to offer higher pay packages. He said that it
has become increasingly difficult to operate as result of this
personnel attrition, and made a case for federalizing Customs
workers, a move that would lead to comparable skills and pay across
the UAE. (Comment: While a federalization of customs
responsibilities has long been rumored, Abu Dhabi and Dubai customs
authorities exercise significant independence and seem to have
little interest in unification. End Comment.)
8. (C) Mehrezi was open to CG's proposal of assistance in arranging
training for RAK Customs personnel. Mehrezi followed up the
December 23 conversation with a request in early January to
establish a training program. In response, Dubai-based DHS/ICE
attachC) and Muscat-based EXBS officer are meeting Mehrezi in the
first week of February to discuss developing a cooperative training
program. DHS and EXBS are already working closely with Dubai
Customs on a variety of training programs. Expanding these
programs to RAK will give us greater visibility on the flow of
goods into and out of RAK, helping either to substantiate or refute
claims made by a former (deposed) RAK Crown Prince that RAK has
emerged as a center for illicit Iran trade in the UAE (reftel).
-------------- --------------
RAK CERAMICS: BOOMING, BUT NOTHING TO DO WITH MISSILES
-------------- --------------
9. (C) Consulate officers visited the offices of RAK Ceramics,
established in 1989 and now the largest producer of ceramics in the
world. The company was founded by current RAK Crown Prince Sheikh
Saud bin Saqr al Qassimi and is effectively run and controlled by
Dr. Khater Massaad, a Lebanese-origin Swiss citizen. RAK Ceramics
exports ceramic products to 135 countries, including the United
States. Factories are operating in Iran, China and Sudan. When
asked by CG whether there was any truth in allegations that RAK
Ceramics' Iran facility may be involved in producing high-tech
ceramics for Iran's missile programs, as alleged by the former
Crown Prince (reftel),Massad became visibly angry and said, "we
make tiles, toilets and sinks and don't want any trouble...the idea
that I would have anything to do with Iran and weapons is totally
false and outrageous." When asked why the former Crown Prince
might allege such things in his folio about RAK circulated on
Capitol Hill, Massad said he couldn't understand why he would
denigrate RAK's most successful company that brings more money into
the Emirate than any other business. He said that the former Crown
Prince "never supported RAK Ceramics" during his time as Deputy
Ruler, even denying RAK Ceramics the energy it required to grow
operations. Massad believed the former Crown Prince is hoping
either to be returned to RAK and cut in on government-related
revenue, or bought off by Abu Dhabi to stop making his (false)
claims. Massad said he planned a counter-campaign to clear his
name, using a "lobbyist" in Washington (nfi).
--------------
NO BITE ON THE BOUT BROTHERS
--------------
10. (C) CG raised the allegation of RAK facilitation of the
activities of the arms-trading brothers Victor and Sergei Bout,
another among the claims made in the former Crown Prince's folio,
with Sheikh Faisal and Oussama Al Omari of the RAK Free Zone as
well as with Khatar Massad of RAK Ceramics. All either denied
knowledge of the brothers entirely, or said they were unaware of
any information that would corroborate the former Crown Prince's
allegations, including that the Bout brothers continue to maintain
interest in a diamond business based in the RAK Free Zone. Sheikh
Faisal offered to direct access to the diamond facility if desired,
and asked for any specific information of concern to the USG about
RAK, which he pledged would be investigated and acted upon.
--------------
COMMENT
--------------
11. (C) This recent visit to Ras al Khaimah was intended to build
Consulate Dubai's understanding of the nature of business activity
ongoing in the emirate and to develop, where possible,
relationships that will help us continue to build that knowledge.
In that regard, developing a training relationship with RAK Customs
provides a potentially valuable avenue for cooperation in an area
where concerns have been raised about trade with Iran and lax
export controls. RAK's strategy to take a larger piece of the
economic pie in the UAE may appear on its face to be
overly-ambitious and difficult to implement, but the poor,
neglected emirate has little choice but to think big if it is to
employ its growing youth population and wean itself from the
limited, though reliable, hand outs traditionally provided by Abu
Dhabi. END COMMENT
SIBERELL