Surrounded by oil and gas but endowed with neither, the emirate of Ras Al Khaimah in the UAE is focused on building a regional manufacturing hub with little financing from debt capital markets.   

Khater Massaad, the chief executive officer of the Ras Al-Khaimah Investment Authority (Rakia), told Reuters there are no plans to further issue debt in order to help expand the $2 billion portfolio he oversees.

Instead, he said his office has hired bankers at Rothschild to develop, among other things, an initial public offering for one of its main properties, the port of Poti in Georgia. It bought Poti Black Sea port and 300 hectares of land in 2008 to develop a free industrial zone there.   

"In the Poti port we have invested a total of $145 million. Rothschild are working actually on the IPO for this port," said Massaad, a Swiss citizen of Lebanese descent who has worked with Sheikh Saud bin Saqr Al-Qasimi, Crown Prince and Deputy Ruler of Ras Al-Khaimah for nearly 22 years.

"We would like to make an IPO to develop further the port and the industrial zone and to generate income," he added.

Massaad would not put a figure on how much he expects to make on the deal as it is in the early valuation stages, but was confident Rakia would make back its investment.
   

He added that there are no additional investments beyond the $145 million projected for Poti at this time, knocking down a news report from Georgia to the contrary.

Rakia, which was created in 2005 to promote inward investment into the Ras al-Khaimah emirate, last raised capital on the international markets in December of 2007 by issuing $325 million of Islamic bonds, or sukuk.

Last year Rakia's investment portfolio earned a profit of $65 million, mainly from leases and licensing of the industrial parks and ports it controls.

The emirate, while not having the oil and gas wealth of Abu Dhabi or the real estate market found in Dubai just 100 km away, did not get caught in the collapse of the real estate bubble.   

"Before the crisis we were selling at $300 a square foot for apartments. And today after the crisis it is still $300 a square foot," Massaad said. But Ras Al-Khaimah did not escape unscathed either.   

Massaad said the growth in 2009 was 8 percent in Ras Al-Khaimah, down from the 14 percent per year pace of the prior four years. Growth is being driven by manufacturing, he said.

"Personally, I don't believe real estate is a real economy in itself," Massaad said. The emirate does have a solid investment grade rating of single-A from both Standard & Poor's and Fitch Ratings.

"Rakia, the purpose was always to attract industrial investment," he said, noting a concentration on cement, pharmaceuticals and glass and a commitment to focus investments internally rather than externally for the next three to five years.

He comes by his affinity for manufacturing honestly as the head of Ras Al-Khaimah Ceramics, the biggest ceramics factory in the world. But automobiles is where he believes there is perhaps the greatest payoff.    

Massaad is focusing on building the emirate into an automobile and parts making hub, by using the geographic location to its advantage for shipping and cheap labour.
In a feasibility study the emirate conducted, it found that there is a surprising lack of manufacturing of automobiles or auto parts in the region. The same is true for tyre making.

"We think Ras Al-Khaimah will become a center of glass and we think also definitely on clustering automobile parts and assembly," Massaad said. - Reuters