The Business Year

Manu Mehra


sovereign smarts

CFO, RAK Investment & Development Office (RAK IDO)


Manu Mehra is CFO at the government of Ras Al Khaimah’s Investment & Development Office. His role is to lead the reorganization and strengthening of the institutional set up with the objective of enhancing the financial oversight and efficiency of various state-owned enterprises (SOEs). With over 25 years of work experience across banking as well as the energy and utilities sector, he has been in various positions at Deutsche Bank, ANZ Grindlays Bank, HSBC, and KPMG. He has been involved in USD20 billion worth of transactions, of which USD 10 billion has been related to global fund raising. At KPMG, he led the review of Dubai’s energy sector validating a budget of about USD10 billion.

TBY talks to Manu Mehra, CFO of the RAK Investment & Development Office (RAK IDO), on the role of free zones in diversification, the benefits of smart state intervention, and the keys most needed for a strong manufacturing sector.

What drives economic diversification in Ras Al Khaimah?

The answer to this question is clear: the long-term vision of successive rulers of the Emirate. That broad vision was in turn shaped by a recognition of the possibilities offered by the Emirate’s resource endowment, coupled with a deeply rooted tradition of openness to trade and foreign investment. Continuously implemented for over 50 years, the result of this has been that Ras al Khaimah today has one of the most diversified economies in the GCC. One key indicator of this is that manufacturing directly contributes about 26% of GDP, while another 10% comes from manufacturing activities in the free zone. As for the actual mechanics of it, the path that has been followed is that the leadership builds a business, develops it to a large scale, and then moves toward partial divestment through a stock market listing. This model has worked well.

How do you expect this diversification process to roll out?

The Ruler’s Office is in the process of developing a formalized long-term strategy that will bring the key economic, social, and environmental elements together for a harmonized long-term development plan for the Emirate. That plan will identify the principal sectors that need to move forward. Manufacturing will certainly remain a focus area, and there is increasing emphasis on tourism. To grow, we need people and businesses and entrepreneurs to come and invest. Manufacturing has always been the catalyst for growth, and it will continue to be so. In this regard, RAKEZ is now the leading growth engine. The Emirate is in a strong financial position, with low level of debt and a net asset position. This means there is enough flexibility for free zones to vary prices if they want to compete on price to attract businesses.

How much economic diversification can there be while industry is still the main sector?

There is a great deal of diversification because the manufacturing sector itself is highly diversified. Among the companies in the free zones, there are firms that produce everything from armored vehicles to chocolates. There are many smaller industries that supply the larger players. As the companies that were set up in the 1980s and 1990s, such as Julphar Pharmaceuticals or RAK Ceramics, became bigger, they attracted small and auxiliary businesses to support their growth.

To what extent will industry continue to grow and support other sectors?

As I mentioned, the Ruler’s Office is working on a long term strategic plan called Vision 2030. This plan has two clear focus areas, which are manufacturing and tourism. Free zones are continuing to attract manufacturing, while tourism is experiencing strong growth as the necessary infrastructure is being put in place and capacity expands. The economic environment in the Emirate is both very stable and attractive for business, and these facts have been repeatedly acknowledged in rating agency reports. One element of this is a USD-pegged currency, which is a credible mechanism for this part of the world. These factors, together with an excellent infrastructure and a supportive legal and policy environment, will continue to be the drivers that attract manufacturing

How is the sovereign rating landscape in the GCC, and how does Ras Al Khaimah fit in it?

There are certain key elements that shape it. Chief among these was the fall in oil prices two years ago, and the consequent emergence of large fiscal deficits, which led to rising government debt. Indeed, if one looks at the debt trajectories of GCC sovereigns, RAK is the only one where government debt is on a declining trend. Thus, our rating has been stable at ‘A’ for 10 years now, even as the majority of GCC sovereigns have been downgraded, some of them multiple times. The diplomatic rift with Qatar has added a new dimension of uncertainty to the region’s politics and had a direct impact on RAK’s exports. However, the Emirate’s strong credit fundamentals withstood this shock as well.



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