In June RakheenRakheen, Ras Al-Khaimah's (RAK) largest property developer announced the construction of RAK Financial City, which will be the centrepiece of RAK Offshore project, a free zone financial hub under development. The city will consist of a cluster of 12 towers and is set to facilitate the emirate's growth by acting as a regional financial centre. Peter-Michael Schuster, general manager of RAK Offshore, spoke to John Foster

Peter-Michael Schuster has had a colourful career in banking that has taken him all around the world to places as diverse as Thailand, Germany, Panama, China and the Czech Republic with Dresdner Bank group. After a life on the road as a compliance expert and involvment in the setting up of numerous Dresdner off-shoots, Schuster found himself in the Middle East, as general manager of RAK Offshore and with a mission to build up the reputation of Ras Al-Khaimah as a place for foreign companies to do business and to help build up the potential of RAK becoming an offshore financial centre

Where did the vision for RAK Offshore come from?
We started off with free industrial zones and the idea for an offshore centre flowed from there, driven by the crown prince and deputy ruler of Ras Al Khaimah, his highness Sheikh Saud Bin Saqr Al Qasim and the chief executive of RAK CeramicsRAK Ceramics, and RAK Offshore, Dr Khater Massaad. Dr Massad set up RAK CeramicsRAK Ceramics 20 years ago and is the most successful ceramics company in the world. They are both businessmen and can see the universal benefit of all and sundry, not just RAK, but the entire UAE.

What services will the financial centre be offering?
Let me start off with talking about RAK Offshore. To start with we are looking at non-financial operations. We are inviting offshore companies to set up in RAK and we will support them logistically. We are growing much faster than, say, a free zone like Jebel Ali freeport. They are seen as slow and over-regulated and our advantage, on the non-financial operations side, is we have space and a small team. This is the first phase of the RAK Offshore project.

What are you looking at developing on the financial side?
As part of the first phase of the RAK Offshore project, we will be dealing with financial services, but on the non-financial side. A major area, where we think we can really add value to the development of the financial services industry in the region, is in the field of outsourcing. We looked into global outsourcing projects and analysed what value financial services companies get from outsourcing.

So how would you develop the outsourcing and administration side of the RAK financial centre?To start off we will try to build a business on the back of 'nearsourcing' for India and the GCC. We will not be trying to attract business from the US and Europe yet. This is in the plan, but it is far away at the moment. We will be looking at 'bread and butter' business to start with, namely call centres, administration, and payroll. RAK can be as competitive as the Philippines, India, Pakistan or Bangladesh. Banks in the GCC countries do not want to give all of their business away to India or the Philippines. RAK has an advantage over these other countries. It has a well-educated population, but it also has the advantage of having Arabic speakers. Local banks have local customers, these customers speak Arabic and it just makes sense allowing Arabic speakers to deal with other Arabic speakers, rather than two people communicating with each other in a non-native second language of English.

Away from administration and outsourcing, how will you be developing the hard end of financial services?
We do not want to be compared, or to compete with centres like the DIFCDIFC, BFH or QFCQFC. We cannot compete with these established centres, particularly the DIFCDIFC as they are a world centre, already have a lot of blue-chip companies on board and have a lot of expertise. They are Dubai; we are just Ras Al-Khaimah. Therefore, we are looking for a niche and we are negotiating with the Central Bank of the UAE at the moment. We will ask about certain areas and it is hoped that the Central Bank will give us permission to operate in them. We do not want to compete with the DIFCDIFC. The Central Bank would not permit another fully-fledged financial centre to be set up in the UAE.

So you would try to complement what the DIFCDIFC is doing?
Yes. If you look at other countries, for example Germany, you have one financial centre, Frankfurt, and it is complemented by small, specialised financial centres like Hamburg, or Dussledorf, which has a large Japanese community so the Japanese banks centre themselves there, or Berlin, as it is the nation's capital. However when you look at Germany, you only think of one financial centre and that I assume, is what other people do when they look at the UAE. We are asking and negotiating with the Central Bank to allow us to start up what will be a small business dealing with areas like Trusts. There is Trusts business in many offshore financial centres around the world, such as Panama, or Lichtenstein. These are not banking cities, but they specialise in Charity Trusts, Inheritance Trusts and so on. The custodian and trustee is not in Frankfurt, or London, he is in another financial city. We want a close relationship with the Central Bank and work together, supporting the DIFCDIFC. We want small and medium enterprises, not the Morgan Stanleys.

Dubai has the DIFCDIFC, and it would be unwise and very difficult for any of the other emirates to set up a competing business. However, London has Jersey and Guernsey, which work in harmony with the City.
This is what we have in mind. For offshore companies and certain financial business. My background is compliance and we want to assist offshore companies set up in the Middle East. We offer a very safe home for offshore companies. But we are doing things step-by-step and trying to find a niche. It will take two or three years for RAK to construct its 12 skyscrapers. It is difficult to nail down what a city that has not been built yet will be doing in a few years time.

How about hedge funds?
Hedge funds are an interesting area, but we will see what we can do in this area in the next few years. But it will take time. We have to be positive, but for me the priority now is to promote the non-financial business. Ultimately we want to set up a body like the Dubai Financial Services Authority, that will create a regulatory framework and police compliance for the financial business operating from the RAK Financial City. We have a lot of recruitment to do. We need to attract expertise and have to rely on our local resources.

So less expats?
Yes. A business cannot operate in somewhere like Shenzhen without Chinese employees and managers. In some countries to hire one expat you have to hire 30 locals. These are the rules. I am astonished by the amount of reliance that regional businesses and large organisations have on expatriate labour in senior and junior positions. There are too many expatriates, and I would want to have mostly Emiratis, working for, running and benefiting from the Financial City.

How do you think the other regional financial centres welcome an addition to their ranks?
In general my contacts are business groups and chambers of commerce. I was a compliance officer for 10 years; I am hardly going to want to promote a business that encourages bad practice. I do not know why other financial centres might feel threatened. In the UAE we are trying to help not just RAK, but the whole of the UAE and do not threaten any other centre.

So the DIFCDIFC should be supporting you, as you do not offer any threat to them?
We would like the DIFCDIFC to support us, as we are not looking out just for RAK, but the whole UAE. Our interests are aligned. We do not want to be like a pirate DVD bought from a stall in China. We do not want to be a bad copy. We want to find our niche and excel, for the good of RAK, for the good of the UAE and for the good of the Middle East.

© Banker Middle East 2007

 

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