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Sizing up Sharjah: Marwan Bin Jassim Al Sarkal

Settling into an interview with Marwan Bin Jassim Al Sarkal, the man in charge of luring foreign investors to Sharjah, it becomes evident that both tensions and ties bond the emirate with neighbouring Dubai.

On the one hand Sharjah is cast into the shadows, often overlooked by businesses and visitors. On the other hand, the bigger brother’s international standing is helping the emirate of 1.5 million people to attract more foreign direct investment than other places of a similar size.

The double-edged sword predicament is not lost on Al Sarkal as he attempts to define Sharjah by differentiating it.

“What makes Sharjah so special is it’s so close to Dubai but yet so different when it comes to its identity,” he says. “We didn’t try to copy what Dubai is doing, we tried to complement them.”

Becoming the underdog is a tough position to accept for an emirate that was historically the first port of call for doing business in the UAE, whether as a foreigner or a local setting up. Sharjah established the UAE’s first airport and the first container port.

Forty years later, the situation has vastly changed. But the emirate is attempting to play a quick catch up. It has announced a multitude of master projects intended to not only expand existing industries but create new areas of investment.

They include a healthcare free zone, a research and technology park, a media free zone, a new property developer (Omran Properties) and multiple tourism developments. Additionally, the emirate is pushing for new businesses in sectors such as the environment, publishing and logistics.

As CEO of Sharjah Investment and Development Authority (Shurooq), Al Sarkal says the smaller emirate is attempting to bask, not bake, in the limelight of its neighbour.

Sharjah is expanding its tourism offering by focussing on cultural experiences, including the Central Souq.

“It’s not a drawback that Sharjah is unknown, it’s an opportunity for a lot of people to get to know Sharjah,” Al Sarkal, who was born in Dubai, says. “But I think it’s our duty, with my colleagues in the government, to promote Sharjah. Some people don’t want to be in Dubai, they think it’s not the right place for them, they think Sharjah is a better place, or Ajman. So it all depends on who are you dealing with.”

But when Al Sarkal took responsibility for promoting Sharjah abroad in 2009, he was confronted with a brick wall: no one knew where he was talking about. That has been gradually changing since the establishment of Shurooq, but Al Sarkal says being third rung on the ladder, behind Dubai and Abu Dhabi, sets a tough uphill climb.

“We found that a lot of people had no clue about the other five emirates; it’s like they didn’t even exist,” Al Sarkal says of the early days of Shurooq, referring to the smaller of the UAE’s seven emirates.

“Our opportunity was to showcase Sharjah. And not just to whoever came to Dubai, but coming up with new players that are planning to come to the region but are not aware about the other opportunities [outside Dubai and Abu Dhabi].”

For seven years, Shurooq has been door knocking across Europe, North America and Asia in a bid to promote itself as a business destination — both independently worthy and as a strategic location near an international hub.

Sharjah opened its first international office in London earlier this year and has held ‘Sharjah Day’ and ‘Invest in Sharjah’ events in China, London, Berlin, Seoul and Milan.

“Now we pick up the phone and everybody knows us,” Al Sarkal says. “The more they hear Sharjah the more they’re going to send their colleagues or friends here.”

Sharjah has renovated several attractions, including Al Qasba.

One of the biggest steps on the ladder has been the acceptance of English. Sharjah is one of the most conservative emirates in the Gulf and had been almost exclusively operating in Arabic. But Al Sarkal concedes that was a disadvantage when trying to attract FDI; the emirate was effectively cutting off non-Arabic-speaking investors.

“We found out that a lot of information about the future of the industries or the future of the economy of Sharjah was … promoted to the Arabic speakers much more than the English speakers and we wanted to create a balance,” Al Sarkal says.

The new promotional tactics emphasise the pros of doing business in Sharjah — and that often means pointing out the pitfalls of operating elsewhere.

“We are not a place where flippers would come and invest, we’re not a place where people come to hit and run, we’re not a place where you’d think to come and maximise your income and just forget and leave,” Al Sarkal begins explaining.

“We’re a place where you find companies would come, establish themselves and stay for the long-term. That’s what makes Sharjah very different. You’ll find a very stable economy, we don’t have the ups and downs; however, we have a very steady growth rate — and in each sector.”

With oil accounting for barely 1 percent of Sharjah’s income, its economy is one of the most diversified in the Middle East. Its key contributing sectors are manufacturing (almost 20 percent) and tourism (about 10 percent), as well as logistics.

The 2016 budget released in February showed an 8 percent rise in revenues, thanks to diversification, and a 2 percent increase in spending to $5.5bn. However, more than a quarter of the budget is still spent on government salaries, with 2,500 additional jobs created this year, according to the budget released by the Finance Department of the Government of Sharjah.

Sharjah is participating in expos around the world to attract FDI.

The emirate is driving several new sectors of the economy, particularly environment-related businesses, healthcare and media.

Sharjah Healthcare City was established in 2012 with 1.2 million sq m of land set aside, including 500,000 sq m to be developed during the first phase. However, the emirate is “still signing deals with hospitals” and building is yet to commence.

Shurooq estimates the emirate’s healthcare sector will be worth $1.52bn by 2020, up from $980m last year. The UAE has just two beds for every 1,000 people, compared to seven in the UK and nine in the US.

“That shows how big the demand is and how low the supply in the market is,” Al Sarkal says, adding there is particular need for specialised healthcare.

He says the success of a teaching hospital attached to the University of Sharjah “shows how much Sharjah is into healthcare but not in a commercial way”.

The American University of Sharjah also is attempting to attract innovative firms to its Research, Technology and Innovation Park, managed by its holding company, AUS Enterprises. The free zone is expected to host 200 companies when the first phase opens in 2018.

“In the whole Middle East, where you have about 1.5 billion people, you don’t really have research for the Arab speaker, so creating a research and technology park will transform Sharjah to become the new Silicon Valley or Palo Alto of the region,” Al Sarkal says ambitiously.

Sharjah is also keen to enhance Arabic literature, creating a publishing house and launching the Sharjah International Book Fair.

While in January it announced a media free zone, part funded by the government, the emirate is yet to decide where such a city would be located.

American University of Sharjah is building a R&D park.

In keeping with its cultural emphasis, Sharjah’s tourism industry — which attracted an estimated 1.5 million visitors this year — focusses on its Arabic heritage and outdoor offerings, although it is starting to build glitzy hotels and resorts.

Recent developments such as Al Majaz Waterfront, which includes offices (including that of Shurooq) and restaurants, and Butterfly House on Noor Island have already helped to boost Sharjah’s tourism appeal. Al Jabal Resort, The Chedi Khorfakkan, on the east coast, will be the emirate’s first ultra-luxury hotel when it opens (the launch has been delayed to 2020), while The Act five-star hotel was completed in August and is expected to open soon.

“[Sharjah] has a lot of opportunity to develop itself as a regional player when it comes to cultural tourism. Yes it’s next to our big brother, the tough one that has the biggest airport, the best facilities [but] how can we add a night to that visitor coming to Dubai to [also] come to Sharjah to experience true Arabia, to go to the desert, or the eco-tourism destinations and to know the past of this region but still cherish the architecture that we have here in Sharjah,” Al Sarkal says.

The Sharjah Commerce & Tourism Development Authority has said it aims to attract 10 million visitors by 2020 — half of Dubai’s goal. The figure appears ambitious based on current visitor numbers and delays to the $1bn-plus airport expansion, which has been repeatedly announced but is still years from fruition.

There are also plans to fulfil Sharjah’s potential in the logistics sector. It is the only emirate with access to both the Arabian Gulf and the Indian Ocean, with two deepwater ports on the west coast — one of which is linked to Hamriyah Free Zone, one of the largest free zones in the Middle East — and Khorfakkan Port on the east coast.

It is also home to the second largest air freight hub in terms of cargo tonnage in the Middle East and the largest Lufthansa cargo hub outside of Germany.

Al Sarkal says while the logistics sector is already advanced, there is plenty more potential, including creating an oil bunkering zone off the coast of Khorfakkan, the city within which Khorfakkan Port is located in a tiny pocket of land controlled by Sharjah within the borders of the UAE’s only east coast-based emirate, Fujairah.

“We feel there is a huge opportunity for Khorfakkan to play a major role in transforming Sharjah as a trading hub,” Al Sarkal says. “The three biggest oil bunkering zones in the world [are] Panama, Singapore and the UAE — in the UAE we’re talking about Fujairah. So there’s a huge opportunity for Sharjah.”

The emirate is deliberately targeting small and medium sized businesses over larger, multinational conglomerates. Rather than an admission of defeat, it is conserving resources to focus on new players that can open up those identified industries.

“The big players, frankly speaking, are mostly here — they’re here or in Dubai or Abu Dhabi. So we’re talking about the SMEs that are looking for an opportunity. They don’t want to pay much but they want to deal with real people,” Al Sarkal says.

Sharjah International Book Fair has grown into one of the largest in the Middle East.

But while the emirate has managed to attract hundreds of SMEs and local start-ups, it has struggled to keep many of them.

“They leave when the place is not… when you’re small enough you can locate yourself in Sharjah, once you reach a certain level you can’t be here anymore,” Al Sarkal laments. “Sharjah is a place that nurtures small and medium-sized business. When you reach a level that you have to expand, maybe Sharjah doesn’t have the capacity to give you that much land.

“[Although], we do have [a lot of desert]. That’s why we created the new Emirates Industrial Area, just to make sure that not everyone leaves Sharjah when they are big enough.

“The biggest ten real estate companies in the [UAE] industry, most of them — I would say eight out of ten — have started in Sharjah. The first plastic company in Sharjah, even the first private hospital, started in Sharjah. Many of them expanded to go to other emirates because there’s an opportunity for them, they’re given better offers.

“But this is our role [at Shurooq] to sit with the Chamber of Commerce and those investors and try to hear what will make them expand their business in Sharjah rather than moving out.”

Al Sarkal says investors’ three top priorities are low costs, no hidden costs and a government that listens to their needs. While he says Sharjah has taken care of the latter two, including full foreign ownership, competing against other emirates’ costs is harder.

“Abu Dhabi, for example, provides a very competitive electricity bill, which is a big bill every month. If they can control it because their cost of energy is lower… then that’s huge. Even if I’m giving  you the land for AED5 per square foot and he’s giving it to you for AED12 per sq ft, in the long run you are still saving much more money [in Abu Dhabi],” Al Sarkal says.

“We’re very old when it comes to doing business and dealing with our business partners but at the end of the day we can’t give everybody what we used to give in the ‘70s or ‘80s.”

However, one of the oldest private companies in the emirate, Crescent Group, remains headquartered there, despite expanding operations to more than 20 countries. Gulftainer remains a firm establishment on the east coast, while also operating several major ports globally. And Emirates Neon Group, one of the largest media firms in the UAE, also remains based in Sharjah, although the Merchant family, which founded the company in 1976, has moved to Dubai, where there are more housing options, Al Sarkal says.

“Sometimes it’s not something you can control as an investment authority,” Al Sarkal says. “Since 2009 we created sessions to hear from investors — ‘what will make you stay here?’

“We also worked with the Chamber of Commerce to create a confidence index to see how confident those investors are in re-investing in Sharjah.”

The key, he concludes, is to provide land and other incentives while refraining from government intervention and ownership.

“That’s why you notice Sharjah today has the biggest industrial area focussed on small and medium-sized business. That’s why you’ll find a lot of the conglomerates or entrepreneurs started in Sharjah and then expanded to other areas around the globe. That’s why you’ll see most of the multinational corporations started in Sharjah and then changed their headquarters to Dubai, for example,” Al Sarkal says.

But with such an ending, Sharjah may need to do more than just lure businesses.

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