Driving commercial and political engagement between Asia, the Middle East and Europe
Driving commercial and political engagement between Asia, the Middle East and Europe
Driving commercial and political engagement between Asia, the Middle East and Europe
Asia House’s research report, The Middle East Pivot to Asia 2023 explores key economic trends emerging between the Gulf and Asia. As part of the research, Freddie Neve, Senior Middle East Associate at Asia House, spoke to HE Dr Thani Al Zeyoudi, UAE Minister of State for Foreign Trade, to discuss growing trade between the UAE and Asia.
The UAE’s trade with Asia has grown considerably over the past few years. Why has UAE-Asia trade boomed over recent years?
The UAE and Asia are both centres of global growth that share a vision of economic diversification, technological integration, industrial modernisation, and trade facilitation, so it is natural for commercial exchange to flourish between our regions. We are also politically close and enjoy stable, positive relations based on trust and mutual respect.
The UAE has been able to leverage our geographical location to become a supply-chain nerve center and a genuine global gateway. Our unrivalled connectivity and world-class logistics infrastructure offers a compelling platform to connect goods and commodities from Asia to the rest of the world, particularly Africa and Europe. Similarly, we have been able to facilitate trade flows into Asia from these important markets.
Our relationship with Asia has been a major contributor to our record non-oil foreign trade. In the first half of 2023, it reached a value of US$337 billion, the highest ever for a half-year and an increase of 14.4 percent over the same period in 2022. Importantly, our non-oil exports are also climbing, growing 11.9 percent to reach US$55.8 billion – more than we achieved in the whole of 2017.
Do you expect UAE-Asia trade to continue growing over the next decade? If so, why? And what are the key drivers of this growth?
I do – and it will. In the past 18 months, the UAE has concluded Comprehensive Economic Partnership Agreements, or CEPAs, with India, Indonesia, South Korea, and Cambodia, which have removed or reduced tariffs, removed unnecessary barriers to trade, enhanced market access for both merchandise and service exports and harmonised digital trade with some of the most dynamic markets in the world.
Importantly, Asia remains one of the world’s principal manufacturing hubs and also an important center of innovation, which will ensure a significant flow of products into the UAE and, via our ports and freezones, to markets right across the world. The UAE recognises the opportunities for our own exporters in the consumer spending power of the emerging middle class in Southeast Asia and India.
As our relationship with Asia deepens, we see considerable potential for investments and joint ventures in sectors such as manufacturing, logistics, food production and energy that will accelerate the exchange of goods and services across what we envision being a new corridor of opportunity. In Indonesia, for example, our national clean energy champion Masdar has partnered with Indonesia’s state-owned power company to develop one of the world’s largest
floating solar plants, while DP World has invested US$510 million to develop a new container terminal in the state of Gujarat.
“Importantly, our non-oil exports are also climbing,
growing 11.9 percent to reach US$55.8 billion – more
than we achieved in the whole of 2017. ”
The UAE has undertaken a concerted campaign to negotiate CEPAs globally. Many of these negotiations focus on Asia. What underpins this strategy? Which Asian countries can we expect future CEPAs to emerge from?
We launched our CEPA programme in September 2021 as a core component of our vision to double the size of our economy by 2030. We are a firm believer that free, inclusive trade, with its stimulative effect on industrial output, innovation, and inward investment, is a key driver of economic growth, which was why we sought to secure a new network of trading partners that could provide preferential access to new markets, new customers, new ideas and new products and commodities. We are planning to complete 27 CEPAs with nations and trading blocs, with the aim of covering 95 percent of global trade. The countries of Asia, with similar histories of trade and exchange, were natural partners in this strategy and their positive response to our CEPA approaches reflects a shared vision. In addition to the completed deals with India, Indonesia, South Korea, and Cambodia, we have started negotiations with Thailand, Malaysia, Vietnam and hope we can conclude those before the end of Q1, 2024.
What has the impact of the UAE’s existing CEPAs with Indonesia and India been? How have they impacted UAE trade with these geographies?
Our CEPA with Indonesia only came into force on September 1, 2023, so we don’t yet have sufficient data on which to draw, although we are projecting that bilateral non-oil trade will reach US$10 billion by 2030. In terms of India, our second-largest trade partner, we can see that the CEPA has helped to maintain the upswing in bilateral trade amid a general downturn in global trade volumes. In the first 12 months of the CEPA, which came into effect on May 1, 2022, non-oil trade reached US$50.5 billion, which is a 5.8 per cent increase on the corresponding period a year earlier – and sets us on the path towards bilateral trade of US$100 billion by 2030. But these CEPAs were designed for long-term growth not short-term gain, and we are confident they will benefit us both for decades to come.
“In the first 12 months of the CEPA, which came
into effect on May 1, 2022, non-oil trade reached
US$50.5 billion, which is a 5.8 per cent increase on
the corresponding period a year earlier – and sets
us on the path towards bilateral trade of US$100
billion by 2030.”
Beyond brokering CEPAs, how else is the UAE seeking to grow its non-oil exports?
Since beginning the CEPA program, we have launched two additional trade initiatives. The first is the Services Export Strategy, which will create new market opportunities for our services sector. According to the World Trade Organisation (WTO), the UAE is the 12th-largest service exporter in the world. In 2022, we exported US$154 billion in services, which represents 2.2 per cent of the global total and underlines the huge potential to expand further in this direction. Our focus will be on leveraging our trading partnerships to develop the export potential of travel and tourism, ICT, professional services, financial services, education, medical tourism, Islamic financial services, the creative economy, and logistics.
The second is The National Agenda for Re-Export Development 2030, which is designed to expand the geographical reach of our re-exports, identify new product sectors with high value-add potential, and remove bottlenecks and other process barriers. Re-exports contribute 6.6 per cent of the UAE’s GDP, supporting around 1.3 million jobs in logistics, banking and finance, insurance, communication, hospitality, transport, healthcare, and recreation.
Which non-oil sectors have the biggest growth potential over the next few years, and how might Asian expertise and investment assist these sectors’ growth?
Services will be a major focus for us, so we expect the likes of financial and professional services, fintech, contracting, and travel to all experience strong growth – and our CEPAs with Asian nations will provide huge opportunities to expand their global reach. We also see considerable potential in the opportunities created by Net Zero and the green economy, including the likes of renewable energy, electric and hybrid vehicles, energy storage and fuel cell technology, agri-tech, and water technology. We definitely see technologically advanced nations such as Korea supporting these efforts, as they already have with the development of the Arab world’s first nuclear power station in Abu Dhabi.
Our Middle East Pivot to Asia report finds that UAE trade with China has been greater than the UAE’s trade with the US, UK, and Euro Zone economies combined over the last couple of years. What accounts for the UAE’s trade growth with China? Is China becoming more crucial to the UAE’s economic growth?
UAE-China trade has certainly enjoyed robust growth in recent years. In the first half of 2023, non-oil bilateral trade reached US$38.2 billion, confirming China as the UAE’s single largest trading partner globally. As an important trading hub, we offer Chinese products a vital gateway into Europe, Africa, and the wider Middle East, which we have sought to enhance in recent years through joint ventures such as the Traders Market megaproject in Jebel Ali – a retail and wholesale marketplace that is now an important node on the Belt and Road Initiative.
It is important to note that the UAE enjoys increasingly positive trading relations with nations and regions across the world, with non-oil trade with both the US and Europe growing consistently in recent years. The goal of our CEPA programme is to broaden our global trading network, which includes deeper ties with not only Asia but also other emerging markets in Africa, Eastern Europe, and South America.
HE Dr Thani Al Zeyoudi has been Minister of State for Foreign Trade since July 2020. He was previously UAE Minister of Climate Change and Environment.
This interview is taken from The Middle East Pivot to Asia 2023 report, which highlights key trends emerging in Gulf-Asia trade. Read the report here.
