The Story of UAE's Modernisation is Incomplete Without India. New Trade Deal Will Further Boost Ties

The signing of the much-awaited Comprehensive Economic Partnership (CEPA) between India and the United Arab Emirates (UAE) this week, will boost the trade and commerce between the two Asian economies. The treaty was earlier slated to be signed during PM Modi’s visit to UAE in the first week of January 2022 but the visit was called off due to the enhanced threat of the Omicron variant. The bilateral trade between the two giant economies is slated to jump from US$ 60 billion to US$ 100 billion with an additional US$ 15 billion thrown in as services.

India and UAE have had traditional trade links through the centuries and trade dominated by items such as dates, pearls and fish, underwent a sharp change with the import of oil commencing in 1962. The real impetus, however, started after Dubai positioned itself as a regional trading hub by the early 1990s and about the same time, the economic liberalisation process started in India. India-UAE trade, valued at US$ 180 million per annum in the 1970s, today stood at around US$ 60 billion before struck. Trade with India now stands at US$ 43.3 billion making the UAE, India’s third-largest trading partner for the year 2020-21. Moreover, the UAE is the second-largest export destination of India (after the US) with an amount of over US$ 30 billion for the year 2018-19. For UAE, India is the second-largest trading partner with US$ 36 billion (non-oil trade).

The United Arab Emirates (UAE) has taken several steps to modernise its economy and conform to international norms. In 2018, taking a cue from India, the Emirati government had introduced a sales tax of five per cent conforming to international practices. On the eve of 2022, the UAE, in a landmark decision, got in sync with the liberalised world by declaring Monday as the first working day of the week. Earlier, like the rest of the Middle East including Israel; Friday and Saturday were holidays and there were only four working days, from Monday to Thursday, available for commercial trade with the rest of the world. Now the private sector has five days and the government offices would work for four and a half days. This paradigm shift will enhance the commercial activities and further improve the economy of the Emirates.

The UAE has also decided to levy a corporate tax at the rate of nine per cent from next year in order to meet the international standards. The Emirati economy is the fifth-largest in the Middle East and the third-largest amongst the Arab states after Saudi Arabia and Egypt, ranking 29th worldwide.

However, its per capita income is higher and is pegged at the 24th rank in the world. The UAE has the highest per capita income of $ 89,000 in the Middle East followed closely by Israel. Out of the ten million population, the Arab population is less than one fourth. India, at 3.5 million, has the highest ex-pat population of 27 per cent in UAE followed by the Pakistanis, Filipinos, Bangladeshis and the Nepalese. There are 14 Indian immigrant billionaires and many thousand Indian millionaires in the country.

The credit of building the nation and its economy in the UAE goes to leaders from two ruling families; Al Nahyan in Abu Dhabi and Al Maktoum in Dubai. Up to 1971, the seven sisters– the Emirates, namely Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Quwain, Fujairah, and Ras al-Khaimah were ruled by the British. On attaining independence and the end of the British protectorate in 1971, HH Sheikh Zayed bin Sultan Al Nahyan, the ruler of Abu Dhabi, unified the seven Emirates into one country and became the founding father of the UAE. He was the first president (Rais) of the UAE till he died in 2004 and was succeeded by his son, HH Emir Sheikh Khalifa Bin Zayed Al Nahyan. HH Sheikh Rashid bin Saeed Al Maktoum, the ruler of Dubai and a visionary leader, became the Vice President and Prime Minister of the UAE in 1971 and helped in modernising the newly created nation.

Sheikh Rashid realised that as far as Dubai was concerned, oil would never last forever. Therefore, he diversified the economy, developed the tertiary sector and promoted trade and tourism. Believing in nation-building, he set up the Jabel Ali Free Trade Zone and build a large port in Jabel Ali. He actually went on the ground with a map and drew the industrial area and the port on a sketch and gave it to the British architect who was accompanying him. Sheikh Rashid held the Majlis with his advisors wherein anyone could walk in and present ideas of starting a new venture. If the idea impressed Sheikh and his advisors, he would tell the person, “ come and do it”.

HH Sheikh Mohammed bin Rashid Al Maktoum, the present ruler of Dubai and the Vice President and Prime Minister of UAE has a global vision and has brought UAE on the world map and taken the country to the next level. Sheikh Mohammed had a vision of making Dubai as busy a port as Singapore and have a skyline like Manhattan in New York in 20 years. Realising that 20 years was a long time, he set the target to be accomplished in five years! A massive construction boom, an expanding manufacturing base, and a thriving services sector are helping the UAE diversify its economy. Presently the ongoing construction projects worth $350 billion are being completed at breakneck speed.

The pandemic COVID-19 did delay Dubai Expo 2020 by a year but there are increasing footprints in the ongoing six months show. No wonder Dubai ranks fifth among the ten best cities of the world after London, Paris, New York and Moscow, and figures ahead of Tokyo and Singapore! HH Crown Prince Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, the epitome of a forward-thinking and acting leader. Both he and his father Sheikh Mohammed, have studied abroad and have trained at Royal Military Academy, Sandhurst, UK. Their collective vision and exposure are taking Dubai and the UAE on a fast track to becoming a commercial hub of the world on the lines of Singapore, Hong Kong, New York and London.

The economic downturn of 2008-09 and the recent pandemic did affect real estate business and infrastructure development. A large number of immigrants who lost their jobs in multinationals due to the pandemic left the country. However, the government did not slow down its infrastructure development, continued to lure investors and landed up with surplus inventories. The real estate prices are now picking up and the signs of recovery are seen in the economy. Estimates for GDP growth rate in UAE for 2021 were 2.1 per cent and in 2022 they are pegged at 4.2 per cent. Dubai is headed for a steady 3.6 per cent growth in GDP this year.

UAE’s investment in India is estimated to be around US$13-14 billion. Indian investments in the UAE are estimated at around US$ 85 billion. There are 4365 Indian companies, 238 commercial agencies and 4862 trademarks registered in the UAE, and the inward Indian FDI stock into the UAE amounted to $6.2 billion. Most Indian companies have invested in real estate, manufacturing, wholesale and retail trade, transportation, logistics, construction, financial and insurance activities. Many leading Indian companies like HCL Infosystems, Wipro, TATA, Nagarjuna Construction Company Limited, Danube, L&T, ESSAR, Dodsal, Punj Lloyd, ElL, Sobha Group, Indian Oil Corporation, Reliance Industries, Essar Group and all leading banks have offices in UAE.

The Modi government after coming to power in 2014, gave impetus to trade between the two countries after two visits by the PM to UAE followed by Sheikh Mohammed bin Zayed is the Chief Guest on our Republic Day in 2017. The signing of CEPA has further strengthened the traditional trade relations between the two countries. Under the stewardship of the new Indian Ambassador to UAE, Sunjay Sudhir, the trade between the two countries is likely to jump to the next level. The story of the modernisation of UAE has been largely made successful by Indian expatriates who have been the backbone of the development ever since UAE became Independent in 1971.

Lt Gen IS Singha, AVSM, VSM (Retd), was Colonel of Rajputana Rifles. The views expressed in this article are those of the author and do not represent the stand of this publication.

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