India, UAE seal ‘historic deal’ and here’s what UAE businessmen have to say
UAE-based businessmen hail the CEPA agreement signed on Friday
Dubai: India and UAE ‘sealed’ a historic deal that will boost bilateral trade from the current $60 billion to $100 billion in the next 5 years.
Union minister of commerce and industry Piyush Goyal today said both India and UAE are entering a golden era of economic and trade cooperation with the signing of the India-UAE CEPA
The agreement will provide significant benefits to Indian and UAE businesses, including enhanced market access and reduced tariffs.
The Indian delegation was led by Union Minister of Commerce and Industry Piyush Goyal, while the UAE delegation was led by Abdullah Bin Touq, UAE Minister of Economy, Dr. Thani Bin Ahmed Al Zeyoudi, UAE Minister of State for Foreign Trade
The impact of ‘the 881 page’ trade agreement will be felt in select sectors, with energy, manufacturing gold and jewellery, and pharmaceuticals expected to figure prominently. It is felt that the full benefits of the duty exemptions and cuts will then be extended to other sectors as the CEPA benefits flow wider.
Could this also be the platform for UAE-India alliances to think beyond traditional sectors?
No doubt, many new avenues of collaboration will open, and this will benefit businesses from both countries and beyond, as UAE is a key gateway to the entire Middle East and Africa.
Healthcare
In the months leading up to the deal being announced, there was speculation build up whether healthcare and pharmaceuticals would have an elevated status in the trade and investment flows.
“It may be difficult for new entrants from India to build a presence in the UAE, because this sector is saturated in terms of capacity,” said Dr. Azad Moopen, Chairman and Managing Director of Aster DM Group, which apart from its hospitals and clinics in the UAe has also invested around Rs30 billion on its in-India network.
Funding from UAE in India’s Tier 2/3 cities
According to him, healthcare investments from the UAE to India would make better sense. “India’s healthcare space is still struggling with capacity needs,” Dr. Moopen said. “If the UAE could consider some of its planned India funds into developing healthcare facilities in Tier 2 or Tier 3 cities, it could ease capacity constraints. If these funds can be provided on preferential terms, it would be even better.”
Medical education
There have been some attempts in the past to rope in Indian expertise in the medical education field into the Gulf. Faculty-level alliances were mentioned as possibilities, but nothing much came of them.
Now, with all the pandemic lessons fresh in everyone’s minds, the CEPA deal could be used to revive those efforts.
Medical education – and more of it – is a requirement for UAE and GCC countries. Capacity needs to be built immediately and significantly.
“This is a space ideal for Indian investors with the right credentials to tie up with healthcare investors or government schemes to build the medical colleges for the UAE and GCC’s future. The next generation of talent for the healthcare sector needs to be home-grown. It’s as important as adding hospitals and clinics.”
Market opportunities
According to Rizwan Sajan, Chairman of Danube Group, the CEPA deal will bring about a shift in NRI investment attitudes – of looking at both UAE and India as equal opportunity markets. “We are more than ready to fill the gap and tap into opportunities in India – be it in real estate, construction, energy, infrastructure, healthcare or retail,” he said. “Many of us – NRI entrepreneurs who made it big in the UAE – would now like to expand into the growing Indian market and help our economy by investing and creating jobs.”
“The easing of duties will cement UAE’s status as a ‘jewellery gateway’ to the world and replacing the likes of Hong Kong and Italy,” said Shamlal Ahamed of Malabar Gold & Diamonds.
This development will make the pricing of Indian manufactured jewellery even more attractive to shoppers - residents, transit arrivals, and tourists - in the UAE.
Ease shipping costs
The duty exemptions will work to the advantage of importers in both countries. The CEPA deal will extend tariff concessions to up to 80 per cent of the goods that make up the trade volumes between the countries.
“In the recent past there had been a tremendous increase in shipping freight charges for goods from India,” said Dr. Dhananjay Datar of Adil Trading. “On this historic occasion, these issues have been addressed and reasonable solutions provided.”
As an exporter of Indian foodstuffs, any reduction in shipping and customs costs will pave the way to India becoming the largest trade partner of this country.
Duty-free exemptions to Indian exports
Based on the latest figures, UAE investments in India is around $17 billion or so, of which $11.67 billion is in the form of foreign direct investment. The rest of the fund inflow into India UAE is as portfolio investments. This makes the UAE the ninth biggest source of FDI for India.
The historical trade agreement is going to open up many vistas of growth for the countries and for bilateral trade to reach a handsome $100 billion. The volumes have already touched $60 billion - that itself shows the confidence level. Today’s deal is just the formalization of a meeting of the minds that has already been there for decades.
In the last two years, UAE sovereign wealth funds have gotten real busy in this space, most notably raising their exposure in Reliance Industries of Mukesh Ambani.
According to Bharat Bhatia, Founder & CEO of Conares, which has steel mills in Dubai, “The trade agreement between the UAE and India would massively benefit that steel and other metal commodity trade exploring the best opportunities to develop between the two countries. As I understand the steel manufacturers in both countries will be benefited from helping them build healthier and long-term relations. The current duties in the UAE customs are 5 per cent and on some products, it is 15 per cent.
“Trade agreements like the CEPA facilitate further investments between the two countries which benefits everyone. We have plans to explore the possibility of investing backward integration in steelmaking in India. This new trade deal between the two nations creates new opportunities for us to expand our footprint in India.”
Raju Menon, Chairman and Managing Partner of the audit firm Kreston Menon, said, that the UAE-India CEPA sign-off will set the template for India’s other upcoming trade deals.
“These are partnerships done with an eye on the future,” he said. “The UAE and India are also aiming to strengthen their partnership in start-ups, fintech, AI, security and renewable energy.
The UAE will be keen to invest in ports, railways and the industrial corridors in India. The fact that almost 80 per cent of India’s exports to UAE will be duty-free is the biggest advantage.
Eliminating trade barriers
“The bilateral partnership deal was done with the objective of eliminating trade barriers and deepening economic linkages between the UAE and India,” said Nasheeda of Nishe Accounting and Consulting. “it can only work wonders for both. Among other things, the agreement would reduce or eliminate customs tariffs and simplify trading procedures, while affording sufficient protection to domestic industries.
While India is one of the world’s largest food producers, it is not amongst the largest food exporters. An enhanced trade relationship with India will contribute to the UAE’s quest to achieve food security while helping boost India’s exports. The deal promises India a gateway to markets in West Asia and Africa.