Next step towards economic diversification and resilience

On July 1, 2022 the UAE and Indonesia signed a Comprehensive Economic Partnership Agreement (CEPA), signalling the start of a new era of increased trade, investment, and cooperation between the two nations.

The UAE-Indonesia agreement, the third CEPA agreement that the UAE has signed with other nations, is a major milestone, and is set to increase the bilateral non-oil trade between the two nations from $3bn to $10bn by 2027.

These agreements will play a pivotal role in the UAE’s global trade strategy byenhancing our access to strategic markets, driving FDI inflows and generating new opportunities across several vital sectors, such as energy, health care, advanced technology, and my owninvestment field: aviation.

On a strategic level, the deal may represent a key element in the UAE’s future growth and prosperity. In my view, our wide range of global partners will play an increasingly important role in the nation’s economic success and the emergence of UAE as a global powerhouse for trade and investment.

Following the signing of the agreement, and as a result of our two countries’ closer cooperation, I was fortunate enough to attend the Business 20 (B20) summit in Indonesia last November.

Held alongside the G20 in Bali, the summit was a perfect platform to explore the avenues our nations would be taking and how the CEPA would start to manifest.

In the presence of His Highness Sheikh Mohamed bin Zayed Al Nahyan, President of the UAE, and the Indonesian President Joko Widodo, conversations spanned a number of important trade topics.

This high-level framework of investment and cooperation is another key driver that will support the UAE’s journey to economic diversification by boosting the non-oil sector contribution to the GDP.

Pioneering new business models

On a more granular level, this means less dependence on industries that require immense investment in brick-and-mortar infrastructure and a focus on high-value adding sectors driven by technology and innovation. We will need to invest in R&D in these sectors with a focus on creating our own Intellectual Properties (IP) and pioneering new business models.

At Mubadala, my role is to attract and encourage foreign investments by enticing international trade partners — preferably established international organisations — to bring the latest know-how in the UAE.

As an example, the geography of Indonesia — thousands of islands — has helped its aerospace industry become the second fastest growing in the world. It’s a massive market of over 270 million people with a growing middle class, which has further spurred demand for air travel.

Mubadala’s industrial services arm, Sanad, with its more than 30 years’ experience in aero engineering, could use its IP advantage and partnerships with leading engine manufacturers to set up a business model that will see an in-country maintenance center of excellence built toservice engines from all over the world.

If, for example, General Electric Aviation can send the engines requiring maintenance from one of its Asian airline customers to Abu Dhabi, the engines can be efficiently shipped to Jakarta.

Using our expertise and substantial commercial partnerships while leveraging Indonesia’s location and lower labour costswould not only create jobs in Indonesia but would also shorten supply chain costs for GE. Additionally, we would get toincrease our global footprint — a win-win equation for all parties.

This is just one example of possible benefits offered in one single sector. Discussions have taken place on a government-to-government level between the two countries on energy, aviation, financial services, artificial intelligence, agriculture, and defenseto name a few, showing the wide-ranging opportunities topartner.

Here at home, in my role of attracting foreign investment to the UAE, I can directly see the economic impact and social benefits of projects that I work on. While attending B20, the bigger picture was evident: agreements like the CEPA are key in enhancing the competitiveness of both the UAE and Indonesia.

Given some of the global economic difficulties we have been through over the course of 2020-2022, it is this level of cooperation that will uncover ways in which economies can increase their resilience to reach their full potential.

Key to partnership

The key to our partnership and to the UAE’s economic future is the ability to provide mutual benefits to nations around the world, and something very apparent during talks in Bali was the focus on innovation and forward thinking in seeking out future opportunities. During the time of the B20, 16 cooperation agreements were signed between Indonesia and the UAE.

Our CEPA with Indonesia is just one example of a partnership built on thorough understanding and mutual respect between two countries with a long history of cooperation and strong bilateral relations.

From a more global perspective, we trade with many leading economies around the world, and we will continue to leverage our innovation-focused approach in the coming decades.

This is why I believe this model will be key and why we should be enthusiastic and optimistic about what the future holds for the UAE’s continued and sustainable economic development.

Mohamed Tarmoom is part of the UAE Investments at Mubadala Investment Company