Dubai: At first sight, the UAE-India CEPA deal might be seen as helping trade flows more than anything else. The removal of import duties or major cuts would act as the catalyst for trade volumes to grow to $100 billion in five years, from $40 billion plus now.
But the full value of CEPA (Comprehensive Economic Partnership Agreement) will cover more than just trade, and extend to investments, the in- and outflow of technology transfers, and boost the startup space.
It was on April 21 that the UAE Ministry of Economy placed the full remit of the CEPA deal to the business and investor community here. While a majority of benefits will start flowing from today itself, there are add-ons that will be included at set timeframes in the next five years.
“As for steel and building material imports are concerned, we are going to examine the opportunities,” said Rizwan Sajan, Chairman of Danube Group. “I’m sure there are reductions in certain products. It will be a matter of pride for us NRIs to import more Indian products to the UAE - and re-export to the rest of the GCC.
“Swift action could not only boost trade but bring down the prices of commodities and save UAE consumers from inflationary pressure. The onus is now on all of us to increase the two-way trade flow to $100 billion.”
Opening up sectors, industries
As of now, 123 items have been marked for immediate tariff elimination for imports from the UAE to India. And 33 more will be zero rated by the fifth year and four more in the seventh year. There will also be a tariff reduction for 35 items (30 per cent to 15 per cent in the fifth year) imported to India.
For imports to UAE, from May 1 172 items from India will have a complete import duty waiver. Another 11 items will have zero rate by the fifth year.
India’s pharma gets a big hand
Of vital importance will be the UAE allowing access to India-made pharmaceuticals. “For the first time, UAE has agreed (India-made) pharmaceuticals and medical products approved by developed countries will get market access and regulatory approval in a time-bound manner in the UAE,” said Raju Menon of Kreston Menon, the audit firm.
“The British Prime Minister Boris Johnson during his recent India rightly echoed Indian Prime Minister Narendra Modi’s recent terminology, of “India being the pharmacy of the world”. India–UAE CEPA will give access to Indian pharmaceutical companies to the vast UAE drug market, estimated to be almost $9 billion by the year 2029. This will be driven by the pandemic and an altering disease profile giving opportunity for bio-similars and biologics to be imported from India.”
Light up investments, create jobs
Neelesh Bhatnagar, former retailer turned serial tech entrepreneur at the helm of NB Ventures, feels CEPA is about jobs. “Specifically, in traditional trading sectors of gems and jewellery, leather and agricultural products. It will also open opportunities in services and leading to a rise in investments.
"The retail sector will benefit most from this, and gems and food (businesses) will be among the first businesses to sign up. With almost every physical retail business going ecommerce, we will witness a further spike of digital ventures in both countries."
Fintech and insurance
As the full benefits of CEPA unfolds, the biggest gainers from the first moments would be sectors such as gold and jewellery, retail, steel and building commodities, etc. Pharma will follow – and there is more to come.
According to Adeeb Ahamed, Managing Director of LuLu Financial Holdings, "Among the several clauses in CEPA, there is a special mention to offer service providers with an open and non-discriminatory environment for cross-border trade in financial and insurance services. CEPA, for one, establishes a framework that will help to promote consumer confidence in digital trade, including ecommerce, and two, enable the UAE and India to revisit the ‘Digital Trade’ chapter in future to address the changes in the digital era."
“This requires greater access to critical technologies, new investments and home-grown solutions that can enable real-time money transfer on mobile payment solutions.”
CEPA going live on May 1 feels like the start of something a whole lot bigger. The next five years will show how big.
“The shipment has been released in India and we will soon have delivery of this in Dubai, making it one of the first beneficiaries of the UAE-India CEPA,” said Chandu Siroya, a veteran of the wholesale and retail trade in precious metals and jewellery in Dubai. “The 5 per cent duty waiver makes sourcing from India highly competitive, and for India’s gold and diamond jewellery makers, this is an opportunity to showcase the best of what they create to a global audience.
The present duty of 5 per cent has been reduced to zero duty for all jewellery - gold, silver, platinum and imitation as well as for pearls, diamonds and gemstones.
It works both ways too. India imports almost 800 tonnes of gold every year and, under CEPA, the UAE has been allocated an import quota of 200 tonnes in the next five years. UAE bullion exporters will benefit from a 1 per cent duty deduction and the current gold exports of 70 tonnes to India has the potential to grow three-fold.