PAK-UAE TIES

AROOJ ASGHAR (Arooj.asghar@hotmail.com)
Nov 16 - 22, 2009

The close relationship between UAE and Pakistan has helped the flow of economic benefits from the UAE to Pakistan. On the economic side, the UAE maintains a leading position as foreign direct investor in Pakistan. The UAE confidence in Pakistan's economy has encouraged others to invest in Pakistan. During fiscal year 2005-06, the FDI from the UAE amounted to $1.6 billion and it has continued to be a significant source of FDI in Pakistan.

UAE has done investment in Pakistan in the six main sectors, which are banking and insurance, services sector including tourism, IT, telecommunication, power, and oil and gas. UAE airlines, Emirates and Etihad are also investing in Pakistan. In the real estate sector, Emaar, Limitless and Tameer are to make large investments.

In addition, Al Ghurair-Giga is investing in real estate and food sectors, while IFFCO of Sharjah is investing in edible oil. Pakistan's investment in the UAE is mainly in the sectors of real estate, construction machinery, and technical services industry. Aabraj Capital has acquired KESC and is investing in it. Aabraj Capital has already started construction of 560MW plant in Bin Qasim, Karachi and is planning to develop a power project on imported coal.

In the area of bilateral trade, Pakistan's imports from the UAE is approximately above $4 billion with crude oil, machinery and gold being the three major items of import.

Pakistan's exports to the UAE is crossing $1.5 billion with the main exports being petroleum product, textiles, rice, leather and its products, fruits and vegetables, sports goods, and surgical goods.

The Pakistani businessmen and professionals in the UAE are playing a major role in banking, medical and construction sectors, especially in Abu Dhabi and Dubai. UAE and Pakistani governments are encouraging major Pakistani business groups to get registered on the stock market in the UAE. The UAE hosts 762,000 members of Pakistani community.

Pakistani schools in UAE need improvement and serious steps are being taken to improve the standard of education in centres mostly run by the missions. The main problem of the schools lies in poor financial resources. New teachers have been appointed. In order to ensure the quality of education, none of the teachers are relatives of the staff of Pakistani missions. The remittances have increased by almost 40 percent and government is trying to double them. Pakistanis are also encouraged to share in the economic development of their country.

The United Arab Emirates has set Pakistan well amongst its potential list of investment destinations. It had announced in 2007 to increase bilateral trade to US$26 billion. In 2007 alone, UAE invested $3 billion in Pakistan mainly in telecommunication and oil sector. Also since Pakistan is closer to the UAE and is ideally geographically placed, it benefits the Arab country to target it for its investments.

Though the political instability and the dismal law and order has become a major hurdle to foreign investment, the UAE is still eager to continue with further investments and is trawling unexplored economic potentials in Pakistan.

Major groups continue to participate in Pakistan's privatization programs. The UAE has already invested billions of dollars in various sectors of Pakistan such as housing and real estate, telecommunication, banking, mineral exploration, oil and gas, information technology and tourism. Other UAE investments in Pakistan are in the fields of airlines, financial business, hotels, and tractors.

The UAE is Pakistan's second largest trading partner and it is also the second largest source of home remittances for Pakistan. The most notable investments that the Arab country has made into Pakistan are in the telecommunication sector where Etisalat acquired management control of the largest telecom entity PTCL while Warid Telecom is the third largest mobile service provider in the country. Wateen, a subsidiary of Warid Telecom, has earned a milestone in the telecommunication industry by becoming the first to introduce Wi-Fi (wireless) internet into Pakistan.

In financial sector, Abu Dhabi group has bought banks in Pakistan such as AlFalah and United Bank Limited while Dubai investors introduced the Dubai Islamic Bank and Emirates Global Islamic Bank which are rapidly gaining significant market shares.

The Emirates Investments Group, which owns Emirates Global Islamic Bank, also has ventures in the insurance sector namely Takaful Pakistan Limited and in the real estate project of Karachi financial towers. Al-Ghuran is another UAE based realtor which plans to invest over Rs45 billion in construction and real estate business in the near future. Al-Ghurair Giga has already announced multi million Goldcrest DHA Islamabad project. Emaar has also turned its attention towards Pakistan and has multi purpose projects worth over $2.4 billion in Islamabad and Karachi which would be completed in the next four to five years.

Pakistan and the UAE have also entered into a landmark agreement envisaging construction of $5 billion oil refinery at Khalifa Point and renewal of soft loan of around $265 million for the construction of dams in Pakistan which would be known as Khalifa Coastal Refinery, to be set up at Khalifa Point in Gwadar and expected to have a production capacity of 200,000 barrels a week.

Abu Dhabi government-owned International Petroleum Investment Company (IPIC) will hold a 74 percent stake in the Khalifa Coastal Refinery joint venture, with Pakistan's Pak-Arab Refinery (PARCO) holding the remainder. The construction work on the project is underway with a planned production from 2012. This is the largest single country commitment for investment in different sectors of Pakistan's economy and has the potential not only to make UAE one of the major economic players but would also open up new vistas of development in Pakistan.

About 400,000 Pakistanis are living and working in the UAE who are a source of strength for the Pakistan-UAE relations. Exports are increasing but balance of payments remained in favour of UAE. There are mainly two reasons for balance of payment imbalance i.e. much of the imports that are brought into the country from the UAE are those which are actually manufactured elsewhere such as India and Bangladesh and are imported via Dubai and other is petroleum import.

UAE can play a major role in the primary sector of Pakistan such as livestock which needs to have foreign investments for uplift.