PAKISTAN-UAE RELATIONS

S.KAMAL HAYDER KAZMI,
(feedback@pgeconomist.com)
Research Analyst
, PAGE
Mar 12 - 18, 2012

FDI INFLOWS IN PAKISTAN BY UAE

YEAR (US $ MILLION)
2000-01 5.2
2001-02 21.5
2002-03 119.7
2003-04 134.6
2004-05 367.5
2005-06 1,424.50
2006-07 661.5
2007-08 589.2
2008-09 178.1
2009-10 242.7
2010-11 284.2

Pakistan and the UAE have for centuries shared many aspects of faith, culture, traditions, and interests. So, it is simply a matter of continuing history and bringing it to the modern age. Effective communication is always the key to good relationships, so they have been working on further improving their channels.

From the business perspective, they have been exchanging high-level visits and bilateral consultations over the past months to find out how they can further enhance their mutual growth.

The Emirates have been sending over a number of business delegations to Pakistan over the past few months while at the same time the Emirates have been receiving delegates from the chambers of commerce of Lahore, Rawalpindi, Gujranwala, and Karachi.

The UAE has been one of Pakistan's major economic and trading partners and the Emirates are fully committed to sustaining this role. The UAE intends to continue providing economic assistance whenever needed as well.

On the other hand, the Emirates appreciate the valuable contributions of Pakistanis working and living in UAE to many of their key sectors. It is estimated that more than 1.2 million Pakistanis are currently residing in the UAE.

While the remittance inflows from UAE were recorded 25.7 per cent in Pakistan during July-April 2010-11. The UAE has captured the position of largest source of remittances by accounting for 23.1 per cent stake in overall remittances during the same period.

Moreover, UAE has also taken over USA as a largest source of remittances flows to Pakistan mainly on back of increased remittances inflows from Dubai and Abu Dhabi respectively. The higher inflows of remittances from UAE seem to be the result of bilateral arrangements of commercial banks with foreign entities under Pakistan Remittance Initiatives (PRI).

The Emirates have had great success engaging Pakistan in retailing, pharmaceuticals, cosmetics, cement, food and beverages, information technology, packaging and agriculture. Looking forward, the UAE wants to further explore investment opportunities in telecommunications, real estate, aviation, banking, and energy.

The Emirates are experiencing growing demand for chemicals, machinery, and heavy equipment so these are investment areas that they are eager to look more into as well. Moreover, the emirates are eyeing opportunities for their small and medium enterprises or SMEs that account for almost 80 per cent of their corporate community.

PAKISTAN EXPORTS TO UAE

YEAR (PERCENTAGE SHARE)
2005-06 8.0
2006-07 8.2
2007-08 10.9
2008-09 8.2
2009-10 8.9
2009-10 (July-March) 8.1
2010-11 (July-March) 7.4

On the other hand, the Pak-UAE bilateral trade is witnessing a great surge, particularly during the last six years. The trade volume, which was around US$ 2 billion during the fiscal year 2000-01, rose to US$7 billion during the fiscal year 2010-11 with UAE emerging as the second largest destination for Pakistani exports.

UAE is one of the largest sources of Foreign Direct Investment in Pakistan. The UAE had also extended its support to Pakistan to finalize the Free Trade Agreement (FTA) with Gulf Cooperation Council (GCC) that would prove a breakthrough in Pakistan's economic and trade ties with GCC.

UAE had reduced the timeframe of multiple visas from six to three months for all countries in the world, but Pakistan had demanded relaxation in this condition and more than six months multiple visa for the businesspersons.

Each of Emirates also offers different business propositions, from construction and chemicals to financial services and tourism to Pakistan. Furthermore, Pakistan's Public Sector Development Programme for 2011-2012 is expected to allocate 14 per cent more that the budget estimates of 2010-2011, which means that many doors are going to be opened up in terms of public projects and their potential privatization.

For its part, the UAE intends to further explore Pakistan's public sector opportunities and avail of the country's various incentives and investor guarantees. The UAE non-oil businesses account for more than 70 per cent of their annual GDP now, so clearly diversification occupies a top spot in their development efforts.

In a similar manner, the structure of the Pakistani economy has evolved a long way from a mainly agricultural base to a service-driven environment.

The UAE was willing to start its Khalifa Refinery Project in Pakistan, involving a huge amount of $6 billion investment. The project was approved by the government of Pakistan during 2007. This project was lingering on due to different reasons like lack of gas supply, security, poor governance and circular debt, which has affected IPIC's other investments in Pakistani energy sector. But, in a recent Joint Ministerial Commission (JMC) of Pakistan and UAE in Dubai, UAE has expressed its willingness to start work on this mega project. It was expected that the establishment of a 500-MW power project was also part of the Khalifa Refinery Project. According to history of the project, the proposed Khalifa Coastal Refinery will be established in Khalifa Point at Hub, Balochistan, near Gaddani coastal area. It would span on 1,800 acres and will be the largest single foreign direct investment ever, if the project is materialized.

The refinery will have a capacity of 250,000 barrels per day, equal to 13 million tonnes of petroleum products per year.

The UAE and Pakistan both understand the implications of a diversified economy and have gone through great lengths to achieve it, so diversification will naturally become an increasingly important aspect of their partnership. The UAE also has expressed its great interest in supporting mega dam projects in Pakistan as part of its agricultural investments, which already includes a number of the country's farmlands.

PAKISTAN IMPORTS FROM UAE

YEAR (PERCENTAGE SHARE)
2000-01 14.5
2001-02 13.1
2002-03 12.4
2003-04 11.0
2004-05 8.3
2005-06 11.9
2006-07 9.1
2007-08 8.5
2008-09 9.1
2009-10 14.5
2009-10 (July-March) 14.7
2010-11 (July-March) 13.3

The emirates are especially looking at corporate farming as an important element in their food security strategy. The Emirates imports around 85 per cent of its food so it represents a major agricultural market, which they encourage Pakistan to further capitalize on. The connection between UAE and Pakistan is the time tested and appears overwhelming especially whenever there's crisis situation. The recent demonstration of the UAE's philanthropic support was observed when the worst floods ruined most parts of the country and affected million of people.

The UAE government ordered urgent delivery of relief material of shelter-displaced people in the flood hit areas. The government and people of the UAE also responded immediately to the emergency needs of survivors following the earthquake disaster, which claimed 80,000 lives and rendered 3.5 million homeless back in 2005.

Apart from these hard times, the UAE has proved its all time support and pledge for the people of Pakistan, a rare piece of unconditional care and help. It was estimated that the UAE government and donor organizations granted Dh9 billion (US$2.45 billion) in foreign aid during 2009.

Pakistan was one of the biggest recipients receiving up to AED1.60 billion ($436.7 million). The UAE committed grants of worth AED998.5 million ($270 million) through Abu Dhabi development in response to the submission of project proposal by the government of Pakistan. Health was the main sector to receive AED349.9 million. The data revealed that total AED183.1 million was spent on humanitarian assistance, almost third of the total aid.

ABU DHABI

The seat of the president of the UAE and the largest by area, Abu Dhabi accounts for approximately 85 per cent of the UAEs' total area. After the UAE gained independence, oil wealth continues to flow to the area and traditional mud-brick huts rapidly transformed into major financial institutions, business centres and moderns infrastructure.

AJMAN

The smallest by area but of great importance, Ajman is one of the seven emirates constituting the UAE. Like other UAE states, Ajman also experienced considerable economic and construction upsurge by offering attractive ventures and commercial opportunities for foreign investors.

DUBAI

Dubai, the growing oasis of the UAE, is the pinnacle of development and innovation. As a global city and region's business hub, it was built on the oil industry but soon attracted the world for overwhelming real estates, financial services, and tourism. This extraordinary urban city opens its doors to the world with greater opportunities for foreign workers, thus keeping the population at rise all the time.

FUJAIRAH

Fujairah is the only emirates in the UAE, which is situated by the gulf of Oman. It's a mountainous state that boasts high rainfall and attracts considerable tourism. Local industry consists of cement, stone crushing, and mining and enjoys good subsidies and federal government grants.

RAS AL KHAIMAH

It is the UAE's northern emirate bordering Oman. Ras Al Khaimah is significantly admired for its largest production of cement, ceramics, and thriving pharmaceutical industry. The Emirate is divided into two main sections, Old Ras Al-Khaimah and Nakheel.

SHARJAH

With nearly one million population, Sharjah is the third largest Emirate of the UAE. Kalba, Dibba Al-Hisn and Khor-Fakkan are the enclaves of Sharjah along with distinctive landmarks, impressive array of cultural, administrative and commercial centres and recreational parks. The Emirate is also notable for its numerous elegant Masajids.

UMM AL QUWAIN

Umm Al Quwain, the least populous emirate, is a blend of historic value and latest developments like dreamland Aqua Park, the largest in the UAE. Umm Al Quwain fort, Old Harbors, Umm Al Quwain islands and Al-Dour serve as precious sites to view the historic and cultural flair of the Emirate.

CONCLUSION

No doubt, the relationship has grown to become an example of cooperation and friendship, with mutual respect and unconditional concern. People of Pakistan have played a vital role in the development of UAE and the emirates have always been at the forefront in support of Pakistan through thick and thin. In the field of trade and industries, relationship between both countries has been strong as Pakistan and the UAE have strong bilateral commercial interaction since long and if present is of any beckoning all indications are that future will follow suit.