PAK-UAE ECONOMIC TIES
TARIQ AHMED SAEEDI
Mar 12 - 18, 2012
Business communities of Pakistan and United Arab Emirates (UAE) have reposed confidence in each other by creating joint ventures worth $21 billion. Today, 27 companies from both the countries are working together in telecommunication, aviation, and different other sectors, thereby stepping up bilateral economic relations.
The relationship building process is evolving at private as well as public sector levels. Investors from UAE are confident about the latent potential of various economic sectors in Pakistan that can become incredibly profitable on the back of appropriate investments. On several occasions, UAE's top officials and diplomats have emphasised on the significance of the economic ties, supporting and facilitating investments and business-to-business relationships. This fact is manifesting itself in the growing two-way trade and rising investment flows from UAE into Pakistan.
GROWING TWO-WAY TRADE
Pakistan-UAE trade transactions have been scaling up rapidly for last five years. From $2.8 billion in 2005, the bilateral annual trade volume has climbed to over $7.6 billion making the emirates one of the largest trade partners of Pakistan.
There is a talk of free trade agreement between Pakistan and gulf cooperation council (GCC). UAE is an important member of the block consisting of member nations including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, Jordan and Morocco.
At the 10th summit of the Pakistan-UAE Joint Ministerial Commission (JMC), UAE foreign minister Shaikh Abdullah expressed his strong desire of free trade agreement with Pakistan. In a meeting with his Pakistan's counterpart, Hina Rabbani Khar, last month in the capital of seven emirates Abu Dhabi he assured her of full support in making the dream of FTA come true.
Pakistan has trade relations with all the GCC members. However, its bilateral trade volume with the emirates is relatively large.
"The UAE firmly believes in the principles of importance of strengthening economic coordination with Pakistan as the later presents suitable environment ready for investment," said Essa Abdullah Al Basha Al Nuaimi, Ambassador of the UAE in Pakistan.
"The fruit of this interest was holding the conference on investment promotion in Pakistan in March 2010 and the UAE Expo Magnificent 7, which was organized last year," added Essa Abdullah during a meeting of CEOs and representatives of UAE investments in Pakistan in January this year, according to a press statement of UAE's ministry of foreign trade.
FOREIGN DIRECT INVESTMENTS & FINANCIAL ASSISTANCES
Foreign direct investments from UAE in Pakistan were around $284 million in 2010-11, which accounted for 16 per cent of total FDI of $1,739 million, as per the statistics of the board of investment.
Over a decade, the biggest inflows of foreign investments were recorded in 2005-06 when UAE made an investment of $1.42 billion in the economy of Pakistan. Foreign minister Shaikh Abdullah in a meeting with the then president Pervez Musharaf and prime minister Shaukat Aziz had expressed his government's desire to increase investments to $26 billion.
UAE had also intended to extend financial assistance including soft loans to Pakistan to construct mega hydropower dams. According to the media reports, UAE has planned to issue soft loan for the Neelum Jhelum hydropower project. It is also said to dole out around $250 million grants for construction of houses in Swat and Malakand. Out of the pledged amount, $30 million has already been disbursed, said a report.
So far, investments have been poured in telecom, airlines, banking, financial services, construction and real state. But, now investors are also taking interest in renewable energy sector, which has a vast potential. A business group namely Masdar is said to be on the stage of discussion with the alternative energy development board (AEDB) in this regard.
To further the economic ties, Pakistan-UAE Joint Business Council has been proposed. The council is reported to start operation from next month. The council will prove an effective platform to resolve the critical issues facing the businesspersons of both the countries. There is a problem of visa issuance to Pakistani businesspersons.
Unquestionably, there is need of removing barriers in the way of progressive Pak-UAE economic relations.
The business council can also used to identify and level out differences that are holding up operationalization of mega projects such as Khalifa Coastal Refinery (KCR), which has an estimated cost of six billion dollars, and creating atmosphere of distrust.
A joint project of UAE (about 76 per cent) and Pakistan Arab Refinery Limited (Parco) 25 per cent, KCR was approved back in 2007. Thousands of jobs are expected to be created once the refinery with 300,000 barrels per day capacity kicks off the operation. Equally critical issue lingering for quite same time is related to the Ptcl's privatization. Non-release of final privatization proceed from etisalat raises doubts over the intention of the buyer, a well-heeled and a leading telecommunication company of Middle East and North Africa (Mena) region. There are some genuine concerns of the buyer like property transference, etc. These issues are important and can militate against prospective free trade agreement or bilateral trade promotion policies, and thus need immediate attention of the authorities.
Pakistan can increase its share in the UAE non-oil foreign trade, which is on the upward trend. During January-October 2011, the non-oil foreign trade climbed 22 per cent to Dhs759 billion ($207 billion at current conversion rate of 1USD=AED3.7) from Dhs623 in the corresponding period last year, showed the data of the federal customs authority (FCA). India, U.S., China, Japan, Germany, France, United Kingdom, Italy, Switzerland, and South Korea accounted for 63 per cent of UAE's total imports in October while UAE exported 67 per cent of its non-oil exports to India, Iran, Singapore, Turkey, Thailand, Switzerland, Saudi Arabia, Kuwait, Iraq, and Qatar, according to the FCA's statistics.