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Economic, investment ties enter defining moment of strategic alliance

India is the UAE's second largest trading partner after China.

THE dawn of new era in UAE and India relations will see the bilateral economic and investment cooperation entering a defining moment of strategic alliance in which most future engagements will be increasingly driven by the governments rather than the business communities of both nations.

The ongoing New Delhi visit of His Highness Shaikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, and his discussions with Indian Prime Minister Narendra Modi will formally signal the beginning of this bold new phase of partnership spanning a whole spectrum of engagements ranging from two-way trade and investment to defence, security, space and agriculture.

Since the Abu Dhabi Crown Prince's first visit to India in February 2016, which was preceded by the historic visit of Prime Minister Narendra Modi to the UAE in August 2015, there has been a new-found optimism, direction, resolve and passion to take the centuries-old ties to a level that justifies the growing economic and political stature of the two nations.

Emirati-Indian relationship is special because of both countries' age-old cultural ties, which were further nurtured by Indian expertise and entrepreneurship in the UAE where peoples of both nations have been partners in progress and prosperity over several decades.

Turning point

Prime Minister Modi's visit in August 2015 marked the turning point as it was the first prime ministerial visit from India to the UAE in 34 years after the visit of then Prime Minister Indira Gandhi in May 1981.

Following Modi's visit, the two countries decided to elevate their relationship to a Comprehensive Strategic Partnership. In the course of Modi's visit and the return visit by Shaikh Mohammed, both sides agreed to cooperate across a wide range of issues.

The UAE committed $75 billion to support investment in India's plans for rapid expansion of next-generation infrastructure, especially in railways, ports, roads, airports and industrial corridors and parks. The UAE being a significant contributor to India's energy security -- it was the fifth largest supplier of crude oil in 2015-16 -- both sides have agreed to promote strategic partnership in the energy sector, including through the UAE's participation in India in the development of strategic petroleum reserves, upstream and downstream petroleum sectors, and collaboration in third countries.

In the area of defence cooperation, both sides have renewed their commitment to strengthening the existing cooperation in training, joint exercises, and participation in defence exhibitions, as well as in identifying opportunities to cooperate on the production of defence equipment in India under the Make in India campaign.

In early 2016, the UAE and India signed a wide-ranging set of seven agreements including on cyber security, infrastructure investment and insurance. The agreements were signed after talks between Shaikh Mohammed and Modi. At their meeting the two leaders deliberated extensively on combating threat of terrorism and explored ways to enhance bilateral cooperation in counter-terrorism, maritime security and defence.

BIPA, FTA progress

Another landmark agreement that paved the way for boosting the economic cooperation was the Bilateral Investment Promotion and Protection Agreement (BIPA) signed in 2013 following the visit to the UAE by Indian President Pratibha Patel. The eagerly-awaited BIPA was crucial in redefining the investment and trade cooperation between the two countries and promises to significantly boost investments in Indian infrastructure projects by the UAE. It had helped enhance investor confidence by ensuring protection of bilateral investments.

The UAE is the 10th largest investor in India, the third largest Asian economy, in terms of foreign direct investment. Both nations are each other's largest trading partners with bilateral trade totalling over $75 billion in 2012-13 fiscal. While the UAE's investments in India have been just over $3 billion, investments made by Indians in the Emirates are estimated to be over $55 billion.

The accord also opened up the possibility of realising a long delayed India-GCC Free Trade Agreement, which has been under negotiation for quite some time.

Over the past two years, bilateral relations got further boosted by the strong political will in both countries, expressed through high-level visits and the many agreements signed between them in past years. Both countries established a joint committee at the foreign ministers level. The committee held many sessions since its inception, to discuss bilateral relations between the two countries.

Ambitious trade target

India ranks third among countries that export to the UAE, accounting for about 9.2 per cent of the total

imports by the UAE. The total volume of foreign trade between the two countries amounted to $60 billion in 2014 and $50 billion in 2015, making the UAE India's third largest trading partner after China and the US.

Bilateral trade between the UAE and India accounted for $17 billion during the first half of 2016. The UAE's imports from India rose to $ 11 billion in the first half of 2016, while non-oil exports to India reached $6 billion during the same period.

The two countries are aspiring to increasing trade by 60 per cent to $100 billion by 2020. The two-way trade exchange is poised to further grow to $160 billion by 2030. According to UAE ambassador to India Ahmad Al Banna, this would make the UAE the largest-trade partner to India in the world - a far cry from 1971, when two-way trade was just $180 million.

UAE largest Arab investor in India

India is the UAE's second largest trading partner after China. The UAE, on the other hand, is the largest Arab investor in India and the 11th foreign investor, in terms of Foreign Direct Investments (FDIs). The total value of Emirati investments in India was estimated at $9 billion in 2015.

The UAE is also the biggest Arab investor in India, accounting for more than 80 per cent of investments from Arab countries. Many UAE companies, like Emaar Properties, Abu Dhabi Investment Authority, the Abu Dhabi National Energy Company (Taqa) and DP World have undertaken considerable projects and investments in the country, and have been operating there for a while. DP World, for instance, has invested billions and has become the largest container terminal operator in India.

The UAE investments into India jumped by about $1 billion in 2015, figures provided by Indian Embassy in Abu Dhabi show. The FDI from the UAE from the year 2000 to 2016 has been $4.03 billion representing 1.40 per cent in terms of total FDI inflows with $1 billion going to India in just one year from April 2015 to March 2016.

The UAE investments in India span over a number of sectors, including construction, energy, metal industries, services, software and systems, petroleum products, precious metals, chemicals and wood products. The UAE has also decided to invest $75 billion in India's infrastructure over the long term. This will be a massive boon to India, whose infrastructure has failed to keep up with the turbo-charged economic growth the country has experienced over the past 15 years.
Major UAE investment in India

UAE's investments in five main sectors:

Construction Development 12%

Power 11%

Air Transport 9%

Hotel & Tourism 9%

Metallurgical Industries 8%

- issacjohn@khaleejtimes.com