UAE-PAKISTAN Bilateral Relations in 2014-15

Mehmood Ul Hassan Khan

AR-141209796

United Arab Emirates celebrated its 43rd National Day on December 2, 2014. It started its journey from sand and now a space agency has been established to surpass even Mars.

United Arab Emirates (UAE) and Pakistan are strategic partners and one of the main stakeholders in the region. They both enjoy extremely close and fraternal relations, founded on deep-rooted cultural affinities, shared faith and traditions. Geographic proximity and identity of interests has further strengthened their bilateral relations. The rise of commercial diplomacy has also started a new chapter in their trust-worthy relations.

Foundation of UAE-Pakistan Bilateral Relations

The foundation of trust worthy bilateral relations was laid by the founder of modern UAE, late Sheikh Zayed bin Sultan Al Nahyan. It has been further strengthened by the President His Highness Sheikh Khalifa bin Zayed Al Nahyan and its government.

UAE’s Assistance & Support to Pakistan

UAE has been a major donor as well as supporter of all kinds of assistance to Pakistan in many diversified sectors i.e. social development (education, health, cleaning drinking water, sanitation, infrastructure, housing etc.), economic development (grants, soft loans, development packages to lessen the energy deficit, budgetary deficit and hosting of many investment road-shows and Friends of Pakistan Donor Conferences in Abu Dhabi & Dubai), infrastructural development (the UAE-PAP is the prime example), political support (always appreciate the government of Pakistan front-line role in the war against terrorism, stand with the people of Pakistan in case of any external aggression etc.). UAE Humanitarian assistance has been contributing good results in far flung areas of Pakistan.

Pakistan’s Positive Contribution to UAE

UAE has also been appreciative of Pakistan’s positive contribution to the evolution of key institutions in the Emirates such as armed forces, police, health and education, and has reciprocated in the same friendly manner to the full satisfaction of Pakistan.

UAE Significance to Pakistan

According to official figures the UAE has become Pakistan’s largest trading partner, with annual bilateral trade reaching $10 billion. It is also the second-largest investor in Pakistan with $21 billion investments mainly in banking, real estate, energy, infrastructure, telecommunications, ports, housing and aviation etc.

New Chapter of UAE-Pakistan Bilateral Relations via Commercial Diplomacy

The long-standing relations between U.A.E. and Pakistan were established in November 1972. In February 1977, the first meeting of the U.A.E.-Pakistan Joint Committee took place in Abu Dhabi. The two countries signed an agreement on avoidance of double taxation in 1999.

UAE President, His Highness Shaikh Khalifa bin Zayed Al Nahyan Visit to Pakistan

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During 2014, the President, His Highness Shaikh Khalifa bin Zayed Al Nahyan privately visited Pakistan and met Pakistan Prime Minister Mian Muhammad Nawaz Sharif. “We are looking forward to further developing the fraternal relations between the UAE and Pakistan and always strive hard to bring benefits to the people of the two countries,” Shaikh Khalifa stressed.

Pakistan’s Response

On his part, Sharif highly appreciated Shaikh Khalifa’s visit which represents the strong relations and the bonds of love between the two friendly countries. He also pointed out the excellent role being played by the UAE in provision of aid to the people of Pakistan in the form of several projects aimed at improving the level of services in various provinces of Pakistan. He affirmed that Pakistani leadership and the people appreciate the UAE, led by Shaikh Khalifa, for this kid and noble gesture.

During the meeting, the two sides discussed bilateral relations and ways to bolster them for mutual benefit. They also exchanged views on a number of latest regional and international developments, in addition to other issues of mutual interest.

UAE-Pakistan 11th Joint Ministerial Commission Meeting

During 2014, UAE and 11th joint ministerial commission meeting was also held in Islamabad. UAE Foreign Minister H.E. Sheikh Abdullah Bin Zayed Al Nahyan headed the UAE delegation. During his two day stay he had different spells of meetings with Prime Minister Mian Nawaz Sharif, President Mamnoon Hussain and Adviser on Foreign Affairs National Security Sartaj Aziz in which he thoroughly discussed a wide range of issues relating to trade & commerce, further enhancing of economic ties, prospects of FDIs and joint ventures. Both sides principally agreed to enhance bilateral economic cooperation and decided to establish Joint Trade Council to promote trade between the two countries.

Achieving of Sustainable Economic Ties

Both sides also agreed that the political goodwill that exists between the two countries must be translated into sustainable economic ties. The two countries also decided to hold first meeting of Joint Business Council (JBC) in the first quarter of 2014 either in Pakistan or UAE as well agreed to appoint focal points to discuss establishment of joint committee for consular affairs.

UAE-Pakistan Energy Cooperation

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UAE is one of the leading Gulf Cooperation Council (GCC) and Middle East and North Africa country in terms of renewable energy production. It has vast expertise, financial resources and a strong political commitment to achieve the desired goals of at least 7 percent of renewable energy mix (solar, wind, thermal, geothermal, nuclear, biomasses) in the days to come. Masdar is the icon of solar and wind energy productivity in the region as well as in the world. Since Pakistan has acute energy deficit in the country for so many years, addressing a joint news conference H.E. Sheikh Abdullah bin Zayed Al-Nahyan said there was huge potential to cooperate and coordinate in the energy sectors, especially the renewable energy and the UAE would be looking at ways and means to develop this sector in Pakistan in the days to come. It is predicted that brotherly country UAE’s cooperation in alternative energy i.e. solar energy would pay its dividends in the days to come.

He said relations between the two countries were diverse, encompassing political, economic and cultural dimensions as well as people to people contacts. The UAE minister was appreciative of the role being played by more than 1.5 million Pakistanis in the development of his native country.

UAE’s Private Sector Energy Cooperation with Pakistan

1. Dubai-based ANC

UAE and Pakistan signed a $2.5 billion agreement for production of 1320 MW electricity from coal in the country. The agreement was signed between Dubai-based state-owned Arab National Company and Private Power and Infrastructure Board (PPIB), a subsidiary of Pakistan’s water and power ministry. While attending the singing ceremony Prime Minister Nawaz Sharif termed the agreement “a milestone in the path towards energy self-reliance.” Pakistan has the 7th largest country coal reserves in the world with 186 billion tons. Almost all of those reserves are found in the southern desert area of Thar.

2. Aqili Group, Dubai

In March (2014), a memorandum of understanding was signed between Al Aqili Group, Dubai, and the ministry of water & power government of Pakistan. According to the agreement, the Aqili Group has expressed interest to supply 3000MW of electricity to Pakistan from Iran under a long term contract. The group shall also finance/build transmission lines to inject 3000MW into the national grid in Pakistan.

Al Aqili Group is rated amongst world’s top group of companies and has a number of high profile partnerships with many prominent multinationals. The Group has successfully established an extensive network of relationships with the business communities, financial institutions and government in all its operating geographies.

3. Dexterite

Moreover, Dexterite a UAE-based company signed a Memorandum of Understanding (MoU) with the Board of Investment (BOI). It would help in distribution system of electricity and this firm would work out as to what investment was required in our distribution companies and what kind of assistance they could provide to our distribution companies

According to the agreement, the ANC will set up two coal power plants with a capacity of 660 MW each in the coastal town of Gadani, some 60 Kilometers off the port city of Karachi. The company will also construct a jetty along with the construction of the power projects. The agreement is aimed at overcoming a simmering energy crisis that has crumbled the already shaky economy of Pakistan.

Appointment of focal persons

In order to increase the volumes of bilateral trade between the two countries, focal persons have been appointed for cooperation in the shipping sector and a MoU was also inked between the Securities and Exchange Commission of Pakistan and Securities and Commodities Authority of the UAE.

Details of UAE-Pakistan 11th JMC

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During the UAE-Pakistan 11th JMC many meaningful sessions were held. Following sectors and segments of economic ties, financial cooperation, prospects of availing FTA, energy cooperation, education and the last but not the human capital exports were thoroughly discussed.

(a)Trade & commerce, investment and bilateral trade: Both sides agreed to further enhance the volumes of bilateral trade, inflows of FDI and joint ventures.
(b) Holding of the Pak-UAE Joint Business Council meeting: It was decided to hold it in the next year.
(c) Status of FTA with GCC Countries: The government of Pakistan requested to gain the FTA status with GCC where UAE is an important country.
(d) Finance & Banking: UAE banking and financial system is strong, stable and sustianble, stable and sustainable. The government of Pakistan needs further enhancing of finance & banking cooperation for the best of its economy and production channels.
(e) Energy Sector: Loan for Neelum Jehlum Hydro Project for $200 Million and investment of Oil & Gas Sector in Pakistan were thoroughly discussed and pledged.
(f) Education: UAE is now the hub of higher education due to which avenues were explored in this field too.
(g) Exports of Human Capital & Visas: The exports of manpower and relaxation of visa management were also discussed and the UAE side promised to resolve these issues. UAE has won the bid of holding World Expo 2020 due to which much mega infrastructural development is being carried in many parts of the UAE, so exports of manpower is bright from Pakistan.
(h)Security: Both sides shared commonalities on the regional and global security issues.
(i) Science & Health Sectors: UAE has become icon of science and health sectors. It is leading country in medical tourism in the GCC and MENA. The government of Pakistan requested further extending of mutual cooperation.
(j) Civil Aviation, Port & Shipping: UAE has become ideal destination of tourism, hospitality. Its civil aviation sector is leading the regional as well as the globe. Its port & shipping sector has the ability to shake the GCC and MENA. Prospects of mutual cooperation in these sectors were thoroughly discussed.

Keeping in view the emerging socio-economic, geo-political and geo-strategic emerging red-lines and irritants in the region and especially in the MENA, further consolidation of bilateral relations and continuous consultations at the highest levels are must to impasse all the difficult phases in order to achieve a progressive, productive and prosper future for both the countries.

UAE: The Biggest Trading Partner

The UAE is a global trading hub and a major trading partner of Pakistan and both countries are keen to further boost and strengthen bilateral trade ties. Bilateral trade between the two countries has crossed $10 billion mark and the UAE has become the largest trading partner of Pakistan too.

According to an official figures, trade between the two countries is increasing day by day it has surpassed $US 10 billion during 2012-2013. The following given table shows the volumes of bilateral trade between the two countries.
(US$ Million)
Years Exports Imports Total Trade Volume Trade Balance
2006-07 1,392.50 3,280.40 4,672.90 (1,887.9)
2007-08 2,070.95 4,985.30 7,056.25 (2,914.35)
2008-09 1,469.90 4,399.62 5,869.52 (2,929.72)
2009-10 1,720.41 4,781.84 6,502.25 (3,061.43)
2010-11 1,855.18 5,812.01 7,667.19 (3,956.83)
2011-12 1,891.45 6,350.894 8,242.346 (4,459.442)
Source: SBP & BOI (2013)

It is evident from the above table that UAE has the comparative advantage in bilateral trade volumes which should be gradually rectified by diversifying our exports mix, trade priorities and, preferences with the help of UAE better commercial diplomacy.

According to State Bank of Pakistan (SBP) Pakistani exports to the UAE have been rising in recent years. The exports increased from Rs55 billion in FY-2009 to Rs206 billion in FY-2013. The SBP says, its share of exports to the UAE was eight per cent worldwide in FY-14.

Further Strengthening of UAE-Pakistan Bilateral Trade (Futuristic Approach)

Sectors Workables/Doables

Improvement in Supply Chain: It is evaluated that Pakistan’s exports to UAE can be doubled from the existing volumes by focusing on improving the overall supply chain of goods being exported to UAE, particularly the perishable products
Reduction of Transpiration Delays: Currently it takes around 72 hours of duration for Pakistani goods to reach UAE which can be reduced to just 24 hours by taking steps towards improving the transportation system along with refrigeration facilities.
Availability of Cold Chain: Pakistani exporters must maintain cold chain during transit of perishable goods which would surely help in enhancing exports to UAE.

In addition to mentioned above, the horticulture sector of Pakistan has the potential to capture sizeable share in UAE markets but unfortunately Pakistan’s exports of horticulture products to UAE were almost inexistent which needs to be developed. Value-addition and diversification of exports mix would brighten UAE-Pakistan bilateral trade in the days to come.

FTA: A Catalyst for UAE-Pakistan Bilateral Trade Composition

It is predicted that the mutual trade volumes can also be enhanced by finalising a Free Trade Agreement (FTA) or FTA between the UAE and Pakistan as well as the rest of the region by among others trade promotion measures. An FTA will reduce the tariff rates on traded goods and services to the advantage of producers, exporters-importers and the consumers at large.

Pakistan Ministry of Commerce (2013-14)

According to Pakistan Ministry of commerce (2013-14) total trade volume between Pakistan and UAE was $9 billion, of which Pakistan’s total imports stood at $6 billion while products worth $3 billion were being exported, depicting a trade deficit of $3 billion but this deficit offsets as Pakistan received workers’ remittances of $3 billion from UAE.

Pakistan Consulate, Dubai (2014)

According to Pakistan Consulate, Dubai (2014) the food product exports of Pakistan to the UAE stood around $400 million in 2013 and will cross $0.5 billion mark this year as the country expects the ban on its poultry products that are exported to the UAE to be lifted soon. UAE’s global imports market is expected to grow by $5.5 billion in 2015 and by will reach to $7 billion in 2020. UAE imported $3.6 billion food in 2010. UAE’s being the Mena regions’ trading hub (UAE ports account for a 61 per cent majority of trade volume among the GCC countries), will be an ideal re-export destination for Pakistan food industry. Moreover, as per the Economist Intelligence Unit, the “UAE’s halal food imports are expected to contribute a 15 per cent of the total GCC imports by 2020, so Pakistan would increase its exports to UAE in the days to come.

Main Exchange of Commodities (Imports-Exports)

UAE is the biggest re-exporter of many edible commodities. Its service sector provides each and every possible facility to increase the volumes of imports-exports.

UAE (Exports) Pakistan (Imports)
Petroleum, petrochemical products, iron ore, scrap-plastics, chemical products, non-ferrous metals-machines, spare parts of cars, ships and boats. Nylon textiles, meat, silk and wool, rice, cotton, crochet-dye, textile-treatment requirements of fabrics and clothes, towels, marble and surgical instruments

UAE: The Biggest Foreign Investor

Foreign direct investment (FDIs) is crucial for economic survival and industrial production. It is the effective tool for job generation and value addition. According to the data of SBP and Board of Investment (BOI), the UAE is the biggest investors in Pakistan. Its collective investment in the country has reached to $US 21 billion in 2012-2013. Moreover, in the last decade, UAE merged as the biggest investor in Pakistan. The major proportions of the UAE investments (private & public) came from banking, telecommunication, information technology, ICT, electronics, real estate, agricultural and corporate farming.

Pakistan’s Investments in UAE

According to the Ministry of Economy, Currently, 7,000 Pakistani companies and 12 trade agencies operate out of the UAE. According to Pakistan Embassy UAE (2014) the investments of Pakistanis have reached to $ 25 billion (Rs.84 billion) in UAE.
Investments by Pakistani nationals in the UAE totalled $23 billion (Dh84.4 billion) while the UAE’s trade with Pakistan have reached $9 billion (Dh33 billion. According to Dubai Land Department’s 2013 figures, Pakistani investors were third highest buyers among foreigners of property in the emirate’s Dh114 billion transactions last year. In Q1 2014, DLD said Pakistani investors spent around Dh2 billion to buy property in the emirate.
UAE Private Companies in Pakistan

More than 27 UAE companies are working in Pakistan. These are actively participating in the socio-economic prosperity of Pakistan. These have already elevated the levels of production, service and value-addition. Detail is given below as:

Sectors/Segments UAE Private Companies Socio-Economic Multiplier Effects
Telecommunications Etisalat, Warid, Wateen and U-phone Pakistan experiences the connectivity revolution. Telecommunication sector is one of the biggest sectors for job creation, revenue and service in the country.
Banking Bank Al Falah under Abu Dhabi Group, Dubai Islamic Bank, Emirates Global Islamic Bank SBP has already appreciated the role of UAE banks working in the country which are the benchmark of service, delivery and finances especially the consumers and general public.
Real Estate Emaar Properties Group, Al-Ghurair Giga and Al Habtour Trading Enterprises, Bahria Emirates, DAMAC and Al-Ghuran UAE companies are game changer, providing the best quality of service and execution.
Airlines Etihad Airways , Emirates Airlines and FlyDubai The introduction of UAE airliners in the country has made international journey a remarkable experience. It has introduced a healthy competition. Etihad Airways and Emirates Airlines are the two most popular airlines in the country.
Insurance Al-Falah Insurance Company, Emirates Investment Group, Takaful Pakistan Limited Insurance industry in the country benefited from the international exposure of the UAE insurance companies.

Prospects of Joint ventures

In the modern economic system joint ventures play very important role in uplifting macro-economy growth rates, industrial production pace, value-addition and qualitative development in the given country.

(a) Petroleum and petroleum products: The import bill of Pakistan always on higher side due to its heavy reliance of oil. Prospects are high to take initiative in this sector.
(b) Aluminum products: Construction boom in the GCC and UAE would brighten the chances of mutual cooperation.
(c) Agriculture (horticulture, corporate agricultural farming, dairy farming and livestock): Food and energy sectors are one of the main emerging issues of the UAE economic diversification policy. Pakistan may assist its brotherly country. Even now many private firms of the UAE are investing in the high protein cattle food named Alaph in Pakistan.
(d) Islamic Banking: UAE and especially Dubai has become regional and global hub of Islamic Economy. Policy measures must be taken to excel in this field.
(e) Construction: Prefabricated houses and affordable low income houses are the basic requirement in the country.
(f) Energy: Pakistan is an energy deficit country which has already damaged our socio-economic fabric. Chances are very high in the energy cooperation especially in alternate energy i.e. solar and wind. Masdar would be game changer.


UAE: The Biggest Worker Remittances Source

In the times of national constant budgetary deficits, a worker remittance is the hope of the last resort. According to latest report of the SBP (2014) overseas Pakistani workers remitted an amount of $5,275.61 million in the first four months July to October of the current fiscal 2013-14 showing a growth of 6.27 percent when compared with $4,964.21 million received during the same period of last fiscal year July-October FY13.

Every year, the 1.5 million Pakistanis working in the UAE send the valuable remittances surpassing to $2.5 billion due to which UAE has now the biggest country of the Pakistani worker remittances in the world. It shows the close trade & commerce relations between the two countries.

Concluding Remarks

United Arab Emirates and Pakistan are strategic partners. Bilateral relations would be further enhanced by initiating meaningful policy measures in the fields of energy production/supply, food security, civil aviation and banking & finance. Enhanced cooperation in the fields of alternative energy especially the solar energy would be game changer in the bilateral relations of both the countries. Effective commercial diplomacy would provide both the countries a win-win position. Since UAE has won the World Expo 2020, immediate demands are likely in the sector of construction material, including cement, tiles, sanitary wares, wooden material, building material, furniture, electrical goods, carpets and skilled manpower, etc.

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