In December’s Arab Strategy Forum 2006 in Dubai, there was much discussion around the improving ties between the UAE and the Asian giants. While this may not be a new phenomenon, two-way ties have recently flourished between China and India, and the Gulf Cooperation Council (GCC) countries.
In a context where both India and China are seeking energy security, the GCC is playing an instrumental role in supplying both countries with crude oil and LNG (Liquefied Natural Gas). China and India also offer significant investment opportunities for UAE-based companies. Similarly, a great number of Chinese and Indian firms have taken root in Dubai. China and India have become the UAE’s main trading partners, with China recently overtaking India for the top position.
At the recent India-Arab World CEO summit, Kamal Nath, India’s minister for commerce and industry, announced that India and the GCC were in the process of establishing a Free Trade Area by 2007. In the meantime, the GCC is also in the final stage of talks to sign a similar agreement with China, also announced for next year.
The latest official figures indicate that bilateral trade between India and the UAE has grown steadily in recent years. Indian exports to the UAE reached $8.5 billion last year, up from $3.3 billion in 2002. UAE exports to India also grew strongly, from $956 million in 2002 to $4.3 billion last year.
Likewise, trade between China and the UAE has also boomed and reached $10 billion in 2005. In particular, China is Dubai’s main trading partner, with trade valued at $8.5 billion. In addition, it is estimated that bilateral trade between China and the UAE, for the whole of 2006, will reach $15 billion.
While the UAE primarily exports mineral products, mainly oil, and aluminium, it imports machinery, electrical and electronic goods from China, as well as textile products. These two sub-categories of imports account for around 60% of total imports.
Taking root in the UAE
Currently, some 1,000 Chinese firms are registered in the UAE and this figure is poised to increase over the next few years. But perhaps the most distinctive and symbolic feature of this Chinese presence in Dubai is leading property developer Nakheel’s Dragon Mart, the largest trading hub for Chinese products outside Mainland China. Inaugurated in 2004 by Sheikha Lubilliona al-Qasimi, UAE minister for economy and planning, the mart is jointly promoted by Nakheel and Chinamex Middle East Investment and Trade Promotion Centre and currently serves as a centre for activity in the Middle East for Chinese businesses.
Meanwhile, according to UAE official figures there are 6,000 Indian firms operating in Dubai, 10% of which are located in the Jebel Ali Free Zone and whose activities range from steel to IT. This figure is set to increase over the next few years. A visit in April this year by three high level delegations from the Indian States of Delhi, Punjab and West Bengal to the Jebel Ali Free Zone proved extremely valuable, as the delegates were able to fully appreciate the high quality of the environment for Indian companies to invest.
Reaping the benefits
Conversely, China and India have also benefited from the economic boom in the GCC, as these countries have started to invest massively in the two fast-growing economies. This can be attributed to the great number of investment opportunities offered in an array of sectors, from real estate and construction to manufacturing and IT.
While UAE-based investments in India have soared, Nath recently added that India was targeting investments from the Gulf to reach $2 billion over the next three years. UAE-based companies such as Emaar have already completed some major infrastructure projects such as the Convention Centre and the Golf Resort in Hyderabad. In addition, DP World is already operating six ports in India.
Similarly, China is getting a lot of attention from GCC investors. DP World already operates seven ports in China. Sultan bin Sulayem, Chairman of Dubai World, recently mentioned that Nakheel was considering developing high-end real estate projects in China due to strong demand. In addition, GCC investors have also shown interest in private equity investment in China. As a case in point, Jade Alternative Investment Advisors, an investment consultancy, has recently announced it intends to raise a $150 million fund to invest in private equity funds operating in China. Jade primarily serves Middle Eastern institutional and corporate investors.
