‘India, UAE can broaden economic ties’

NEW DELHI :India and the United Arab Emirates are looking to identify and incorporate commodities to diversify trade between the two countries, UAE ambassador to India 8said in an interview. The diversification of traded commodities can broaden the scope of economic cooperation and make local currency transactions even more versatile, Alshaali said in an email interview. He added that India, Europe, and the Middle East MoU for the India-Middle East-Europe Economic Corridor (IMEC) could potentially reduce shipping costs and facilitate efficient trade in goods and services. On the recent approval of 75,000 tonnes of non-basmati white rice for export from India to the UAE, he stated that Indian rice has earned a reputation for its quality and flavour, making it a preferred choice in the UAE and many other countries. Edited excerpts:

Local currency trade is picking up between India and the UAE. Do you think this will help usher in a new era of trade ties between the two countries? What is the vision for this going forward?

Yes, the increasing trend of local currency trade between India and the UAE has the potential to usher in a new era of trade ties between the two nations. This development signifies a commitment to strengthening economic cooperation and reducing reliance on foreign currencies, which can streamline the trade processes and reduce transaction costs. The vision includes expanding the use of our respective national currencies, the UAE dirham and the Indian rupee, in various trade transactions. By promoting direct exchange rates, facilitating the settlement of trade transactions, and encouraging the use of local currencies, both countries aim to foster deeper economic integration. This move is expected to facilitate bilateral trade, encourage direct investment, and improve financial transfers, ultimately enhancing the robustness of our trade relations and contributing to economic growth and stability in both nations.

Currently, the local currency trade has begun with gold and oil. Are both countries discussing other commodities to add to these items?

The framework outlined in the MoUs signed by CBUAE and Reserve Bank of India (RBI) seeks to promote the use of the national currencies in commercial transactions, which would contribute to the development of the foreign exchange market, facilitate bilateral trade, encourage direct investment, and support economic growth and financial stability. The diversification of traded commodities can broaden the scope of economic cooperation and make local currency transactions more versatile. Discussions are ongoing to identify and incorporate commodities of mutual interest and benefit both nations.

Considering global trade is expected to shrink, what is the UAE’s strategy to better use the FTA and boost trade with India? India and the UAE are trying to push non-oil trade. Would this include the UAE increasing its imports from more sectors in India?

Coming into force on 1 May 2022, the UAE-India Comprehensive Economic Partnership Agreement (CEPA) is the UAE’s first CEPA and a cornerstone of our new foreign trade agenda. The agreement eliminated or reduced tariffs on more than 80% of product lines, created new platforms for SME collaboration and promoted mutual investment flows, particularly into priority sectors.

The signing of the CEPA has contributed to strengthening economic ties between India and the UAE. Both countries are committed to expanding their partnerships across various sectors, focusing on sustainable growth. The agreed UAE-India CEPA Council (UICC) will function as a B2B collaboration mechanism, with a focus on MSMEs and start-ups, for building greater economic linkages and optimising CEPA benefits. Integration of activities will take place under the CEPA council and established committees/sub-committees.

Initial figures indicate that from May 2022 to April 2023, the first 12 months of the CEPA, bilateral non-oil trade reached a value of US$50.5 billion, a 5.8% increase on the same period from the previous year. It is commendable to see the effectiveness of the CEPA in promoting trade and investment, and both countries are committed to building a mutually beneficial partnership that delivers long-term prosperity.

What ambitions does the UAE have for the newly announced India-Middle East-Europe Economic Corridor? How does it compare to existing connectivity initiatives?

India, Europe, and the Middle East MoU for the India-Middle East-Europe Economic Corridor (IMEC) is a significant initiative that aims to boost connectivity, trade, and sustainability among participating countries. The UAE’s involvement in IMEC is expected to be multifaceted, leveraging its strategic location, trade expertise, and commitment to environmental conservation to contribute positively to the success of the corridor and strengthen international partnerships.

IMEC represents a collaborative effort involving multiple countries, showcasing the willingness of nations to work together for mutual economic and environmental benefits.

The UAE’s strategic geographical location and well-developed infrastructure, particularly its ports and transportation networks, make it a key player in enhancing connectivity within the IMEC. The country can serve as a vital hub for the transit of goods and services.

The IMEC initiative aims to create an extensive economic corridor comprising two pathways – the east corridor, connecting India to the Arabian Gulf, and the northern corridor, connecting the Arabian Gulf to Europe. This will significantly enhance connectivity and integration between these regions, fostering economic growth, trade, and cooperation.

By reducing shipping costs and facilitating efficient trade in goods and services, IMEC has the potential to boost the economies of the participating countries. This corridor can serve as a crucial trade route, benefiting not only India, Europe, and the Middle East but also the global economy.

The UAE announced a $2 billion investment in India ‘food parks’ to tackle food security in South Asia and the Middle East, the UAE, India, the US, and Israel last year. What is the status of this project, and how has the progress been?

The UAE’s announcement to invest $2 billion to set up food parks across India is part of efforts by I2U2, to help tackle food insecurity in South Asia and the Middle East. The US and Israeli private sectors will be roped in for technologies to reduce food waste and spoilage, conserve fresh water, and employ renewable energy sources at the food parks.

We are currently working on this with all partners of the group to establish the parks, and several meetings have taken place for the next steps.

On 25 September, India allowed exports of 75,000 tonnes of non-basmati white rice to the UAE. Will it be sufficient for the country, or is it going to request more quantity as it prefers Indian rice more than other nations? How is the UAE coping after India’s non-basmati white rice export ban? Has the UAE asked India to remove the ban on non-basmati white rice?

There is a strong and cooperative relationship between India and the UAE in the realm of rice trade. The recent approval of 75,000 tonnes of non-basmati white rice for export from India to the UAE is a testament to the enduring partnership between our two nations. While this specific quantity of rice is significant, it is essential to recognise that both India and the UAE share a mutual interest in promoting bilateral trade and addressing food security concerns. Our governments remain committed to facilitating trade that benefits the populations of both countries.

Regarding the UAE’s preference for Indian rice, historical and cultural ties have fostered this preference. Indian rice has earned a reputation for its quality and flavour, making it a preferred choice in the UAE and many other countries. We value this preference and aim to meet the UAE’s rice needs to the best of our abilities.

As for India’s export ban on non-basmati white rice, it is essential to consider that these trade measures are taken in response to domestic factors, such as food inflation concerns and weather patterns affecting rice production. Both India and the UAE are committed to fostering a robust and harmonious trade relationship that addresses food security, promotes economic growth, and respects the preferences of our trading partners. We will continue to work closely together to ensure that our trade ties remain strong and mutually advantageous.

Recently, the climate change minister said in an interview that the UAE, through COP28, is trying to get $100 billion as far as climate financing is concerned and that the country would soon be sending the declaration draft on climate finance and food security. Has it been sent to the member countries yet?

In the context of COP28, the UAE is actively working towards making climate finance more affordable, available, and accessible. As part of these efforts, we are collaborating with international financial institutions (IFIs), multilateral development banks (MDBs), the International Monetary Fund (IMF), the World Bank, and GFANZ to leverage capital markets, standardize voluntary carbon markets, and incentivize private capital and finance for climate action. Additionally, we have engaged with the G20 High-Level Expert Group to design a modernised approach to climate finance. We emphasise the urgency of climate financing, and a call on donor countries is underway.