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NEWSLETTER,U.A.E

Post-Covid Economic Recovery Propelled UAE’s Non-Oil Foreign Trade on a 27% Higher Growth Trajectory

March 16, 2022

As the post covid economy gained momentum, the non-oil foreign trade of UAE witnessed an increase of 27% yearly during 2021 to reach Dh1.9 trillion, equivalent to $517.27 billion.

Even in 2021, the non-oil foreign trade registered more than 11% higher growth compared to the pre-Covid levels in 2019, highlighted Vice President and Ruler of Dubai, Sheikh Mohammed bin Rashid in a tweet on Sunday, 27th February 2022.

The Minister of State for Foreign Trade, Dr Thani Al Zeyoudi noted, “This rebound proves our economy’s resilience and underlines our status as a major international trade hub.” The Minister also added, saying that the increase was a “record single-year leap”.

The UAE government also released a statement quoting, “These results come in light of the launch of the Projects of the 50 and the continuous efforts being implemented by the country to enhance its position on the international trade map and ensure an attractive, active and open commercial environment to the world and linked to a diverse and strong network of global supply chains. Non-oil foreign trade of all emirates registered a rise last year.”

The economic recovery of the UAE has gained momentum due to the country’s timely and rapid anti-pandemic response including widespread testing, containment and vaccination drive. Furthermore, the country has also rolled out several fiscal and macro-economic policies to accelerate the economy and help the hardest hit business sectors e.g. retail and tourism sectors rebound. The International Monetary Fund (IMF) said in its report dated 27.02. 2022.

As per IMF estimate, the UAE’s economy grew 2.2% in 2021, driven by a 3.2% expansion in the non-oil sector. The International financial institution expects UAE’s economy to grow by 3.5% in 2022, on the back of the expansion of the non-oil economy by 3.4%.

The Central Bank of the UAE (CBUAE) forecasts the economic growth of the country to be pegged at 4.2% in 2022, over 10% higher than the previous year’s forecast of 3.8%. Dubai Media Office reported a 27% rise in non-oil trade during the first half of 2021 amounting to Dh 900 billion.

UAE revealed its plan for a Comprehensive Economic Partnership Agreement (CEPA) with seven other countries last year, including the UK and South Korea. The country has just concluded its CEPA with India in February 2022.

The CEPA with India, the 3rd largest economy in Asia after China and Japan, is all set to promote the country’s non-oil trade further taking it to $100 billion over the next five years, from $60 billion currently. It is believed that many Indian investors will seek Dubai company incorporation due to the emirate’s strategic location and its status as one of the leading international financial hubs.

The country’s non-oil exports surged by 33.3% in terms of value to Dh 354 billion, surpassing the Dh 300 billion mark for the first time in the history of the nation and up by 47.3% of the pre-covid level in 2019.

UAE’s re-export trade registered an increase of 27.7% annually to Dh 521.3 billion, 1.6% higher than that of 2019 while the imports clocked a 23.8% jump to about Dh 1 trillion, an increase of around 7% compared to 2019.

In 2021, China was the largest trading partner of UAE and accounted for about 11.7% of the total global foreign trade witnessing a year on year rise of 27% to Dh 212 billion in non-oil trade.

India was the second-largest trading partner, accounting for 8.7% of total non-oil trade and amounting to Dh164.4 billion. Saudi Arabia too contributed significantly with Dh 125 billion of non-oil trade as the third-largest trading partner.

Conclusion:

The 27% year on year growth of non-oil foreign trade showcases consistent growth across all business sectors and signals the most opportune time to all prospective investors for business-setup-in-Dubai.

NEWSLETTER,U.A.E

UAE Targets 20 Unicorns by 2031 through Skill-Up, Start-Up, Scale-Up Programmes

March 16, 2022

UAE has set an ambitious plan to become home to 20 privately held startups valued at more than $1 billion each, commonly known as ‘unicorns’ in business, over the next nine years, country’s Minister of State for Entrepreneurship and SMEs, Dr Ahmad Belhoul Al Falasi, noted on Wednesday, 10th November 2021.

At the launch of the “Entrepreneurial Nation Project” in Dubai, Falasi emphasized that this would be the fundamental theme of the ‘entrepreneurial nation’ initiative that would aim for public-private partnerships and bringing together funding entities to support startups to grow.

“A number of large corporations have come to us saying we want to be a part of this,” said the Minister. “We want to help you grow these companies; we will interpret the value of the company,” he added.

The national project offers 3 programmes:

The SkillUp academy programme helps the UAE populace with entrepreneurial skills and mindset.
The StartUp programme focuses on achieving success stories and helps entrepreneurs, in the UAE and outside, to embark on their entrepreneurship journey. It provides entrepreneurs, who are desirous in doing business in Dubai and other parts of UAE, with various incentives and support services.
The ScaleUp programme aims to empower high revenue earning and fast-growing companies that are at least years old and have the potential to grow into a unicorn.

UAE is relentlessly working to achieve its ambitious target systematically and methodically, informed the minister adding,” We want to transform ourselves from a regional to global entrepreneurship hub.” He also appraised why the country is confident about realizing its target by 2031

The corporate tax announcement is a winning situation for entrepreneurs, emphasized Dr Falasi. “With the latest corporate tax announcement, you will see for sure government fees being reduced – that is what has been agreed,” he remarked.

“Three years down the line, you will get a position where setting up a business would be much cheaper, and you would not be paying government and fees or taxes unless you are profitable,” said the Minister. “The government needs to create revenue, and this model is a fundamental gamechanger for startups,” he highlighted.

The UAE has an advantage in attracting foreign capital because its population is overwhelmingly foreign workers, he commented. “So foreigners feel much more confident starting their business in a country, which has 90% ex-pats as opposed to other countries,” he noted.

After the outbreak of the pandemic, the UAE government has introduced visa and business reforms for attracting more expatriates to live and work in the country.

The government plans to offer funding in several formats, including equity, direct lending and loan guarantees, to boost startups and entrepreneurship, the minister added.

A Dh1 billion private equity fund has been launched for financing SMEs operating in strategic sectors. The first funding will be made available during the first quarter of 2022 and over the next five years.

The Minister attributed the country’s attractive labour market as the biggest challenge for entrepreneurship. “It is very tempting to go for a job than to start a business – the majority of entrepreneurs here are actually employed and have a side hustle. But today, we want to encourage young students to look into (full-time) entrepreneurship,” he remarked.

Opening accounts within 48 hours in partnership with Emirates Development Bank (EDB) is an initiative under the StartUp programme. “The No.1 complaint I got was the amount of time it takes to open up a bank account,” said the Minister. EDB launched an app that provided the necessary support, during the last three months, to more than 500 entrepreneurs seeking to establish a business by opening accounts in less than 48 hours. The account opening is free for all and across all emirates and doesn’t need a minimum balance.

Lending activities through strategic financing solutions are being promoted by the UAE government to support company formation in Dubai UAE as startups and SMEs. “I’m putting on my other hat as Vice-Chairman of the Emirates Development Bank (EDB). We introduced a credit guarantee where the federal bank guarantees 50 per cent of loans through eight commercial banks that will lower the interest rates for entrepreneurs,” Al Falasi remarked.

The Ministry of Economy rolled out the Innovation Patent initiative during February 2021 to safeguard intellectual properties at the national level. “It’s a stepping stone for startups,” noted Al Falasi. “This way you are able to protect your product before going to the market. Otherwise, you would have to wait for a long time, and that delays your access to the market,” the Minister highlighted.

In his speech during Step Conference 2022, the Minister informed about the government initiatives for entrepreneurs. He highlighted saying, “The first thing we did was to decriminalise bounced cheques as there were many cases where entrepreneurs renting office space, retail space were being criminalised.” A new law, decriminalizing bounced cheques has recently been announced in January 2022.

The UAE has long reduced its dependence on oil and started focusing on a knowledge-based economy that potentially harnesses emerging technologies and innovative ideas. The country’s unicorn ambition is mainly driven by Dubai, the emirate standing tall as home to more than 10,000 SMEs and startups, and organizing annual startup contests including Dubai Startup Hub’s Smartpreneur competition series. Dubai Smartpreneur is an opportunity for innovative startups to present their business ideas and eventually establish their business setup in Dubai free zone.

NEWSLETTER,U.A.E

India and UAE Sign CEPA to Boost Trade by $100 Billion

March 16, 2022

On 18th February 2022, India and the United Arab Emirates (UAE), entered into a Comprehensive Economic Partnership Agreement (CEPA) and signed a wide-ranging trade and investment pact, that is set to benefit almost 90% of trade, both exports and imports, between the two nations and boost bilateral trade to more than $100 billion over the next five years.

In a meeting held virtually, the Prime Minister of India and the Crown Prince of Abu Dhabi, and Deputy Supreme Commander of the United Arab Emirates (UAE) Armed Forces, mutually agreed on a futuristic partnership roadmap between the UAE and India for broader economic cooperation. The two countries agreed to work together and address shared global challenges to achieve shared objectives of development and promotion of new trade and investment.

The CEPA was the first bilateral trade accord concluded by the UAE and was also the first for India in the MENA region and was concluded in a record time of just 88 days.

The pact will come into force by May 2022 and the provisions of CEPA will be implemented once the relevant constitutional legalities are put in place by the two countries.

INDIA AND UAE ENJOY STRATEGIC BUSINESS PARTNERSHIP

India is the second-largest trade partner of the UAE, accounting for 9% of the UAE’s total foreign trade and the number one trading partner for non-oil exports, accounting for nearly 14% of total non-oil exports. The UAE, on the other hand, is the third-largest bilateral trade partner of India. The bilateral trade between the two nations is expected to surpass $60 billion in the current financial year.

According to an estimate by the Indian Embassy in the UAE, the UAE’s cumulative investments in India are about $17-18 billion, of which more than $11 billion is in the form of FDI. While India mostly invested in the coal, oil and gas and real estate sectors, the FDI inflow from the UAE has primarily been in the real estate and ceramics and glass. The UAE is the eighth biggest foreign investor of India and its future investments in India are expected to flow in healthcare, infrastructure, and renewable energy sectors.

KEY FEATURES OF INDIA UAE CEPA

STRINGENT RULES OF ORIGIN

The trade pact between India and UAE has enforced stringent rules of origin conditions, with 40% value addition needed on exporting items to prevent routing of products manufactured in third countries to India via UAE.

As per government officials, there is a need for substantial processing of up to 40% value addition under this trade deal and a certificate of origin issued by the Ministry of Economy, UAE. Some high-valued items are kept out of these stringent value-addition requirements.

The deal also incorporates a permanent safeguard mechanism to address issues with a sudden surge in Indian imports.

TARIFF ELIMINATION AND ZERO DUTY ACCESS ON A RANGE OF ITEMS

The trade deal will eliminate 80% tariffs on Indian and Emirati goods, and 100% tariff elimination will take place within 10 years. The pact will provide the UAE zero duty access to 90% of India’s exports to the country in value terms.

Indian products set to benefit are gems and jewellery, textiles and pharmaceuticals while on the UAE side, commodities like aluminum, copper, and petrochemicals are set to benefit from the removal of tariffs.

ONE MILLION JOBS FOR INDIAN LABOUR-INTENSIVE INDUSTRIES

CEPA is expected to generate one million jobs for Indian labour-intensive industries including textiles, gems and jewellery, leather, footwear, sports goods, pharma, plastics, furniture, agricultural items and automobiles. Besides goods, CEPA will also include 11 service sectors and more than 100 sub-sectors that would benefit from the pact including construction, education, tourism, computer-related services, health, travel, nursing, engineering, finance among many others.

India-UAE CEPA will provide automatic registration and marketing authorization of Indian generic medicines within 90 days if approved by FDAs of developed countries including the USA, Japan, EU and UK.

AGREEMENT ON LIBERALIZED VISA REGIME FOR INDIANS

Under India UAE CEPA, a liberalized visa regime for Indians has been agreed including a three-year visa for intra-corporate transferees and a 90-day visa for business visitors and contractual service suppliers from India. The 90-day visa is extendable for contractual service suppliers.

THE NEGATIVE ITEMS AND SECTORS

Some items including dairy, fruit, cereals, vegetables, tea, coffee, tobacco, dyes, soaps, footwear, petroleum, tyres, toys, aluminum scrap, copper, processed marble, among others, have been kept out of the trade pact with the UAE by India. These are part of the negative list of items with a purpose to protect the domestic industry.

Some areas where manufacturing has been robust and sectors wherein the government has introduced production-linked incentive schemes (PLI SCHEMES) have also been put on the negative list,

AGREEMENTS AND MOUs OF INDIA UAE CEPA

The partnership between the two countries has resulted in joint work on several agreements and Memorandum of Understanding (MOU) in different areas as outlined below.

Economy

Some of the economic partnership agreements include establishing a dedicated India Mart in Jebel Ali Free Zone, enhancing investments in infrastructure projects for both countries, establishing a dedicated investment zone for UAE companies for doing business in India, and establishing a food corridor to boost food processing in India.

The partnership also calls for exploring investment opportunities for Indian investors in establishing specialised industrial advanced technology zones and initiating business setup in Dubai, Abu Dhabi and other free zones, in areas of logistics & services, pharmaceuticals, medical devices, agriculture, agri-tech, steel and aluminum.

Security and Defence

The bilateral partnership in this area includes

sharing of experiences, training and capacity building, and defence exchanges and maintaining regional peace and security.

Education

India will set up an IIT in the UAE and for the first time outside India.

Energy and Renewables

The partnership agreement includes collective efforts in attaining the global energy transition in future with the ongoing investment from UAE in India’s renewable energy sector.

Recognising the immediate need for climate action, the two countries agreed to strengthen cooperation for facilitating the implementation of the Paris Agreement. Working closely with the International Renewable Energy Agency (IRENA) and the International Solar Alliance (ISA) has also been part of this agreement besides establishing a joint Task Force for the production of Green Hydrogen.

Advanced Technology

The two sides agreed to collaborate and expand emerging technologies and promote e-businesses and e-payment solution platforms. The agreement also reached on promoting startups and focusing on areas such as agritech, prophecy, fintech, edutech, health care, logistics and supply chain and chip design.

Other Areas

The two countries entered into partnership agreements in other areas including International Corporation, Health Cooperation, Food Security, Skills and Cultural Cooperation.

MOUs

Two MOUs reached are

MOU between India’s Gift City (IFSCA) and Abu Dhabi Global Market (ADGM)on financial space including projects and services
MOU between India’s Agricultural and Processed Food Products Export Development Authority (APEDA) and the UAE’s DP World and Al Dahra on Food Corridor as a food security agreement

CEPA BENEFITS – INDIA

1 Greater access to the GCC and North African markets including markets in Europe and the Commonwealth of Independent States (CIS)

2. Increased business prospects for ready-made apparel and jewellery exporters

3. Cheaper imports of gold and plastic due to reduced tariff

4. Access to certain European countries and Africa

5. Increased Access to 40 free zones in UAE

CEPA BENEFITS- UAE

UAE’s economy is expected to grow by 1.7% in 10 years with a value of $9 billion with this CEPA with India including increased exports by 1.5% amounting to $7 billion, increased imports by 3.9% amounting to $14 billion, and increased employment, generating 140,000 new high-skilled job opportunities.

CONCLUSION

The CEPA between India and UAE is a win-win deal and has spread waves of new hopes amongst the stakeholders across industries of both countries. UAE’s strategic location is all set to open new trade vistas and Dubai company incorporation.

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