How UAE is diversifying its economy by boosting non-oil trade

Preparing for a future without fossil fuels, the UAE is diversifying and expanding its non-oil economy, focusing on trade and investment in order to add new economic and to its service

Context

As a part of its mission to diversify the economy and reduce oil dependency, UAE is increasing bilateral trade with its allies. To support this initiative, the UAE’s Ministry of Economy explored over fifteen countries to understand trade potential and relations between each of the countries and the UAE. To sign Free Trade Agreements (FTAs) with multiple countries, Intellia helped identify relevant macroeconomic indicators and sectors that will be beneficial for bilateral trade for UAE and the countries they are looking to trade with. These in-depth insights helped UAE decide which countries to sign FTAs with to boost foreign trade and increase non-oil exports which is one of the central goals of UAE’s “We Are the Emirates 2031” initiative.

Challenge 

To assist UAE in reducing its reliance on oil and gas for government revenue, Intellia conducted extensive macroeconomic research for fifteen countries, assessing their political and social climate to analyze the feasibility of free trade agreements between the UAE and these countries. The countries explored included Cambodia, Chile, China, Colombia, Eurasia (EAEU) member states, the European Union (EU), Georgia, India, Indonesia, Iran, Japan, Kenya, Pakistan, Serbia, South Korea, Turkey, and Ukraine.  

The primary challenge was to understand the state of each economy for further insights into the potential benefits that trade would create for both countries. Taking into account the impending global recession and political situations currently affecting most countries in Asia and Europe, the second challenge was to identify the conditions for trade within the country to determine whether they would be favorable for UAE. This included deliberation on any initiatives, policies, and schemes that would highlight the extent of facilitation or obstacles that the UAE would have to face during the trade. Having deep-dived into the overall economic conditions and trade conditions in the country and within UAE, it was imperative to highlight the specific goods and services that would be viable for bilateral trade once the FTAs were signed. This would ease the process for UAE and allow efficient trade once the countries mutually agree. 

The Intellia Approach

Picking the Players

For the ease of picking the countries to sign FTAs with, Intellia helped key decision makers by providing an extensive quantitative and qualitative analysis for fifteen countries that highlighted the macroeconomic indicators reflecting the socio-economic and political situation of each country to understand the emerging relationship between that country and the rest of the world as well as the UAE. Leveraging this information helped UAE decide if it would be beneficial to sign FTAs with that particular country to accelerate non-oil trade. 

Where do we stand? Highlighting the current state of the Global Economies

An overview of the economic state of each country being considered with a focus on metrics such as GDP breakdown, historical trends and forecasts and the balance of trade for that country helped UAE develop an understanding of the current state of the global economies. The team at Intellia was able to identify the top ten import and export markets for each country and the top products imported/exported for valuable insights into the trade currently taking place within the countries. The project also shed light on the bilateral trade and investment agreements in which the country was currently participating. 

Diving Deeper – UAE in focus

To understand the bilateral trade relationship between each country and the UAE, the team of consultants at Intellia presented an overview of past trade relations and their possibility to change in the future. Considering UAE’s recent focus on trade and investment to meet its 2030 goals, the current relationship between UAE and each country was highlighted in terms of the goods and services involved in bilateral trade. This particularly detailed analysis of the trade in goods allowed the identification of the main products for trade once the FTAs are signed between the countries. Specific trade promotion activities such as expos, trade shows, and publications were also noted to identify common interests and to highlight the practical steps to boost trade exchanges.

UAE’s competitive advantage in select export service sectors was highlighted with a focus on the value of exports for each sector, the maturity of the UAE ecosystem, and the opportunity size for that service sector to provide a holistic picture of trade for the UAE and the country in focus. 

For smooth trade, the team at Intellia spelled out the obstacles as well as the facilities that would ease trade. This included information on any trade barriers, non-tariff barriers, intellectual property rights, competition policies, customs valuations, and rules of origin that could be involved during the trade process. 

This nuanced and detailed approach by Intellia allowed UAE to swiftly base their decisions for favorable FTAs with the countries that presented promising returns and conditions for UAE to boost non-oil trade. 

Impact

Since the beginning of this year, UAE has initiated talks with a number of these countries for Comprehensive Economic Partnership Agreements (CEPA) to bolster trade relations and support economies across the globe while increasing non-oil exports for the UAE.

In July 2022, UAE took its first step towards bilateral trade with African nations, signing a Joint Statement in Nairobi to declare the intention to commence negotiations for a CEPA between UAE and Kenya to deepen trade and investment relations.

Considering the extensive insights by Intellia, UAE and Ukraine have initiated talks about a bilateral trade deal. Talks began in December 2022 and are expected to conclude by mid-year 2023. 

“A UAE-Ukraine CEPA will help to drive Ukraine’s economic recovery and create new opportunities for exporters, investors, and manufacturers, and facilitate collaboration in high-value sectors such as infrastructure, heavy industry, aviation, IT & food security” – UAE’s Minister of State for Foreign Trade, in a recent tweet, highlighting Intellia’s specified sectors for trade.

In addition to these recent agreements to strengthen trade & investment ties with African and European nations, UAE has leveraged the data collected by Intellia to achieve significant progress in agreements with Turkey. By February 2022, UAE and Turkey agreed to trade by signing memoranda of understanding, cooperation agreements and protocols in thirteen fields.

Intellia associate Aleesha Shahzad commented “It is impressive to see the impact that this project has had. 7 out of the 9 MoUs signed between Turkey and UAE were recommended by consultants at Intellia.”