Report on UAE’s New Investment and Trade
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Report on UAE’s New Investment and Trade
The United Arab Emirates is in a protracted journey towards attaining a sustainable and thriving non-oil economy, as its oil and gas reserves dwindle. This journey has already taken off on the right footing because the United Arab Emirate’s government realized the need to diversify its economy early and started implementing strategies towards this end. However, the UAE must collaborate with other nations to achieve its ambitious goals. Such goals can only be achieved through entering into strategic bilateral agreements with other countries.
1.0 Subject
This report is about the opportunity for the United Arab Emirates to enter into a comprehensive bilateral trade and economic agreement with Ukraine. Ukraine is the largest grain producer in Europe, and the United Arab Emirates is a desert country with a huge grain demand to support its rapidly growing population. Similarly, Ukraine has a well-established software development industry. It can collaborate with the United Arab Emirates to help it achieve its dream of becoming a technological hub in the GCC and the world. Therefore, comprehensive trade and economic agreement with Ukraine would be a strategic move to help the United Arab Emirates enhance its food security and promote its technological innovativeness, among other trade and economic benefits.
2.0 Why This Matters to the UAE
This report is critical to the United Arab Emirates because the country is on a recovery path from the vagaries of Covid-19 and its position as a supply chain hub in the region and the world was threatened by the serious supply chain disruptions. In turn, the United Arab Emirates realized how fragile its economy is because of its heavy reliance on imports. The UAE imports most of its foodstuffs because it has very limited arable land and poor rainfall due to its arid climate and relies heavily on irrigation for production, which is expensive to operate and maintain. On the other hand, Ukraine is a global leader in grain production and software development, and comprehensive trade and economic agreement would bolster investments in these sectors, which are critical to the economy of the United Arab Emirates.
3.0 Implication for the UAE
Investments, trade, and economic cooperation with Ukraine are strategically important to the United Arab Emirates. Such cooperation has significant economic implications for the United Arab Emirates. Specifically, such a deal would help the country realize its Vision 2030, which focuses on attracting foreign investments in the country and growing local industry. Some of the Vision 2030 and Centennial 2017 strategic goals are promoting a healthy and stable population, security and safety, a stable macroeconomy, and an enabling business environment (UAE National Committee of SDGs, 2017). Foods security and technological innovation are central to these goals.
Securing more cost-effective food imports and information technology expertise would stimulate the local food processing and technological innovation industries. The Emirati government is keen on growing the private sector in the country. It rightfully believes that the private sector is a critical economic advancement driver because it would absorb most of the local workforce and make the Emiratis gainfully engaged in contributing towards their welfare and the country’s economic development. This is pertinent because currently, the UAE government remains the largest employer of Emiratis. In addition, the private sector is dominated by expatriates, who make up the 88% of the country’s almost 9.9 million total population as of 2020 (Dubai Online, 2022). Therefore, creating avenues for investments for the Emiratis is critical for advancing the UAE government’s development agenda.
In addition, this strategic approach would also increase the participation of the Emiratis in the growth of their local economy. Such initiatives are in line with the food security, technological leadership, and Emiratization policies of the Emirati government. Specifically, the Emirati government is keen to make the country food secure and a technological hub, as articulated in the National Food Security Strategy 2015 and the Vision 2030, respectively (UAE National Committee of SDGs, 2017). In its food security strategy, the United Arab Emirates is keen on diversifying its food sources while promoting local production and processing. The country has made great strides in increasing local production using technology in a land that is essentially not arable because of its arid conditions and water scarcity. Already, the country has taken significant strides in developing hydroponics technology and developing water, heat, and pest-resistant crop varieties.
Similarly, UAE needs to attract investments and expert professionals in emerging technologies, such as artificial intelligence, virtual reality, augmented reality, internet-of-things, and robotics, to achieve technological leadership in the region and the world. Such engagements with prospective investors would help transfer technical knowledge to the Emiratis, promoting the emergence of locally owned and managed technological firms. Likewise, in its Emiratization policy, the UAE government is prioritizing the hiring of Emiratis over migrant workers to promote political and economic stability and preserve the national identity of the country, in which indigenous Emiratis are a minority. It also encourages the local population to engage in private ventures by creating a facilitative business environment.
4.0 Details
4.1 Reasons for Trade and Economic Deals
The United Arab Emirates is very keen on attracting foreign investments as it diversifies its economy to reduce overreliance on oil. This has been widely reported in Bloomberg, a trusted media company focusing on business. In its news article titled “UAE eyes more trade pacts to secure billions in investment”, published on 21st of February 2022, Bloomberg reported that the United Arab Emirates was entering into trade and economic agreements with Columbia, Israel, India, Indonesia, and the United Kingdom, some of which were about to be concluded and sealed. This development was in line with its strategic plan of attracting $150 billion in foreign investments from international partners as the country positions itself as a business and finance hub globally (Omar & Cranny, 2022). These deals are aimed at expanding UAE’s market from aluminium, petrochemicals, and steel, which are its primary export products, while accessing strategic imports, such as foodstuffs. They are also at responding to the increased competition from Saudi Arabia, which is also pursuing foreign direct investments aggressively to maintain its dominant position in the Persian Gulf as an economic powerhouse (Ackreman, 2022). Altogether, bilateral agreements allow the partners to advance their interests by reducing the barriers to trade and cooperation. Already, the United Arab Emirates has some tariff and non-tariff barriers that constrict business with individuals and nations with a divergent political and economic view from those of the UAE government. In this regard, a bilateral investment and trade agreement with Ukraine would reduce such barriers for both countries and encourage the flow of foreign direct investments into the UAE.
4.2 Current Food Security Situation
The United Arab Emirates is considered food secure despite the lack of arable land and water scarcity, considering that the country is primarily a desert. This is because the country can import food from international markets with its vast financial resources and venture into high-technology food production strategies, such as hydroponics (Sengupta, 2021). Consequently, its Global Food Security index climbed from 31 to 21 between 2018 and 2019, respectively (Sengupta, 2021). Its current strategy to diversify its food supply sources by collaborating with several countries and bolstering its global food supply chains to improve its food security. By partnering with Ukraine through a comprehensive bilateral trade and economic agreement, UAE can accelerate its progress towards its desired goal of building a sustainable economy. Ukraine is currently the largest exporter of sunflower oil, second in barley exports, third in wheat and rapeseed exports, and fourth in corn exports, accounting for 50%, 19%, 18%, 16%, and 12% of the global exports in sunflower oil, rapeseed, barley, corn, and wheat, respectively (Braun, 2022). With global grain prices increasing consistently, a bilateral trade agreement would be mutually beneficial to the UAE and Ukraine in food categories that cannot be grown in greenhouses because of their land intensiveness.
4.3 Current Technological Innovation Situation
The UAE is currently leading the world in adopting new technologies and innovativeness. Its thematic investing strategies that target wide areas and industries has helped the country attract 44.5% more foreign direct investments into the country between 2019 and 2020, to reach $19.88 million, even then such investments had declined globally due to the disruptions of the Covid-19 pandemic (Ur-Rahman, 2021). This strategic direction makes a bilateral agreement with Ukraine instrumental in advancing the global technology hub of the UAE.
4.4 Benefits of Specific Agreements with Ukraine
The United Arab Emirates and Ukraine would benefit mutually from a comprehensive bilateral trade and economic agreement. On the one hand, the UAE would access a cost-effective grain source to advance its food security agenda. Besides, the UAE can collaborate with Ukraine to develop new grain varieties that are draught-resistant and nutrient-rich. This can help address the vagaries of climate change and economically-sustainable food production. On the other hand, Ukraine would access the growing UAE grain market driven by population growth and an increasing desire for healthy foods.
4.5 UAE’s Future Position
A comprehensive bilateral trade and economic agreement would improve UAE’s position as a thriving and sustainable economy in the future. The UAE aspires to become a regional and global hub of supply chains and technological innovation. Partnering with Ukraine would advance achieving this long-term objective.
Conclusion
A comprehensive bilateral investment and trade agreement is the strategic approach that the United Arab Emirates can employ to realize its ambitions economic goals. Ukraine makes a suitable partner because of its close proximity to the UAE and leadership in grain production and software development. A bilateral investment and trade agreement between the UAE and Ukraine would be mutually beneficial to the two countries. Specifically, UAE could progress its economic diversification, food security, and technological innovation agenda, while Ukraine would benefit by diversifying its international grain market. The Minister of Economy and Finance should move with speed to initiate, negotiate, and finalize the bilateral agreement with Ukraine to secure early economic benefits. This is critical when the country and the world are recovering from an economically- devastating Covid-19 pandemic.
References
Ackreman, G. (2022). UAE’s Diplomacy Overdrive. Bloomberg. Retrieved from https://www.bloomberg.com/news/newsletters/2022-02-21/uae-s-diplomacy-overdrive.
Braun, K. (2022). Column: Ukraine’s rising role in grain exports complicates impact of crisis. Reuters. Retrieved from https://www.reuters.com/markets/us/ukraines-rising-role-grain-exports-complicates-impact-crisis-2022-01-26/.
Dubai Online (2022). UAE population and demographics. Retrieved from https://www.dubai-online.com/essential/uae-population-and-demographics/.
Omar, A. A. & Cranny, M. (2022). UAE eyes more trade pacts to secure billions in investments.Bloomberg. Retrieved from https://www.bloomberg.com/news/articles/2022-02-21/uae-eyes-more-trade-pacts-to-secure-billions-in-investmnents.
Sengupta, C. (2021). UAE at 50: How the nation is advancing its food security agenda. Gulf News. Retrieved from https://gulfnews.com/uae/uae-at-50-how-the-nation-is-advancing-its-food-security-agenda-1.1638423565325#:~:text=The%20UAE%20jumped%2010%20places,in%20innovation%2Ddriven%20food%20security.
UAE National Committee of SDGs (2017). United Arab Emirates and the 2030 agenda for sustainable development. Retrieved from https://fcsa.gov.ae/en-us/Documents/UAE%20SDGs%20%E2%80%93%20Executive%20Summary%20%E2%80%93%20VNR%202018%20EN.PDF.
Ur-Rahman, Inayat. (2021). UAE leads Middle East in adopting smart technologies and innovation. Gulf Today. Retrieved from https://www.gulftoday.ae/business/2021/08/12/uae-leads-middle-east-in-adopting–smart-technologies-and-innovation.