PHOTO
Almost three months since the UAE-India Comprehensive Economic Cooperation Agreement (CEPA) was implemented from 1 Ma, 2022, indications are that the target of $100 billion bilateral trade in five years will be achieved much before or even be exceeded.
“In all likelihood the target of $100 billion in five years will be reached much before. If services are included, the target will exceed $150 billion,” said Suresh Kumar, Chairman of Indian Business & Professional Council (IBPC), the oldest and largest organisation of Indian businessmen and professionals in the UAE, in an exclusive interview.
“CEPA is a game-changer that will spur economic growth and increase employment opportunities on both sides. This is a landmark agreement and the momentum has started from the second day of the implementation when the first shipment of gold jewellery reached the UAE, followed by similar shipments from the UAE to India,” he said.
CEPA covers 11 service sectors and over 100 sub-sectors. It offers the advantage to small and medium enterprises (SMEs) in the UAE and India. It aims to create some 140,000 jobs in the UAE by 2030.
“A free trade agreement naturally gives market access to the partners. The general applied rate is 5 percent, and after this 89 percent of Indian products are eligible for zero duty benefit. Most sectors have benefits of CEPA, many of them, including small and medium enterprises (SMEs), are labour intensive.
“The ball is in the court of businesses and investors. The two governments have done their job. CEPA is a treaty concluded in 88 days, a record time for any FTA. But CEPA is not just a foreign trade agreement. By definition it is comprehensive in the sense that it includes trade, investments, intellectual property rights and competition rights in both geographies of India and the UAE. It’s much wider than a free trade agreement as it includes all services including financial services and intellectual property rights,” he said.
Kumar explained that both Indian and UAE businessmen need to visit each other’s geographies to get themselves updated because both countries have made significant strides, particularly Dubai, in terms of ease of doing business. Dubai is the fifth in the world in terms of ease of doing business, which offers several opportunities to investors.
“There is opportunity to invest and create new manufacturing capacity because there is a 40 percent value add element in CEPA. Indian companies that come and do last mile production, packaging, warehousing and distribution here have access to 20 countries in the Middle East and CIS countries, with the advantage of Made In UAE label,” he said.
He also pointed out that the UAE has one of the best physical and digital infrastructure in the world, even better than many advanced markets in terms of shipping, ports, logistics, transportation and connectivity, which can bring down costs of transshipment.
“For instance, right now there is severe shortage of containers in India, but there is enough container capacity here. What exporters in India can do is to move some of their goods in non-containerised traffic here for transshipment and very quickly they can forward to any country,” said Kumar.
He added that CEPA also provides for cooperation in food production and food security with a $7 billion food corridor coming up. Meanwhile, DP World is spearheading a ‘Farm to Port’ plan, a world class logistics transportation network covering unconnected regions, and link them to Mumbai’s ports.
India mart in Dubai
India is also looking at setting up a permanent India mart in the UAE on the lines of the Dragon Mart in Dubai. DP World is collaborating with India to set up the mart, which will be called Bharat Mart, in Jebel Ali, where Indian companies can showcase their products and services.
As for benefits for the UAE, Kumar said 80 percent of UAE products will have significant tariff concession in the Indian market. The immediate benefit will be available for petroleum products, petrochemicals, base minerals and metals.
“The UAE now has a strategy to focus on diversification of non-oil economy, and when that happens manufacturing will pick up and UAE products will have ready access to one of the largest markets in the world with a 1.3 billion population,” he said.
Another important segment is bilateral cooperation agreement on pharmaceutical products. India exports about $200 million worth of pharma products, whereas the UAE exports about $3 million worth of pharma products to India.
“The value of pharmaceutical products trade is very minimal compared with the overall UAE-India trade,” said Kumar, noting that the trade is not commensurate with the potential available in both the markets.
“To address this, there is a fast-track approval process made available in the agreement. Under this process, pharma products will be eligible for fast-track approval within 90 days, provided those products have a regulatory approval from the US, UK, Canada, Australia and Japan. This provision will enable larger Indian companies to have access to the UAE market and beyond. The price competitive Indian pharma products will help cut cost on the health service so that India will add value to the region’s health security.”
A major beneficiary of CEPA is the gems and jewellery sector, which accounts for a substantial portion of India’s exports to the UAE.
Kumar pointed out that “CEPA has already given boost to the bilateral jewellery trade,” with exports from India rebounding from their Covid-19 slump since May 2022.
According to the Gem & Jewellery Export Promotion Council (GJEPC), India’s jewellery exports to the UAE slumped by 67.28 percent year to year in 2020-21. It could not rebound to the pre-Covid levels of $9.5 billion in 2021-2022 and remained in a negative growth trajectory till April 2022. Since the implementation of CEPA, exports grew by 16.22 percent to $837.14 million in May-June 2022 compared to $720.31 million in May-June 2021.
(Reporting by Bhaskar Raj; Editing by Anoop Menon)
