India has recently signed the Comprehensive Economic Cooperation and Partnership Agreement (CEPA) with the United Arab Emirates (UAE), India’s third largest trade partner. This agreement is slated to benefit about 90 percent of the bilateral trade between the two countries and increase the value of bilateral trade from US$ 60 billion to US$ 100 billion in the next five years. ORF hosted a panel discussion to assess the the impact of CEPA on Indian businesses and the opportunities for greater cooperation between India and the UAE.
The discussion was moderated by Dr Nilanjan Ghosh, Director, Centre of New Economic Diplomacy, ORF. The first speaker of the discussion was Ambassador Navdeep Suri, Distinguished Fellow at ORF. He described the agreement as “FTA+++” (Free Trade Agreement) due to its approach towards trade and services. Additionally, he also trained the spotlight on the geopolitcal strategy behind the signing of this agreement. According to him, the political will of the Indian government to negotiate and sign the agreement in such a short indicates the importance that India attaches to its relationship with the UAE. He mentioned four key aspects of India’s close partnership with the UAE. Trade is one of the most important components of India’s relationship with the UAE as the country is India’s third largest trading partner (next to the United States and China) and second largest export destination. Secondly, the investment relations between the two countries have grown very rapidly in recent years. Investors from the UAE are particularly keen on investing in areas such as renewable energy, ports, logistics, and warehousing. Thirdly, energy continues to dominate discussions between India and the UAE because of the large size of the Indian market and India’s ability to secure concessions on oil. Finally, he stressed the important role that the Indian community in the UAE plays in fostering the relationship between the two countries.
Dr Aparna Sawhney, Professor of Economics at the Jawaharlal Nehru University, focused on the bilateral trade between India and the UAE. According to her, the pattern of bilateral trade between India and the UAE has been consistent over the years and the COVID-19 pandemic has not made any significant changes in the composition between India and the UAE. India mainly exports labour intensive products such as gems and jewellery, apparell and textiles, and food stuffs. A reduction in tariffs is likely to help India’s export sectors, notably the labour intensive export industries which have been hardest hit by the pandemic. Further, the CEPA can become a gateway for India into the Middle East and North Africa (MENA) region in terms of trade and economic relations. She also added that the CEPA is likely to be particularly beneficial to the pharmaceutical, food and beverages sector, as companies and products which have received prior approval certificates will now gain faster approvals from the authorities in the UAE, thereby, saving time that is spent in acquiring these. However, there is a need to assess the exact volume of value added trade between the two countries and accounting for the environmental costs that can emerge from this agreement.
The third speaker for the discussion was Dr Meena Singh Roy, Distinguished Fellow at the Middle East Institute. According to her, economic diplomacy lies at the heart of any bilateral agreement. She spoke on how the CEPA has initiated a “golden period of cooperation” between the two countries. It has provided a roadmap to India in terms of not only identifying its strategic interests in the Gulf region but also the means by which these interests can be achieved. However, much of the success lies at the ability of the two countries in meeting the promises made during this agreement. According to her, the critical areas of partnership for India are science and technology and innovation and start-ups. The future of India-UAE bilateral relations would be defined in terms of the efforts the two countries put in these sectors. Furthermore, she also indicated how the relationship between India and UAE needs to assess the strategic strenghts and weaknesses of each of the country’s and not just be purely bilateral. Reflecting on Ambassador Suri’s point on the political will of the Indian government to strengthen its bilateral relations with the UAE, Dr Singh Roy affirmed that CEPA would provide a massive opportunity to bring about ‘real’ and sustainable development for both countries and also trigger the possibility of creating a new quadilateral agreement in the Middle East.
Mr Suresh Kumar, Chairman, Indian Business and Professional Council, Dubai, presented an investor’s perspective to the discussion and explored the implications of CEPA on investors in India and the UAE. Attributing the wide scope of CEPA to the leadership chemistry between the two countries, he went on to explain how the momentum in the relationship picked up since 2015, leading to the Comprehensive Strategic Partnership Agreement (CSPA) in 2017 and then the CEPA. He also clarified the definition of ‘comprehensive’ in this context, which encompasses of not just trade and invetsments, but also intellectual property rights, and competition rules. As per his reading of the agreement, both countries have ample freedom to explore potential synergies on non-trade related aspects. Additionally, he remarked that India and the UAE are ready to conform to global best practices with respect to trade and saw that as a positive sign in strengthening that further. Shifting the focus on the investment landscape, he gave a brief idea of the regional economic distinctions in the UAE, where Dubai and northern UAE are more trade oriented, and Abu Dhabi is more investment oriented. Explaining this further, he also discussed the idea of strategic and financial investors, the former having specific agendas and sectors that they operate in and the latter having a clear critieria of investment with the focus being for future generations. CEPA’s implications on the investment, in his opinion, need to thus be understood in terms of the nuances of invetsment in both countries.
In the closing discussion, all the panelists were seen to be in agreement on the tremendous potential and scope CEPA carries toward bolstering Indian businessess. Yet at the same time, they also felt that there are certain areas that India needs to be wary of, for instance the Golden Visa scheme and its marketing as well as its meaning for the education, tourism, hospitality, and IT sectors. As was rightly said by Ambassador Suri, it is always prudent to “be mindful of the devil in the detail” and not take everything on its face value.
This event report is written by Tapakshi Magan, an intern at ORF.
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