Catalysing Investments
As India remains one of the leading trade partners and a major source of FDI in the UAE, especially Dubai, non-profit premier organisation IBPC Dubai strives to create ideal business opportunities for Indian businessmen in the UAE and vice-versa
The UAE and India have witnessed a transformational change in bilateral relationships since 2014. It has evolved from a traditional trade one to a comprehensive strategic partnership. This can be attributed to the pro-business agenda of the then newly elected government led by Prime Minister Narendra Modi in 2014 and the new oil reality prompting the UAE government to focus on alternative growth drivers beyond the hydrocarbon sector. A significant improvement in bilateral relationships was witnessed post the landmark visit of Prime Minister Modi in August 2015 and again after his reelection in August 2019, followed by the visit of His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, in February 2016. Both leaders clearly understand the significance of deepening cooperation in various areas to enhance trade to reach $100 billion by 2020.
According to the Government of India, trade between the UAE and India crossed $59.9 billion in FY18-19, with $30.1 billion worth Indian exports to the UAE and $29.8 billion worth UAE imports to India, making India one of the top trading partners of the UAE. Furthermore, Jebel Ali Free Zone is home to more than 800 leading Indian companies.
Both India and the UAE have taken a number of initiatives to facilitate investments across sectors to drive economic development. Further, a large number of Indian diaspora in the UAE have also prompted Indian companies to invest in the UAE to meet the rising demand. As a result, India ranks as one of the top countries investing in the UAE.
FDI AN EFFECTIVE PARTNER
Total FDI flows into the UAE from India have reached $6.6 billion in 2016 compared to $0.7 billion in 2010, recording a CAGR of 17.1 per cent. Going forward, the UAE government’s new FDI law passed in 2018, which allows 100 per cent foreign ownership, is likely to accelerate investment flows by around 20 per cent in 2019, up from an average growth rate of eight per cent.
According to the Dubai FDI Monitor, India has emerged as the fourth largest source of FDI with 21 projects in Dubai recorded at the end of 2019. Based on total projects in Dubai, India ranked third with 138 projects, and fifth with $2.45 billion investment since 2015. Within India, Bengaluru have invested in total of nine FDI projects with Dh22.6 million ($6.15 million) FDI capital since 2015, while Chennai has three FDI projects in Dubai with a total investment of Dh34.2 million ($9.31 million).
Within the UAE, Dubai is likely to remain a hot destination for foreign investors going forward. With a total of 523 FDI projects as of 2018, the emirate is consistent in attracting investment flows from both developed as well as emerging nations such as the US, UK, France, India and China.
As per the 2018 Top FDI Performers Report, Dubai ranked number one globally and also topped the charts in the category of number of investors attracted as per the City FDI Performance Index 2018. During the year, Dubai was the leading investment destination in terms of number of FDI projects and total FDI capital in the Mena region. Dubai also achieved the highest total FDI capital inflows of $10.5 billion during 2018. The top five FDI capital source countries accounted for 70 per cent of FDI capital into Dubai while the top five FDI project source countries accounted for 57 per cent of FDI projects in 2018. Notably, India contributed 12 per cent of all FDI capital into the emirate in 2018. HOME AWAY FROM HOME Over 50 Indian companies, including DCM Shriram and LT Foods are showing keen interest in expansion of operations to the Ras Al Khaimah Economic Zone (RAKEZ) in the UAE. With over 14,000 multinational companies present in the RAKEZ, nearly 22 per cent is represented by Indian companies. The Indian companies in the UAE have established base through three different modes of entry: greenfield investments, joint ventures and collaborations. Some of the key examples of companies entering the UAE market through greenfield investments mode are Dabur International Ltd, Larsen & Toubro International FZE, Tata Steel and UltraTech Cement Middle East Investments Ltd. The second mode of the entry adopted is the JV route. The UAE-based Ashok Leyland LLC is a JV between Ashok Leyland Ltd. (49 per cent) and Ras Al Khaimah Investment Authority as well as JK Cement Works (Fujairah) FZC, a JV owned by Indiabased JK Cement Ltd (90 per cent) and Fujairah Investment establishment.
EASE OF DOING BUSINESS
According to the World Bank’s Ease of
Doing Business report, the UAE has consistently ranked higher than its GCC peer countries, largely due to the positive business climate, business-friendly regulations, and favourable demand-side dynamics, amongst other factors. In terms of taxation, the UAE has zero-corporate tax levied on industries, with exceptions of foreign banks and hydrocarbon companies. Even with the introduction of value-added tax (VAT) in the UAE, the cost of business for Indian companies may increase while the corporate tax structure remains unchanged. Apart from a favourable taxation structure, the country also has a quality infrastructure industry, ranking amongst the top 20 nations globally on the infrastructure front.
To highlight the investment opportunities in the UAE for the Indian businesses and professionals, in a commissioned study IBPC Dubai, touches upon the strategic ties and facilities that stand to benefit the bilateral relationship.