UAE-India ties: Time to pull no punches

Dr. N. Janardhan
Program Manager, Gulf-Asia Relations
Editor, 'Gulf in the Media'

Nearly three-and-a-half decades after Sheikh Rashid bin Saeed Al-Maktoum visited India, Vice-President and Prime Minister of the UAE and Ruler of Dubai Sheikh Mohammed bin Rashid Al-Maktoum is scheduled to visit India on March 26. In the intervening period, not only have the leaderships on both sides changed several times, but the emirate of Dubai, and the UAE as a whole, as well as India have made such rapid progress that they have transformed themselves from being mere players to become examples worth emulating on the global economic and political fronts.

On the ground, there is enough to suggest that the bilateral relations are smooth sailing. Apart from the issues of oil and expatriates associated with the Gulf and India, non-oil trade between the two countries increased four-fold in the last five years. Some of the UAE-India deals, centering around Dubai, over the last three years make the bilateral engagement interesting reading. Dubai Ports International (DPI) won a 38-year concession to manage, operate and develop the Rajiv Gandhi Container Terminal in Kochi on a build-operate-transfer basis in 2004. This was the DPI's second successful bid, following a 30-year contract for the Vishakhapatnam port. In 2005, the Dubai Gold and Commodities Exchange was set up as a joint venture between the Dubai Multi Commodities Centre, Multi Commodities Exchange of India Ltd and Financial Technologies (India) Limited, and Emaar Properties announced it will develop a multi-billion dollar "Knowledge Corridor", an IT community, in Andhra Pradesh. In 2006, Emaar MGF partners with a European hotel chain announced rolling out up to 100 Formula 1 budget hotels in India in 10 years. Finally, it is possible that the Dubai Internet City's Smart City project may finally see the light of day in Kerala this year. It is also likely that the two countries will discuss several other potential projects during Sheikh Mohammed's visit.'

But there ends the feel-good factor.

While the UAE is India's and China's largest trading partner in the Gulf Cooperation Council (GCC) bloc, a comparison of the current level of trade and future projections tell a different story. The outlook of the UAE-China trade potential is very optimistic with a recent report envisaging a $100 billion business by 2015 -- a phenomenal increase during the next decade from the $14.2 billion bill in 2006. But the prediction for the UAE-India trade potential -- which was about $13 billion in 2005-06 -- is unhealthy. A recent economic study rooted in gravity model analysis points out that "the magnitude of India's export potential is highest with Oman, followed by Qatar, Bahrain and Kuwait," and concludes that there is "no export potential with the UAE and Saudi Arabia," which implies that "India's export basket" is not diversified and it is "overtraded with the UAE and Saudi Arabia."