A brief on India-Dubai Trade

Brief on Trade Between India and Dubai & Northern Emirates
The UAE has become a top 30 global trading nation as it boosted its share in global trade to Dh 1 trillion from Dh 150.4 billion in 2007 as per the World Trade Organization’s (WTO) latest report on global trade. The UAE ranked higher than Thailand, India, Australia and Norway among the exporters.

India has the largest presence amongst foreign countries in terms of the companies registered with Dubai Chamber of Commerce and Industry. The number of Indian companies registered is 12,359 out of about 101,000 companies registered with the said Chamber as of February 2008. 6,154 Indian companies are registered with Sharjah Chamber which is 18% of the total of 33,103 companies registered with the said Chamber. Jebel Ali Free Zone Authority has 575, RAK Free Trade Zone has 681, Ras Al Khaimah Investment Authority has 300 and RAK Chamber of Commerce has 1227 registered Indian companies as of May 2008. Approximately 60% of the companies in the Fujairah Free Trade Zone are from India.

Al Khaleej Sugar, the world’s biggest sugar refiner has agreed to buy one million metric tones of raw sugar from India to increase production. The sugar has been contracted for delivery in the crop year starting May 1. Al Khaleej plans to increase production 43 percent this year to two million tones using only raw sugar from India because of lower freight costs. It is the first year the refiner is importing raw sugar from South Asia.

About 45 percent of Dubai’s gold exports go to India, the world’s biggest consumer of gold and jewellery. Dubai Multi Commodities Centre (DMCC) announced that gold trade through Dubai reached $7 billion in the first quarter of 2008, up by 74 percent from $4.08 billion during the same period in 2007.Despite consistently high prices; Dubai’s gold trade has witnessed consistent growth in the last six months. It registered a 42 percent increase over the fourth quarter of 2007 and amounted to $4.96 billion. Gold price averaged $925 per ounce during the first quarter of 2008. According to figures compiled by the Statistics Department of Dubai World, a total of 115 tonnes of gold was exported from Dubai in the first quarter of 2008, an increase of 74 percent from the corresponding period in 2007, and 42 percent higher than exports during the last quarter of 2007. The top trade item between Dubai and India is gold. India is the second largest exporter of gold to Dubai, accounting for 13 percent of all gold exports from Dubai. Additionally, Dubai Gold and Commodities Exchange (DGCX), the Middle East’s first commodities derivatives market, appointed Bank of Baroda as a clearing bank for the exchange. A memorandum of understanding was signed between DGCX and Bank of Baroda in this regard. The partnership will enable DGCX members to open their settlement account with the Bank of Baroda, which is the only Indian bank in the UAE with full fledged banking operations.

India’s largest Power Project exporter, Bharat Heavy Electricals Limited (BHEL) has achieved another breakthrough in the Middle-East market with a prestigious export contract for 2 Gas Turbine Generating units of 42 MW each from the United Arab Emirates. Valued at Rs. 1,500 million, the order has been received from Al Ghail Power LLC, a company wholly owned by Ras Al Khaimah Investment Authority (RAKIA), Govt. of Ras Al Khaimah. BHEL has so far set up 14 power projects, apart from substations and supply of a host of equipment for the power and the oil & gas sectors.

Emirates Shipping Line has joined the Mediterranean India Express (MIX) service operated by United Arab Shipping Company linking major ports of the Indian subcontinent and the West Mediterranean coast via the Middle East. Emirates Shipping Line has acquired slots on the express service from January 18, 2008. The service covers a large number of ports.

A Memorandum of Understanding (MoU) was signed between Sharjah Chamber of Commerce and Industry (SCCI) and Indian Business and Professional Council, Sharjah (IBPC) for setting up an India Trade and Exhibition Centre at the Al Khan Business District, Near Expo Centre, Sharjah. Country Specific Trade and Exhibition Centres are being built in Sharjah and establishing the India Centre was under negotiation for the last 4 years with Government of India.

Dubai’s total diamond trade increased by 53 percent in 2007 to reach $ 11.23 billion. The emirate’s rough diamond trade recorded a 29 percent increase from 2006 to reach $ 4.82bn, while trade in polished diamonds increased by a massive 88 percent to reach $ 6.41bn. Polished diamond imports from India reached $ 2.33bn in 2007, an increase of 88 percent from $ 1.24bn in 2006. The UAE economy grew by 7.4 percent last year compared to 2006. A large number of international diamond dealers, led by Indian businessmen, have begun a mass migration of their organizations from Antwerp to Dubai. The tax-free and friendly business environment of Dubai is credited with luring the diamond traders. Dubai’s rough diamond trade totaled $4.8 billion (Dh17.6bn) in 2007. About 350 firms specialized in diamond trade are now part of Dubai Diamond Exchange (DDE), compared to about 300 in 2006.

The trade outlook between India and Dubai has the potential provided the relationship is expanded and deepened. Analysts say if the FTA could be formalized, both GCC and India stand to benefit as it would remove restrictive duties and push down the tariffs on goods being traded between them. With the GCC—India trade showing a remarkable surge in the last few years, speedy and successful FTA negotiations would lead to a more intensive economic engagement between the two.

For deepening of relationship, the existing trade in Gold, Gem & Jewellery must entail higher value additions in the industries located in the two countries. A recent step in this direction has been to recognize International Diamond Laboratory at DMCC, Dubai as laboratory for certification of Diamonds under India’s Trade Policy. The expansion of trade must cover diversification to other goods and sectors, including services. Trade in Industrial & Electrical Machineries & parts, pharmaceutical products and processed foods need to be emphasized. Opening of Banking, Insurance & IT sectors for freer exchange of the services in which the two nations have comparative advantage shall help accelerate the two way trade.