The United Arab Emirates (UAE) and South Korea agreed to boost economic cooperation, including pushing for preliminary consultations on a free trade agreement (FTA), at the first South Korea-UAE joint committee meeting held in Seoul on Friday, June 8, 2007. If accepted, the FTA would be between South Korea and the Gulf Cooperation Council (GCC) – Kuwait, Saudi Arabia, Bahrain, Oman, Qatar, and the UAE. In addition, the UAE and South Korea signed a Memorandum of Understanding (MoU), which among a series of issues will augment cooperation in maritime transportation and crude oil shipping. The agreement includes exchanging technology in maritime safety and environment protection, as well as stockpiling South Korea with oil from the UAE.
•We believe the pursuit of a FTA between the GCC and South Korea will also help improve security measures for various private sector industries, as well as provide a model and standard for future foreign investment seekers in the Arab world.
Mutually Beneficial Investments are Key
Last weekend’s UAE-Korea Business Investment Opportunities Exhibition (COEX) in Seoul showcased several important bilateral agreements that had been signed in the past, which were the official framework that governed previous investment relations.
•2002 – Agreement on the Promotion and Protection of Investment: provides Korean investors in the UAE with special protection and a package of investment incentives.
•2003 – Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion: protects Koreans’ income in the UAE from being subjected to tax by UAE authorities.
•2006 – Agreement on Economic, Trade and Technical Cooperation: protects cooperation opportunities in the fields of scientific research, telecommunications, industry, trade, training, agriculture, transportation, tourism and investment. In turn, it encourages individuals and firms from both nations to study the possibility of establishing joint projects.
To a large extent, the agreements provide security measures, giving South Korean investors confidence needed to enact large-sum investments in a number of UAE public and private sector industries, namely Internet technology, energy, trade and tourism. We believe the protection and opportunities provided for investing in the UAE are ahead of most Arab countries. If other Arab states can afford to make similar stipulations, we suspect the opportunity for long-term foreign investment in other Arab countries would increase.
Snapshot: UAE’s Economic Growth and Attractiveness to Foreign Investment
Boosting economic cooperation with South Korea has already proved profitable in just a few years:
•Total trade between the two economies doubled in the past three years, going from $7.96 billion in 2003 to $15.8 billion in 2006.
•UAE has become South Korea’s second largest crude oil supplier, providing 158 million barrels in 2006.
•Oil sales to Seoul last year were worth $10.6 billion.
As for the UAE’s competitiveness, it ranks number one among Arab countries and 32nd internationally in attracting foreign investments. The UAE has a nominal growth of 9.8 percent and its overall GDP rose to $163 billion. Although the UAE pumps 2.6 million barrels of oil a day, its non-oil sector’s share of the GDP dominates the economy, making up 67-73 percent of the total.
UAE Sets the Standard for Middle East Foreign Investment
It is no doubt that the UAE’s booming economy and multi-sector investment opportunities makes it attractive to foreign investment seekers. However, we believe the hinge pin in long-lasting successful investments rests in the country’s ability to effectively protect and secure the investors’ assets, which will ensure enthusiasm for future investment opportunities.
