The India-Middle-East-Europe Economic Corridor, which was announced during the G20 summit in New Delhi on Saturday, is expected to help the UAE double its non-oil trade by 2031 while benefiting other countries involved in the project and boosting trade relations with Europe and India, analysts have said.
India and Europe are also expected to gain from the new initiative as they focus on hastening the growth of their economies and diversifying supply sources away from China.
“The India-Middle-East-Europe corridor will be a win-win for all countries involved in the project,” president of Nasser Saidi and Associates, Nasser Saidi, and its director of macroeconomics, Aathira Prasad, said.
“The move will support the UAE's diversification efforts, as it can expand its trade with other markets in the corridor, underscoring its current efforts to deepen trade relations with emerging market nations.”
The corridor, which will include the UAE, Saudi Arabia, India, Jordan, Israel and the EU, would “significantly enhance connectivity and integration between participating countries”, state news agency Wam reported earlier.
It will also include France, Italy, Germany and the US.
“This is a tremendous opportunity for India to speed its economic development and for Europe to diversify key supply chains away from China,” Scott Livermore, chief economist at Oxford Economics, told The National.
“Countries along the route also stand to benefit through improved connections with two of the world’s leading markets, which should present numerous new business opportunities.”
The project will be made up of the east corridor connecting India to the Arabian Gulf and the northern corridor connecting the Arabian Gulf to Europe.
The cross-border, ship-to-rail transit corridors are expected to reduce shipping costs across the network and support trade in goods and services to, from and between the UAE, Saudi Arabia, India, and Europe.
There will also be “spillover benefits across the GCC if this [corridor] accelerates the development of a rail network in the region”, Mr Livermore said.
The UAE is building a 1,200km rail network connecting 11 cities across the country – from the border with Saudi Arabia to Fujairah in the north – as part of the Etihad Rail project.
Etihad Rail is expected to form a vital part of the planned railway network across the GCC.
The new economic corridor will help the Emirates to increase its non-oil trade as it focuses on bolstering its trade relations with different countries around the globe.
“Increased efforts to further develop economic corridors and comprehensive trade agreements all feed into the UAE’s target to almost double its non-oil foreign trade to Dh4 trillion by 2031, from Dh2.2 trillion in 2022, and to double overall GDP [gross domestic product] to Dh3 trillion by 2030,” said Carla Slim, an economist at Standard Chartered Bank.
The Arab world's second-largest economy aims to sign 26 comprehensive economic partnership agreements by 2031 as it seeks to attract more investment and diversify its economy.
The UAE has already signed agreements with India, Indonesia, Turkey and Israel and is holding negotiations with several other countries to expand trade relations.
Non-oil foreign trade hit a record Dh1.24 trillion in the first half of 2023, up 14.4 per cent year on year, as the UAE's non-oil exports during the period exceeded the annual level recorded five years ago.
The country's non-oil exports with its top 10 most important trading partners rose by 22 per cent in the first six months of this year, Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, said last month.
“Deep trade agreements need to be signed to reap the full benefits from the corridor,” Mr Saidi said.
“The region should take this opportunity to improve trade facilitation measures”, including easing the movement of goods at the border and focusing on reducing overall trade costs, he said.
“In the medium term, integrating trade infrastructure (ports, airports, logistics) in the wider Mena region would lower costs and facilitate intraregional trade, leading to greater regional integration,” said Mr Saidi.
The project will also help to bolster clean hydrogen exports, “as part of joint efforts to lower greenhouse gas emissions, and integrate environmental conservation in the initiative”, Wam reported.
“Given ongoing renewable energy projects and net-zero emissions ambitions of the UAE and wider GCC, one could even envisage a GCC renewable-energy-powered, integrated electricity grid could extend all the way to Europe and India,” Mr Saidi said.
The UAE aims to become net zero by 2050 and is developing a number of new renewable energy projects, including a solar plant in Abu Dhabi's Al Dhafra region with a capacity of two gigawatts, as well as the Mohammed bin Rashid Solar Park in Dubai with a five-gigawatt capacity.
A potential land-based alternative to the Suez Canal will reduce the risk of it being a chokepoint, as it currently handles about 10 per cent of global maritime trade, Mr Saidi said.
“Instead of viewing the corridor as a threat to revenue, this should be seen as an opportunity to integrate the various modes of transportation … creating an air-sea-land custom-free corridor to support the movement of goods,” he said.
Amos Hochstein, US President Joe Biden's co-ordinator for global infrastructure and energy security, laid out a rough timetable for the project over the next year.
In the next 60 days, working groups will put together a more detailed plan with specific dates.
The first phase will involve identifying the areas that need investment and where physical infrastructure can be connected between countries.
“Whilst it remains unclear as to the speed and scope of the proposed corridor aimed at enhancing rail and shipping connectivity between India, the Middle East and Europe will garner traction, what is clear is that the transformative partnership could potentially usher in a new era of global connectivity that will increase efficiencies, reduce costs and bolster economic unity,” said Ehsan Khoman, head of ESG, commodities and emerging markets research at MUFG.