India is set to overtake Japan as the UAE’s largest merchandise trade partner over the next decade and half, according to a forecast by HSBC.
The bank, in its United Arab Emirates Trade Report, part of a biannual look at global trade patterns, said that India’s growing thirst for energy will see it become the UAE’s largest trading partner by 2030, with other factors such as UAE’s drive to invest directly in India as well as to capture a greater share of the Asian tourism market, also propelling trade growth between the two countries.
“We expect India to overtake Japan to become the largest export destination, given its growing demand for energy from strong economic and population growth,” the HSBC report said.
“Long-standing cultural and commercial links with India will be boosted by recent efforts to strengthen political ties,” it added.
The bank was apparently referring to the high profile three-day visit last February by Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, to New Delhi to visit prime minister Narendra Modi, accompanied by a delegation of seven ministers and 60 UAE based entrepreneurs, two-thirds of whom were of Indian origin.
The UAE committed to invest up to US$75 billion in Indian infrastructure. This year, that has included an “anchor” investment stake in Mahanagar Gas, which is developing gas supply systems in Mumbai, plus a $150 million stake in Greenko, an India-based renewable energy firm.
Last year, Japan was the UAE’s largest merchandise trade partner with a 6 per cent share of trade, though India was a close second with a similar share.
Asia in general will continue to be by far the most important region for UAE trade growth, HSBC said.
“Japan remains an important export destination, at second place in 2030, with China still the third most important market followed by Singapore and Korea,” the bank report predicted.
“Vietnam will be the country with the fastest export growth for the UAE, rising 10 per cent a year in the period 2021-30. As well as Vietnam, exports to China and India are also expected to grow by 10 per cent a year in the decade to 2030,” it said.
Although the country continues to be among the most successful in the region in terms of diversifying its economy, the UAE is expected to remain heavily dependent on oil — directly and indirectly — the bank said.
Still, tourism will continue to be the fastest growing of its service exports sectors.
Tourism accounted for 58 per cent of services exports last year, up from 43 per cent in 2000, and HSBC sees that growing to 62 per cent by 2030.
Saudi Arabian tourists are still the most important single source of services trade. Saudi Arabia accounted for 12 per cent of UAE exports of services last year, more than 90 per cent of which was tourism, as a record one million Saudis visited the UAE, HSBC noted.
amcauley@thenational.ae
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