The economic dimensions of Pakistan-UAE relations
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The UAE has rolled over the $2 billion loan it had provided to Pakistan as a bailout, so the Pakistan Tehreek-e-Insaaf government could sail through the difficult economic moment of August 2018. This loan was earlier due to mature on April 19, 2021, but Pakistan can now delay repayment and continue to remain in a comfortable situation with regards to its foreign exchange reserves.
There has also been a recent mention of an Emirati role in “bringing the Kashmir escalation down” between the two nuclear-armed countries – India and Pakistan. In the recent meeting between the foreign ministers of UAE and Pakistan, there has been an exchange of views on how both countries can join hands and support the peace process in Afghanistan.
The UAE foreign office has said that they will be keenly looking into the matter of work visas to Pakistanis which were stopped in November 2020. Pakistan has expressed an urgency on this count. Remittances have been a bright spot in Pakistan’s economic performance amid COVID-19. The inflows from abroad remained above $2 billion since June 2020 – a trend which could be threatened if employers including those in the UAE do not start inviting workers once again from Pakistan. There is also a push from the private sector, and it is likely that a liberal regime for longer term business visas would soon be announced for Pakistan.
Despite the uncertainties around the visa regime, remittances from the UAE during March 2021 were $590 million — a growth of 15 percent in comparison to March 2020. One possible reason for the growth could be the large number of Pakistani firms registered in the UAE. Currently, according to an estimate by the UAE embassy in Islamabad, there are 7,000 Pakistani enterprises operating from the UAE who have a high demand for workers from Pakistan.
The inflows from abroad remained above $2 billion since June 2020 – a trend which could be threatened if employers including those in the UAE do not start inviting workers once again from Pakistan.
Dr. Vaqar Ahmed
The firms from the UAE operating inside Pakistan also have expansion plans as soon as the challenges associated with the pandemic subside. Between July and February of fiscal year 2019-20 (FY20)-- a pre-pandemic period-- Emirati firms were able to repatriate $56 million in profits and dividends.
Pakistan’s export flows which had remained depressed during FY20 in fact posted an increase in the case of the UAE. The country’s exports to Dubai alone amounted to $1.3 billion, an increase of 14 percent in comparison to the previous year. During the first and second wave of the pandemic, Pakistan was able to send important food supplies to the UAE. Important industrial needs were also imported from the UAE including raw materials and machinery. During FY20 imports from the UAE to Pakistan stood at $6.4 billion.
Trade relations are expected to further blossom as the UAE invites Pakistan to expand its profile through the annual Dubai Expo. Pakistan also understands the importance of UAE as a hub which can help integrate in regional value chains. Pakistan’s halal meat being exported to Jordan via UAE presents a case study for other sectors too wishing to penetrate the gulf region.
To look into holistic economic cooperation between the two countries, recent meeting between both foreign offices have agreed to put forward a plan of ministerial level visits from both sides which in turn could map trade and investment opportunities, in turn helping post pandemic recovery in both countries.
Pakistan is particularly interested in attracting foreign direct investment for priority special economic zones – some of which have already been recently visited by the private sector from the UAE. The private sector and associations in second-tier cities including Faisalabad and Sialkot have stepped up their efforts to invite delegations from the UAE for joint ventures in value-added textile, high-end sports goods, pharmaceuticals, and health care products.
Not all business associations across several other second-tier cities of Pakistan can afford to arrange such scoping visits and this remains an area where the Board of Investment should step up its efforts and present opportunities in non-traditional hubs of economic activity across Pakistan.
Finally, the pandemic has opened collaborative opportunities in sectors not explored earlier. Most notably, these include IT and ICT services, telemedicine, and education. The Pakistani government’s facilitation toward digital trade integration could help startups and mature firms alike increase their presence in the Gulf.
*Dr. Vaqar Ahmed is joint executive director at the Sustainable Development Policy Institute (SDPI). He has served as an adviser to the UN Development Programme (UNDP) and has undertaken assignments with the Asian Development Bank, the World Bank, and the Finance, Planning, and Commerce Ministries in Pakistan.
Twitter: @vaqarahmed
