Far East Trade

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The release of new UAE-Japanese trade figures this week has highlighted the increasing strength of UAE's position in the Asia-Pacific market.

The statistics, released by the Japan External Trade Organisation (JETRO), show a dramatic rise in trade between the UAE and Japan, a trend mirrored throughout the Gulf Cooperation Council (GCC) countries. Within this broad trend, the UAE has positioned itself as one of Japan's most significant trading partners in the GCC and Middle East and North Africa (MENA) region.

Japanese trade with the UAE rose by 31% in 2005, according to JETRO. A large proportion of this was accounted for by Japanese imports from the UAE, which increased dramatically last year reaching $28.73bn compared with $18.46bn in 2004. This 55% increase represents approximately a quarter of the UAE's total exports to all countries, according to IMF economic indicators.

The increase is partly attributed to Japanese imports of crude oil, which were affected by high oil prices. However, the actual quantity of crude oil exported from the UAE and the GCC to Japan has also increased with a growth figure of 7.62%. The UAE was also the primary provider of aluminium from the region to Japan with exports totalling $213m. JETRO officials attributed the general increase in Japanese imports to economic expansion in the GCC and to the moderate recovery of the Japanese economy.

The UAE, which was the second-largest exporter to Japan behind Saudi Arabia in the MENA region, was also the largest importer of Japanese goods. The value of these imports totalled $4.86bn out of an estimated figure of $80.8bn worth of imports to the UAE in 2005. According to Yoshio Minagi, managing director of JETRO in the UAE, 40% of these imports were in transport equipment. Although Japanese imports represent a relatively small percentage of the UAE's overall imports, the relationship with the country is growing. There was growth of 5.7% in Japanese exports to the UAE last year.

Minagi told OBG that the trade volume between the two countries is impressive, having doubled over the last five years. He added that he believes the future will be particularly bright for trade relations between the two countries. Discussing Abu Dhabi, he said, "Japanese companies are showing an increasing interest in the emirate and they have already recognised Abu Dhabi as a potentially big market."

Japanese companies are present in several industries and sectors in the UAE. Japanese influence is particularly increasing in the provision of utilities and the development of technologies for alternative energy. Mitsui and Tokyo Electric Power Co joined UK company, International Power, in securing one of Abu Dhabi's largest water and power facilities at Umm al-Nar under plans that have led to the privatisation of all of Abu Dhabi's utilities services.

The Japan Co-operation Centre, Petroleum (JCCP), based in Abu Dhabi has also been working with the UAE University at al-Ain with the stated objective of "exchanging knowledge on sustainable environment and water resources in arid environments with a view to providing a better understanding of the environment and rehabilitation of the environment through the utilisation and application of innovative technologies".

The Japanese electrical company Sanyo is also seeking to expand its operations in the UAE into energy-based technologies. Toshimasa Iue, president of Sanyo Electric told Trade Arabia during a short tour of the UAE and Saudi Arabia last week, "We plan on expanding our markets in the Gulf in a big way. The construction boom both in the UAE and the Gulf is a chance for us to... introduce our solar energy business into this sector."

The healthy state of Japanese-UAE trade relations was highlighted at the end of last month by the signing of an Avoidance of Double Taxation Treaty between the two countries. The agreement, which will come into effect in August, means that individuals from both countries will not be liable to direct, indirect or local government taxes on trade operations relating to sea and air freight.

Mohamed Khalfan bin Kharbash, the minister of state for finance and industry, told the Emirates News Agency (WAM), "Relaxed and balanced taxation systems would benefit both countries. Such systems create a healthy environment for investment." The move is seen as a precursor to the widely anticipated free trade agreement between Japan and the GCC, which is in the early stages of discussion.

Meanwhile, UAE trade relations with other countries in Asia and the Pacific have also gained momentum. In discussion with the Khaleej Times last week, Dileep Nair, consul-general of Singapore in the UAE, commented, "The bilateral trade between the UAE and Singapore has recorded a 60% increase over the last two years, touching $6bn last year. This year, the figures are expected to grow further." He added that although there are more than 100 Singaporean companies conducting business in the UAE, there is plenty of room for development. As part of this strategy, Nair wishes to encourage the flow of Emirati tourists to Singapore.

A report in McKinsey Quarterly also suggested that many investors from the Gulf have looked to Asia for further investment opportunities. The report said, "We believe that up to $250bn from the Gulf states will be available for investment in Asia over the next five years. While the West would remain Asia's dominant source of investment, this shift represents an important change in the pattern of global capital flow." The report added that these flows are not simply one way, and that there is an increased desire from Asian companies to invest in the GCC.

The UAE is in a strong position to take advantage of these shifts as it continues to build up strong trade relationships with Asian countries. It is evident that Japanese companies, in particular, see great potential for investment and development in the UAE.

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