Critical Analysis of Pakistan-UAE Bilateral Trade Since 2000: Challenges and Opportunities for Pakistan

Abstract

Fraternal relations between Pakistan and UAE have continued uninterrupted since the inception of both the countries. Over the years, this relationship has gained strategic interest for Pakistan due to a number of factors including presence of Pakistani labor force in the UAE, economic strength of the UAE and strong commercial linkages. This research provides an in-depth analysis of bilateral trade data since 2010 and provides highlights in certain sectors along with sectoral trends. The balance of payment has largely stayed in favor of the UAE with a heavy role played by the petroleum products. Pakistani export basket remained limited to few codes and mainly at the raw level of export specially in textiles and meat (halal) while a number of important products saw negative growth e.g., cereals and rags, worn cloth etc. A comparison of these trends with the traditional competitors shows that Pakistan has fared worse than India, Vietnam and Thailand in almost all sectors. A detailed comparison in various sectors of economy is undertaken to establish these facts.The market of UAE represents a vibrant, relatively developed and a regional hub model of economy. Its demographics include more migrants than its local population. The Government of UAE has tried to move towards a market trend whereby reliance of economy on oil and gas sector is reduced and further diversification of products takes place. Its quantum of international trade is vast and diverse. The bilateral trade, overall, remains to be of greater significance to Pakistan than for the UAE.In this backdrop, the challenges presented by the UAE economy and changing situation are of strategic economic importance to Pakistan. These challenges include Pakistan’s inability to exploit the existing potential, to follow rules-based regime that is extremely important for the UAE to continue to be seen as an important player in the global trade as well as issues related to quality of exports from Pakistan. Other regional players specially India have tried to establish their own positive relations with the UAE. These along with global trade disruptions are serious challenges for Pakistan.However, it also presents opportunities for Pakistan specially the enhanced need of the UAE to import manpower to fulfill its ambition to be seen as knowledge-based-economy. Many white-collar jobs can be filled with educated Pakistanis who have a good understanding of the Muslim culture. In addition, traditional trade sectors (with possible diversification) represent areas of strength for Pakistan on which further links can be developed. Remittances, existing economic linkages and the concept of Islamic economy/banking are also strong points of linkages that work both ways. UAE is also looking for new areas to invest.Following, a detailed projection of both the economies some recommendations are made to enhance trade specially to diversify in the existing trade sectors, to enhance sea-based exports, to export skilled workforce and to explore Islamic Banking among others.