Economic Synergy: UAE-South Korea Trade Agreement

Aroma Noor

In the ever-evolving landscape of international relations and trade, the recent UAE-South Korea agreement, Comprehensive Economic Agreement (CEPA), was struck on October 14, 2023. This trade deal stands as a testament to the potential of collaboration between two seemingly disparate nations. In the first half of 2023, trade ties had already been steadily advancing where non-oil bilateral trade touched $3 billion and was up 21% from 2021. As we delve into the depths of this new agreement, we find not economic opportunities but a blueprint for building strong global partnerships. The trade deal, inked with much fanfare, covers a broad spectrum of sectors, from technology and renewable energy to healthcare and culture.

Through this agreement over the next decade, South Korea will be opening 92.8% of its market whereas, the UAE shall be opening 91.2% of its market. The UAE is South Korea’s 2nd largest Arab trade partner while South Korea is the UAE’s 11th largest trading partner among the non-Arab countries. This diversity signifies a profound shift from conventional trade arrangements. The CEPA, or Comprehensive Economic Partnership Agreement, falls within the category of free trade agreements (FTA) but distinguishes itself by placing a greater emphasis on a wider range of economic cooperation and interactions in addition to liberalizing markets. It is a signal that both the UAE and South Korea have recognized the necessity to adapt to the ever-changing world economy and the growing interconnectivity of industries.

One of the most striking implications of this agreement is the promise of economic growth. A $20 billion project in collaboration with the Korea Electric Power Corporation and an ensemble of Korean enterprises has been at play since April 2023. The UAE gains access to South Korea’s cutting-edge technology and manufacturing capabilities, opening doors to innovation and job creation. On the other hand, South Korea secures access to the UAE’s vast energy resources, helping diversify its energy sources and reduce its dependence on a single sector. The result? Mutual economic growth is more resilient to market fluctuations. If anything, this agreement will only provide with a more foundational base for the local and foreign businesses to stand on.

While keeping in view all the positive aspects, let’s not be blindsided by the promise of prosperity. This endeavor is packed with challenges and acknowledging them will be the key to overcoming them. The Middle East is a volatile region by any measure. Its geopolitical uncertainties may pose a significant risk for the energy markets which form the backbone of this bilateral agreement. Both the UAE and South Korea must navigate this tumultuous terrain with utmost care and resilience.

There were questions on UAE’s trade relationship with Israel while keeping in view the Israel-Gaza conflict, UAE is firm on its steadfast principle of segregating politics from economic imperatives. They see this stance as a way of promoting trade as a vessel for peace and mutual understanding and gains among nations, regardless of political climates. As UAE has also signed several CEPAs with Israel, Turkey, India, and Indonesia to expand economic cooperation away from oil. The UAE is striving to secure trade deals with six other countries by the end of 2023. In addition to this, this trade deal may lead to increased competition in certain sectors. Resultantly, may affect local businesses. A delicate and judicious approach will be required to balance the interests of the domestic industries to gain the benefits of international cooperation.

Regarding investments, by early 2021, South Korea’s investment balance will be approximately $2.2 billion in the UAE, spanning various sectors such as finance, insurance, mining, energy, technology, and real estate. Meanwhile, the UAE had primarily invested in South Korea’s real estate, telecommunications, energy, logistics, and other industries. It is anticipated that UAE investments in South Korea will undergo a substantial transformation following its declaration to invest $30 billion into sectors related to renewable energy, advanced technology, and other segments of the new economy in the upcoming phase.

The establishment of the CEPA between the UAE and South Korea goes beyond being a bilateral deal; it serves as a message to the world, affirming that in a time marked by intricacy and transformation, global cooperation continues to be the cornerstone for achieving mutual prosperity and sustainable economic advancement.

The writer is currently pursuing her BS in International Relations at National Defence University, Islamabad.