UAE, India Sign Pacts on Investment Treaty, Linking Digital Payments, IMEEC

February 16, 2024 by Middle East Briefing

The UAE and India have signed a bilateral treaty for investment promotion and multiple MoUs in the field of regional connectivity, energy, fintech, culture, power trade, and digital infrastructure. These agreements were concluded in mid-February during an official visit of India’s Prime Minister Narendra Modi to the UAE, his seventh trip to the Emirati nation since taking office.

By Melissa Cyrill

India and the United Arab Emirates (UAE) concluded seven agreements on February 13, including a bilateral investment treaty (BIT), International Framework Agreement on the India-Middle East-Europe Economic Corridor (IMEC), and memorandum of understanding (MoU) on port infrastructure development, power trade, linking digital payment platforms like UPI, credit and debit cards, among others.

The pacts were signed during Prime Minister Narendra Modi’s official two-day visit to the UAE, following delegation-level talks with President Sheikh Mohamed bin Zayed Al Nahyan in Abu Dhabi.

This was Modi’s seventh trip to the Gulf state, on which occasion he also inaugrated the BAPS Swaminarayan temple in Abu Dhabi, the first Hindu temple in the UAE. It is an indication of strong bilateral trust and cooperation between the two countries whose economic growth and trade diversification targets have become increasingly aligned in recent years.

Trade

India and the UAE have in place a Comprehensive Economic Partnership Agreement (CEPA) since 2022, which boosted their bilateral trade to US$85 billion for FY 2023.

UAE is India’s third-largest trading partner for the year 2022-23 and India’s second-largest export destination. India is the UAE’s second largest trading partner, with the bilateral trade rising to USD 85 billion in 2022-23. In this regard, the leaders expressed optimism regarding elevating the bilateral trade to USD 100 billion well ahead of the target year 2030. The two leaders also acknowledged the formal unveiling of the UAE-India CEPA Council (UICC), which stands as an important development in the bilateral trade partnership. – India’s Ministry of External Affairs

A Bharat Mart will be created at Jebel Ali, a large commercial port and business hub on the southern outskirts of Dubai, and will support Indian micro, small, and medium enterprises (MSMEs) by enabling their products to reach international buyers across the Middle East, Africa, and Eurasia. The Bharat Mart will thus promote bilateral trade, leveraging both the CEPA and strategic location of Jebel Ali port.

Prior to PM Modi’s visit, RITES Limited (a central public sector undertaking under India’s Ministry of Railways) had entered into an agreement with Abu Dhabi Ports Company. Additionally, the Gujarat Maritime Board had also signed an agreement with Abu Dhabi Ports Company. These will help to develop port infrastructure and bolster connectivity between the two nations.

ADIA sovereign wealth fund gets green light in India’s GIFT City

The Abu Dhabi Investment Authority (ADIA), the largest sovereign wealth fund (SWF) in the United Arab Emirates (UAE), will be setting up a fund worth US$4-5 billion to invest in India through the tax-neutral finance hub located in Prime Minister Narendra Modi’s home state of Gujarat. This initiative was disclosed during the state’s investment summit held in January this year, following its initial announcement in July of last year. The regulatory body overseeing financial services, known as the IFSCA, operating within Gujarat International Finance Tec-City (GIFT City), has granted ADIA provisional approval to establish the fund per sources speaking to Business Standard.

Funds established within GIFT City have the flexibility to invest in both Indian and foreign equities, as well as debt securities and other assets. The international financial services center (IFSC) in GIFT City offers a range of attractive incentives, including a 10-year tax exemption for companies setting up operations there, no levies on fund transfers from overseas jurisdictions, and proximity to Indian markets. ADIA, along with its wholly-owned subsidiaries, is exempt paying from long-term capital gains taxes on investments in India via a legal provision introduced in 2020 and valid until March 2025.

At the Vibrant Gujarat investment summit in January 2024, India’s finance minister Nirmala Sitharaman noted the expansion of financial activity in the GIFT City. This includes the international bullion exchange, 25 banks operating within the IFSC of which nine are foreign banks, and 26 aircraft lessors collectively leasing over 136 assets.

Despite a slow start, fund management activities within the GIFT City have gained momentum. As of December 2023, per reporting in the Business Standard, GIFT City hosted 95 local and global funds, with total commitments reaching US$30 billion and investments surpassing US$2.93 billion. Further, as Sitharaman elaborated at the Gujarat Summit, “there are 80 fund managers who have established 89 schemes and 29 insurance entities, including eight insurance and reinsurance firms. Eight ship leasing companies have commenced operations here”. The IFSC in GIFT City has 50 professional consulting firms, law firms, and chartered accountancy (CA) companies besides 40 fintech entities.

Other SWFs are now in discussions with the IFSCA on setting up in the zone.

READ: A Step-by-Step Guide to Establishing Your Business in India’s GIFT City

Key agreements reached between UAE and India in February

Bilateral Investment Treaty
Inter-Governmental Framework Agreement on the India-Middle East-Europe Economic Corridor (IMEEC)
Memorandum of Understanding for cooperation on Digital Infrastructure Projects
Memorandum of Understanding in the field of Electricity Interconnection and Trade
Memorandum of Understanding for cooperation with the National Maritime Heritage Complex, Lothal at Gujarat
Cooperation Protocol between the National Library and Archives of the UAE and the National Archives of India
Agreement on interlinking of the instant payment platforms – UPI (India) and AANI (UAE)
Agreement on inter-linking domestic debit/credit cards – RuPay (India) with JAYWAN (UAE)

Bilateral Investment Treaty

The BIT will facilitate investment relations between the two countries. Accounting for foreign direct investments (FDI) worth US$3.5 billion, the UAE is India’s fourth-largest source of FDI.

Earlier this year, in January, President Al Nahyan had visited India for the Vibrant Gujarat summit. During the summit, Gujarat Chief Minister Shri Bhupendra Patel announced that DP World, a prominent logistics and ports company headquartered in Dubai, had signed an MoU with Gujarat for investments in the ports. Furthermore, an investment worth INR 10 billion (approx. US$120.46 million) by Shobha Developer of the UAE for Ahmedabad Riverfront Phase-2 had been finalized.

Gujarat’s FDI in the UAE amounts to US$2.4 billion, and an MoU has been inked in the banking and financial services sector, focusing on regulatory practices, through the Dubai International Financial Center with GIFT City.

IMEEC

The UAE and India are taking lead on promoting regional connectivity via this bilateral MoU for the creation of an intergovernmental framework on the India-Middle East-Europe Economic Corridor. Key elements of the Framework include the development and management of a logistics platform, including a digital ecosystem, and the provision of supply chain services to handle all types of general cargo, bulk, containers, and liquid bulk to facilitate the IMEEC. This is the first agreement under the IMEEC initiative, which was launched on the side-lines of the G20 Leaders’ Summit held in New Delhi last year.

UPI and other digital payment systems

UAE and India have reached an agreement to interlink their respective national digital payment platforms—UPI (India) and AANI (UAE)—to enable seamless cross-border transactions between the two countries.

Prime Minister Modi also congratulated President Al Nahyan for the launch of the UAE’s domestic card scheme JAYWAN, leveraging on the digital RuPay stack shared by the National Payments Corporation of India (NPCI) with the Central Bank of the UAE.

Digital infrastructure

An MoU aimed at jointly exploring, assessing, and evaluating investment cooperation in the digital infrastructure sector was also reached. This MoU was signed by the Emirati Ministry of Investment of the UAE and India’s Ministry of Electronics & Information Technology, focusing on improving collaboration by fostering relationships between public and private organizations in the UAE and India. The MoU also seeks to explore and evaluate the feasibility of establishing a supercomputer cluster in India and initiating data center projects in the country.

Culture and heritage

Both countries recognize cultural and knowledge diplomacy as key elements in their robust bilateral relationship.

An UAE-India Culture Council Forum was established through an MoU signed in 2022, encompassing membership from both sides. Additionally, a cooperation protocol has been established between the National Archives of the UAE and India, along with an MoU for collaboration with the National Maritime Heritage Complex at Lothal, Gujarat. These initiatives aim to keep strong the centuries-old ties between the UAE and India and safeguard the treasures of their shared history.

Energy and power trade

UAE and India discussed ways to enhance their bilateral partnership in the energy sector, covering oil, gas, and renewable energy. Two new long-term LNG supply agreements were recently signed between ADNOC Gas and Indian Oil Corporation Ltd and Gas Authority of India Ltd (GAIL) for 1.2 MMTPA and 0.5 MMTPA, respectively. ADNOC Gas Processing supplies around 60 percent of the UAE’s natural gas requirements and has the largest gas processing complex in Abu Dhabi.

The two countries also agreed to advance their cooperation in hydrogen, solar energy, and grid connectivity. An MoU on Electricity Interconnection and Trade is to facilitate fresh energy cooperation between the two countries, including on the Green Grids – One Sun One World One Grid (OSOWOG) initiative launched by PM Modi at the COP26.

In the field of education, the leaders of both countries appreciated the launch of the first Master’s program in Energy Transition and Sustainability by the Indian Institute of Technology (IIT) Delhi in Abu Dhabi.

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