PAK – UAE Bilateral Economic Relations

The Economic relationship between the United Arab Emirates (UAE) and Pakistan has witnessed considerable growth in recent years. As two strategically located countries in the region, they have recognized the immense potential for trade cooperation and are actively working towards strengthening their economic ties. The UAE is one of Pakistan's most significant trading partners, with bilateral trade reaching billions of dollars annually including workers remittances. Pakistan mainly exports textiles, clothing, rice, and agricultural products to the UAE, while importing petroleum products, machinery, and equipment. This trade volume has been crucial in generating foreign exchange for Pakistan and fulfilling its domestic and international obligations. The UAE has also made good sized investments in various sectors of Pakistan's economy, such as telecom, real estate, energy, and infrastructure development. Such investments are not only helping Pakistan for job creation but increasing economic activity and contributing to Pakistan's foreign exchange reserves.

The UAE and Pakistan have also initiated various economic cooperation initiatives to strengthen their trade relationship. Both countries have signed a Free Trade Agreement (FTA) which provides a framework for greater market access and reduced trade barriers. In this regard, UAE provides an immense opportunity for Pakistan to diversify its export base. By further expanding its export basket and focusing on high-value products, Pakistan can generate more foreign exchange. The UAE's open markets, extensive logistics networks, and favorable business environment provide a conducive platform for Pakistani exporters to explore new markets and cater to the demands of the UAE's diverse consumer base. By tapping into the UAE's market potential, Pakistan can enhance its foreign exchange earnings and reduce trade imbalances. Nearly 62pc of total exports to the Middle East region go to the UAE market alone. However, it suffered a decline of 20.23pc to $1.474bn in FY23 from $1.848bn over the corresponding months last year (FY22) which of course is evident from the negative GDP growth rate in financial year under discussion due to bad position of foreign exchange reserve resulting economic activities to cool off. Please note that out of seven UAE states, the bulk of export was destined for Dubai amounting to $1.328bn during FY23.

To give boost to exports and for promoting import substitution, Pakistan has launched a much awaited specialized bank for dealing international trade i.e. Export Import Bank of Pakistan (EXIM). It will eventually play a vital role in strengthening trade and investments between Pakistan and rest of the world including the UAE. Through its comprehensive financial services, export credit insurance, and investment promotion initiatives, Exim Bank to facilitate trade activities across borders. With the support of Exim Bank, Pakistani exporters can expand their reach, explore new markets, and establish long-term trading relationships with international businesses. 

Remittances play a crucial role in Pakistan's foreign exchange reserves, and the UAE has consistently been one of the top sources of remittances for Pakistan. A substantial number of Pakistani workers are employed in various sectors in the UAE, including construction, hospitality, and services. What they earn is sent back to Pakistan, contributing significantly to the country's foreign exchange reserves. The UAE's policies and ease of doing business have attracted many Pakistani professionals, which in turn has strengthened the remittance inflows. In FY23 Pakistan witnessed a remittance of $4.468 Billion which though contracted 20.5% however it was due to global economic issues and management of Dollar in Pakistan which attracted other negative factors. Now when Pakistanis are going abroad majorly towards Middle East, the remittance numbers can grow this year if Government of Pakistan may facilitate them to use legal and proper channel.

Pakistan was among the first countries that formally recognized the UAE whereas it has played significant role in developing various Emirati Firms including Emirates Air Line. In 1985 it was Pakistan International Airline (PIA) who provided technical and administrative assistance to Emirates Air Line whereas first landing destination of the later was Karachi airport whereas UAE has played a significant role by investing into various projects of Pakistan at that time and even now when Pakistan was in dire need of Foreign Exchange. In recognition of the UAE's humanitarian support to Pakistan, multiple institutions, bridges, airports and hospitals in Pakistan are named after the UAE's founding father and first president, Sheikh Zayed bin Sultan Al Nahyan.

The UAE's role in strengthening Pakistan's foreign exchange reserves through trade cooperation have much more significance than what is apparently understood. Remittance inflows, investments, export diversification, and bilateral economic initiatives contribute significantly to Pakistan's foreign exchange earnings in this regard. By further enhancing trade ties with the UAE, Pakistan can leverage the UAE's robust economy, expand its export base, attract more investments, and ultimately bolster its foreign exchange reserves. With such initiatives like EXIM Bank, Free Trade Agreement and different economic co-operations, a collaborative effort and continuous engagement between the two countries can pave the way for a mutually beneficial and sustainable trade relationship.