During his recent visit to Pakistan, UAE President His Highness Sheikh Mohamed Bin Zayed Al Nahyan hinted that Abu Dhabi would greatly broaden its investment footprint and prop up foreign inflows in Pakistan in the coming days. Some Pakistani media outlets mentioned that His Highness Sheikh Mohamed bin Zayed promised to make huge investments in Islamabad. Citing the decades-long friendly relations between the two countries, the Emirati president also recalled his father’s immense love for Pakistan.
His Highness Sheikh Mohamed bin Zayed also assured the Pakistani prime minister that the UAE would always stand by Pakistan. Given that the status of trade ties between the two countries is already positive, the UAE president’s visit held special meaning. With Islamabad currently engulfed in a financial crisis, its recent interactions with Abu Dhabi have taken on renewed significance.
After signing on to a tough economic restructuring program and $7 billion bailout with the International Monetary Fund (IMF) in 2019, the Imran Khan government could not implement most of the conditions. When Shehbaz Sharif took office in April of 2022, it triggered political turmoil and instability in the country, scaring off foreign investors and crashing the stock market.
Currently, rising inflation and approximately $30 billion in damage from catastrophic floods—which left at least a third of the country underwater—have drained foreign reserves to their lowest level since 2014, leaving just enough for a few weeks worth of imports, according to the State Bank of Pakistan.
Abu Dhabi has helped by deferring payment of a $2 billion loan and agreeing to an additional loan of USD one billion, but IMF loan conditions still prevent Islamabad from accessing various amounts from other sources until the IMF program is restored. Exploring fresh opportunities for investment offers some hope amid the pervading gloom and can benefit both the UAE and Pakistan in the long term.
Building sustainable economic linkages with the Gulf Cooperation Council (GCC) needs to be Islamabad’s main priority with the GCC states. Instead of clinching financial deals, Pakistan has sought aid from various GCC states, along with a greater focus on military-to-military ties. As a result, Pakistan’s economy has not progressed and remains dependent on aid programs from the IMF.
Recently, Pakistan’s Foreign Minister, Bilawal Bhutto Zardari, exchanged views with the UAE Minister for Foreign Affairs and International Cooperation, His Highness Sheikh Abdullah bin Zayed Al Nahyan, on regional and international issues of mutual interest, agreeing to continued close cooperation between the two friendly countries.
Emphasizing the need for dialogue and diplomacy, the two countries have decided to find peaceful resolution of conflicts and disputes in the Middle East, South Asia, and the GCC. In this regard, Pakistan asked the UAE to use its leverage over India to persuade New Delhi to hold talks over the long-pending matter of the Kashmir Valley.
In the meantime, the U.S. has also offered to mediate. In the long run, Abu Dhabi’s growing stakes in Pakistan can have a positive impact on its foreign policy by promoting neutrality and a purely trade-oriented approach.
Ahead of His Highness Sheikh Mohamed bin Zayed’s visit, Faisal Niaz Tirmizi, Islamabad’s envoy to Abu Dhabi, told Emirati state media that bilateral trade between the two countries is expected to double its 2021-2022 volume of $10.6 billion.
Also, negotiations are underway to sign a Comprehensive Economic Partnership Agreement with the UAE, under which, according to Tirmizi, active policy measures would be taken to remove trade barriers, rationalize tariffs, and facilitate investors and traders on both sides.
Agriculture, construction, logistics, and human resources are the main strengths that Pakistan can offer the UAE. Since both countries are members of China’s Belt and Road Initiative megaproject, there is a wide scope for joint cooperation on the China-Pakistan Economic Corridor. Furthermore, Pakistan’s Gwadar port is just under 700 km from the UAE’s main port of Ajman, which has a thriving Free Trade Zone that makes up 20% of the UAE’s overall industrial units.
Since the UAE wants Pakistan to invest in its economic zones, trade relations between Islamabad and Abu Dhabi naturally complement each other, and both sides have discussed setting up a Pak-UAE Business Council. Contributing a work force ranging from laborers to highly educated people running businesses in the UAE, Pakistan is a key source of raw talent and capital for the UAE.
According to the Emirates News Agency, nearly 1.7 million Pakistanis work in the UAE, making it the second largest Pakistani expatriate community in the world and a valuable remittance source for Pakistan. At the Dubai Expo last year, more than 100 memoranda of understanding were signed by Pakistani companies, signaling the interest of Pakistani investors in the UAE.
Pakistan is also an energy export destination for the UAE as it sources 56% of its crude oil needs from the UAE, according to a 2021 report by the Trade Development Authority of Pakistan. In turn, Pakistani exports to the UAE include clothing, food items, agricultural products, and fruits and vegetables.