UAE, Egypt and Jordan industrial pact will ‘unleash billions’

The partnership hopes to strengthen each country’s economic clout and competitive standing, both in the region and further afield 

The UAE, Egypt and Jordan’s decision to enter into an economic partnership stands out from recent announcements of bilateral deals struck between Arab countries and Western partners.  

The regional partnership, announced in Abu Dhabi on Sunday, aims to unlock industrial opportunities and enhance sustainable economic growth in the three countries across five key sectors; food and agriculture, fertilisers, pharmaceuticals, textiles, minerals and petrochemicals.

Abu Dhabi state holding firm ADQ will allocate $10 billion (AED36.7 billion) to establish joint industrial projects, create job opportunities, contribute to increasing economic output, diversify the economies of the three countries, as well as support industrial production and increase exports.

“It is no coincidence that these three countries have entered into an economic partnership, given that they are all vulnerable to supply chain issues, which has beset the global economy, and they share a set of complementarities that will help each country address shortages,” Neil Quilliam, associate fellow at Chatham House’s MENA programme, tells AGBI. 

“The fact that they have all normalised relations with Israel is important too. However, we are now in an era of new partnerships in the region, and this is just one of many. For example, Jordan, Egypt and Iraq have also formed a trilateral engagement to address common economic issues.”

The partnership between the UAE, Egypt and Jordan hopes to considerably strengthen their economic clout and competitive standing, both in the region and further afield. 

Today, the combined GDP of the UAE, Egypt and Jordan represents 25 percent of GDP of the entire Mena region, with a value of $765 billion annually. Between them, the three countries constitute about 26 percent of the region’s population (122 million consumers) and are ranked 14th in the world in terms of the value of exports and imports, at $6 billion. 

They also enjoy a highly advanced logistics infrastructure including numerous airports, ports and strategic transport corridors such as the Suez Canal. Dubai’s logistics company DP World is credited with moving about 10 percent of global trade while Emirates SkyCargo, the world’s largest cargo airline, flies to about 50 freight locations.

Arab countries have been looking to implement strategic partnerships to redress their high food import dependency ratios

“The partnership will lead to the creation of industrial opportunities worth billions of dollars by identifying joint industrial projects in the future,” said Dr Sultan Al Jaber, UAE minister for Industry and Advanced Technology, speaking at the signing ceremony on Sunday. 

Named the Industrial Partnership for Sustainable Economic Growth, the hope is that it serves as a catalyst for unleashing lucrative new streams of investment. 

“The partnership’s $10 billion fund will serve as seed money to cement what can be seen as an economic connectivity agreement,” Mohammed Baharoon, director general at b’huth, a Dubai public policy research centre, tells AGBI. 

“All the sectors will require investment in infrastructure and will also require collaboration beyond the three countries to establish that connectivity. The amount announced does not indicate the extent of the investment but rather indicates an incentive for growing the five sectors it is focusing on.” 

Quilliam notes how the sectors being targeted for growth will play to the economic strengths of each country and ultimately enable them to leverage each other’s strengths. 

Individual strengths, mutual benefits

“Jordan has a highly developed pharmaceuticals sector and an abundance of under-utilised minerals, whereas Egypt has a strong agricultural base, and a competitive textiles industry,” says Quilliam.  

“However, both countries lack investment, technology and industrial leadership and the UAE has that in abundance. Focusing on food security, healthcare and energy is a smart move given the uncertainty around global supply chains.

The partnership is about helping insulate regional economies against further global economic disruptions and preparing for an era of intense competition between the US and China and its repercussions on the Middle East.” 

All three countries boast considerable petrochemical resources which will serve as key enablers for the five key sectors earmarked for growth; in 2019, the combined contribution of the petrochemical industry to GDP in the UAE, Egypt and Jordan exceeded $16 billion.

With regards to the agriculture and food sector, there’s an opportunity to increase the production of wheat and corn in the three countries to about 30 million tonnes annually, from 16.5 million tonnes currently, according to Dr Al Jaber. 

Addressing the region’s food security challenges will be a top priority in the immediate future. 

In recent years, Arab countries have been looking to implement strategic partnerships to redress their high food import dependency ratios. According to a report published by Bond Alpen Capital in January last year, countries such as Qatar, Bahrain and the UAE import anywhere between 80-90 per cent of their food supplies, leaving them extremely vulnerable to increases in global food prices. 

Egypt, the world’s largest importer of wheat, is currently enduring an acute food crisis due to the outbreak of the Russia-Ukraine conflict –  a brutal double whammy attributable to spiralling food prices and the two warring countries previously supplying around 85 percent of Egypt’s wheat. 

In an effort to counter rapidly growing external imbalances, Egypt’s government devalued its currency, the Egyptian pound, by 10 percent in March and subsequently approached the IMF for help. Financial commentators have suggested that a debt restructuring may be on the cards.  

“The timing of the announcement is likely connected to the fallout from the economic disruption arising out of the Russian invasion of Ukraine,” Kristian Ulrichsen, Middle East fellow at Rice University’s Baker Institute, tells AGBI. 

“The Egyptian and Jordanian economies have been struggling to respond, and authorities in both countries, as well as in Abu Dhabi, are mindful of the speed with which growing economic grievances could assume political dimensions after the events in 2011.”

As part of his speech at the signing ceremony, Dr Al Jaber commented: “This partnership will contribute to strengthening relations and cooperation with our brothers in Jordan and Egypt, and is in line with the goals of the Principles of the 50 that were announced by the UAE with the aim of building a better future.” 

Partnership puts economy before politics

Last December, during celebrations to mark the 50th anniversary of the UAE’s founding, it unveiled a set of 10 principles to serve as a strategic roadmap for the country’s next 50 years of development.

“This new partnership is economically motivated, which is consistent with the UAE’s Principles of the 50, which puts economy before politics,” says Baharoon. “It does, however, have a number of strategic implications.”

He notes how the fact that it is economically motivated means the focus on issues like climate change, as well as food and health security, reflects a wider understanding of security that is not restricted to military aggression or terrorist attacks.

Meanwhile, the emphasis on industry will prioritise knowledge transfer and scientific research which look set to be major areas for cooperation across the region and beyond.