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GCC and Japan move into fast lane for trade growth

racing car WAM
The use of Japanese cars in Abu Dhabi's new autonomous racing event is a sign of tightening economic bonds
  • Trade between Japan and the UAE reached $54 bn in 2022
  • More than 340 Japanese companies operate in the UAE
  • Japan accounts for 3% of the UAE’s foreign direct investment

When Abu Dhabi announced the launch of the world’s largest autonomous racing league last month, it was with a significant nod to trade with Japan.

Aspire, an arm of the emirate’s Advanced Technology Research Council, unveiled plans to host the first autonomous car race next year, featuring the Dallara-built Super Formula cars exclusively provided by Japan Racing Promotion.

It is the latest collaboration in a bilateral trade story between the UAE and Japan that grew 58 percent to exceed AED200 billion ($54 billion) last year, compared with AED127 billion in 2021.

This positioned the UAE as the seventh-largest trade partner of Japan, up from 10th in 2021.

UAE exports to Japan grew 70 percent to AED169 billion while imports rose to AED31 billion, up by 13 percent.

“We are beginning to see growing commercial ties in non-energy sectors, with Gulf sovereign wealth funds in particular looking towards Japan for growth opportunities and assets that can support their own countries’ economic diversification away from oil,” said Freddie Neve, senior Middle East associate at think thank Asia House.

“On the other hand, Japan is interested in the investment opportunities arising from the Gulf’s economic diversification.”

Neve added that the recent decision to allow Emirati nationals to travel to Japan visa-free for both tourism and business purposes was “another interesting development that should positively impact Gulf-Japan trade”.

Emirates resumed flights to Tokyo-Haneda airport from April 2, after a three-year hiatus arising from the coronavirus pandemic.

Delegates confirmed their commitment to economic collaboration at the 9th Abu Dhabi-Japan Economic Council

The ninth session of the Abu Dhabi-Japan Economic Council held in Tokyo last month reaffirmed its commitment to further enhance partnerships and investment opportunities.

Ahmed Jasim Al Zaabi, chairman of Abu Dhabi Department of Economic Development, said: “Over the past years, the cooperation between Abu Dhabi and Japan has diversified further to include various sectors and enhance mutual trade and investments.”

Japan is the third-largest source market for Abu Dhabi’s inward foreign direct investment and represents three percent of total inflows to the UAE. 

The value of Japanese investments in the UAE exceeded AED51 billion at the end of October 2022.

The UAE is also home to more than 340 Japanese companies operating in sectors including technology, renewable energy, transportation, healthcare, infrastructure and manufacturing.

The Emirates are Japan’s largest supplier of crude oil but experts predict growing economic collaboration will cover sectors including renewables, advanced technology and robotics, artificial intelligence, healthcare and space.

Shihab Ahmed Alfaheem, UAE ambassador to Japan said the two countries were also accelerating development of renewables, including large-scale projects for producing and using hydrogen.

GCC growth

Bilateral trade between Japan and the wider GCC region stood at around $80 billion in 2021, with Saudi Arabia and the UAE making up around 80 percent of this trade. 

“Oil underpins much of GCC-Japan trade,” said Asia House’s Neve said, “but Japan is increasingly interested in the opportunities emerging from the Gulf’s development of alternative energy sources, such as hydrogen.” 

Away from energy, Saudi Arabia’s Public Investment Fund increased its stake in Japanese gaming giant Nintendo to just over 8 percent in February. 

Neve said this aligned with Saudi Arabia’s Vision 2030 goal “to invest in its digital economy and the gaming sector to provide entertainment for its young population and create additional employment opportunities in the private sector”.

Asics Arabia, a subsidiary of the Japanese sportswear brand, recently unveiled an ambitious expansion plan for Saudi in partnership with Apparel Group, planning a number of stores across the kingdom.

Other recent investments include Saudi’s PIF increasing its stake in Japanese film company, Toei, to 6 percent earlier this month, and the Qatar Investment Authority acquiring 32 residential assets in Japan last year.

Last month, Bahrain-based Investcorp also opened an office in Tokyo as it looks to capitalise on Japanese investment opportunities.

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