Deals and state visits fuel UAE-Turkey trade hopes

Reuters/Molly Darlington

• Non-oil trade expected to reach $40bn over next 5 years
• UAE among top 15 investors in Turkey
• Cepa deals underpin UAE’s $810bn economic ambition

The trade corridor with Turkey is expected to become one of the UAE’s fastest growing for the rest of the decade on the back of a new economic deal and high-profile state visits.

UAE President Sheikh Mohamed bin Zayed Al Nahyan visited Turkey last month, an event described by his minister of economy as taking the Emirati-Turkish partnership to “new heights”.

Turkish President Recep Tayyip Erdogan is expected to visit the UAE later this month, following his re-election as part of plans to attract billions in investments from Gulf countries.

• Turkey expects investments of $10bn from GCC nations
• UAE-Turkey Cepa deal to boost non-oil trade to $40bn
• Gulf sees potential in Turkish energy and defence

When he last visited the UAE in 2022, his first since 2013, 27 agreements were signed. They aimed to boost trade, industry, health and medical sciences, land and sea transportation and climate action.

The closer ties follow the signing of a comprehensive economic partnership agreement (Cepa) in March. It is expected to boost the value of non-oil bilateral trade between the two countries to $40 billion in the next five years.

Total non-oil trade between the UAE and Turkey reached $19 billion in 2022, an increase of 40 percent compared to 2021. It represented a share of more than 3 percent of the UAE’s non-oil foreign trade. 

At the same time, the UAE’s direct foreign investments in Turkey amounted to more than $5 billion. This puts the UAE among the top 15 countries investing in the country.

Leading Emirati companies investing in Turkey include ADQ, Emirates NBD, Emaar, International Holding Company, Abu Dhabi Investment Authority and Mubadala.

Exports and imports growth

Experts at Standard Chartered see the strong trade growth continuing until the end of the decade at least.

UAE exports to Turkey are predicted to grow at an average annual rate of 10 percent. Imports will grow by 8.4 percent – the fastest growth of any of the UAE’s trade corridors.

Rola Abu Manneh, CEO, Standard Chartered UAE, told AGBI that the Cepa’s provisions, combined with the strong economic fundamentals of both countries, “make this trade corridor an attractive prospect for investment and trade expansion”.

“The agreement focuses on enhancing economic integration and removing trade barriers,” Manneh said.

“It is expected to create a favourable environment for increased bilateral trade and the flow of goods and services.”

Manneh expects to see large-scale capacity expansions in key industries such as agtech, clean energy, real estate development and tourism. 

Ali Metwally, an economist and risk analyst specialising in the Mena region at Infospectrum, agreed. Cepa signing allows Turkey to “tap into the UAE’s market and leverage its economic strengths”, he said.

“By signing the Cepa, Turkey can enhance its non-oil trade and create job opportunities, which is crucial for its economic growth and development,” Metwally told AGBI.

Turkey’s trade deficit contracted by 35 percent in June to $5.4 billion after imports fell 16.8 percent to $26.3 billion – the lowest level since October 2021. This follows a sharp devaluation in the lira since the election in May. 

The UAE aims to become a AED3 trillion ($810 billion) economy by 2030, and Cepas are key to realising these goals, Metwally said.

The Turkish deal is the fourth to be concluded by the UAE following similar agreements with India, Israel, and Indonesia. More than 20 others are in the pipeline. 

Bilateral relationships

Metwally said the agreement also reflects the UAE’s efforts to strengthen its economic ties with friendly countries. These emphasise bilateral relationships over reliance on political and economic blocs.

Both the UAE and Turkey have strong construction and infrastructure sectors. Collaboration in these areas could lead to increased trade and investment, he said. 

According to Manneh, collaborative efforts in agtech research and development, as well as investments in agricultural projects, are also expected to promote sustainable farming practices and boost food security targets.

Both agreed that tourism is another sector poised for growth. Emirates and Etihad Airways operate more than 30 flights to Istanbul weekly.

Abdulla bin Touq Al Marri, UAE minister of economy, said relations between the two countries are “ushering in a new chapter”, adding that he is “looking forward to a promising future full of tremendous trade, economic and investment opportunities”.

Under the Cepa signed, customs duties will be eliminated or reduced on 82 percent of goods and products, representing more than 93 percent of non-oil trade. 

The agreement is expected to increase non-oil bilateral trade to $40 billion annually within five years, while also creating 25,000 new jobs by 2031. 

Tugay Tunçer, Turkish ambassador to the UAE, said last month that the two nations do not compete but rather complement one another.

Several Turkish companies are establishing regional offices in the UAE and Emirati investors are operating substantial business and investment activities in Turkey.

The UAE also allocated $100 million in aid to Turkey following the devastating earthquake that hit it and Syria last year.