UAE gearing up for big investments in Sri Lanka

The United Arab Emirates, the largest foreign direct investor in Sri Lanka among GCC economies, and the world’s fourth largest oil exporter, is mulling even more investments in Sri Lanka – and this time on a large scale.

“Sri Lanka’s security and stability is attractive for UAE private investors. We are keen to expand our investment profile in Sri Lanka beyond current levels,” revealed the newly-appointed Ambassador for the United Arab Emirates to Sri Lanka Abdul Hamid Abdul Fattah K. Al Mulla yesterday.

He was addressing Minister of Industry of Commerce Rishad Bathiudeen during his courtesy call on Bathiudeen yesterday at the Ministry of Industry and Commerce in Colombo. Mulla arrived in Colombo having completed his tenure in Italy, along with such previous high profile postings as Jakarta, London and Washington.

“Our bilateral trade stood at $ 1.1 b at the end of 2011, but shows potential for future growth. Sri Lanka’s security and stability is attractive for UAE private investors. We are keen to expand our investment profile in Sri Lanka beyond current levels. In this light, we are also very keen to sign a Bilateral Investment Protection Agreement (BIPA) with Sri Lanka. We have the bilateral Double Tax Avoidance Agreement with Sri Lanka already helping mutual trade,” he said.

Mulla added: “We are initially looking at investing in port development, port management, and tourism infrastructure development in Sri Lanka. As for tourism, there are 58 flights a week originating from Dubai to Colombo by UAE-based carriers Air Arabia, Fly Dubai, Emirates, and Etihad. This growing traffic is also a sign of the tremendous tourism attraction of Sri Lanka at the UAE’s end, the reason why investments in this sector have become a priority for us.”

“We welcome UAE’s private investors to Sri Lanka. Sri Lanka’s investment climate has improved vastly thanks to the vision of President Mahinda Rajapaksa,” said Bathiudeen. “For Sri Lanka, UAE is the second largest trade partner in the Middle East after Iran. As at end of 2011, 22 UAE firms have actively invested $ 448.6 m in Sri Lanka, of which $ 16.5 m consisted of Sri Lankan equity. In 2010 alone, the UAE, the largest foreign direct investor in Sri Lanka among GCC economies, invested $ 66 m in Sri Lanka. The $ 1.1 b bilateral trade levels in 2011 also show there is high, unrealised trade potential between the two countries that we can jointly explore for mutual gains.”

According to the Department of Commerce, bilateral trade turnover which stood at US$ 384 million in 2002 has topped $ 1112 million ($ 1.1 b) in 2011, with the balance of trade in favour of the UAE during the last 10 years except in 2007 and in the Jan-June 2012 (1H) Sri Lanka’s trade with UAE stood at $ 971.19 m (exports at $ 89.41 m).

Sri Lanka’s top exports to UAE are tea, apparel, food preparations, coconuts, diamonds, tyres, wood and articles of wood, and titanium (ores and concentrates).

On an invitation extended by Bathiudeen, Sheikha Lubna Al Qasimi, Minister of Foreign Trade of the United Arab Emirates, arrived in Sri Lanka in November 2011 leading a high-powered delegation and both countries successfully concluded the first SL-UAE Business Forum in November 2011 in Colombo.

On 7 October, Dubai-based $ 300 m Fakih Group, the unique global player in the gifts and souvenir sector known for items with multinational identities, reported prompt success for its Sri Lankan made products in key hubs of Dubai and Abu Dhabi.

On 8 September, Pure Gold, the reputed and award winning multinational jeweller based in Dubai, announced in Colombo that as part of its $ 272 m expansion drive during the next five years to Sri Lanka, Saudi Arabia, the Maldives and Malaysia with new stores, it will invest $ 50 m in Sri Lanka to set up its sales network in the duty free complex and within the country.

The UAE is the second largest Arab economy and the fourth largest oil exporter in the world. In 2012-13, UAE is expected to beat GDP growth forecasts of the IMF. The IMF has estimated 3.5% GDP growth for UAE in 2012 and 2013, but the UAE Central Bank now predicts that the growth could be even higher, at 4%.

The UAE has become a growth driver for Gulf Economies (GCC) and HSBC’s economists for the Middle East and North Africa said that UAE was one of the few economies in the world where “private sector growth is accelerating rather than losing pace”.

“Signing a Bilateral Investment Protection Agreement (BIPA) with Sri Lanka will be very important to bring UAE investments to Sri Lanka,” Mulla reiterated.