UNITED ARAB EMIRATES MINISTRY OF FOREIGN TRADE

UAE’s Export Opportunities To The EFTA countries

Prepared by Ahmad Al - Ananbeh

Supervised by Dr. Mutar Ahmed

March 2010

Ministry of Foreign Trade Department of Analysis and Trade Information

Index Introduction

3

First: Economy of EFTA states

6

Second: EFTA trade agreements

7

1- EFTA Free Trade Agreements 2- Free Trade Agreement between the GCC and EFTA 3- UAE’s Agreements with EFTA Third: EFTA's foreign trade Fourth: UAE’s foreign trade with EFTA UAE’s non-oil exports to the EFTA states UAE’s imports from EFTA states Fifth: UAE’s investments with EFTA states Recommendations and Conclusion

2

8 9 12 12 16 18 23 26 29

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Introduction The world witnessed during the past years several changes especially the global financial crisis that had deep economic influences mainly on the foreign trade sector, and obliged all countries in the world to reconsider their economic and developmental strategies in order to deal with the new situation and take advantage of the lessons brought by the global financial crisis influence. There is no mean to confront the high cost of the growing global competition except by entering into economic blocs that allow the benefit from the economies of scale and production specialization based on the comparative properties they enjoy and that enhance their global competitiveness. As a result, the United Arab Emirates inspired by the visions and directives of the wise leadership in the state, tended on all levels, especially in the foreign trade sector related to the Ministry of Foreign Trade, to promote the economic diversity, highlight the trade position of the UAE on the world map, enhance its competitiveness on the global level by increasing UAE’s exports and strengthening its presence on the current markets and opening new ones through the activation of cooperation with countries and economic blocs. In this regard was signed the Free Trade Agreement between the Gulf Cooperation Council (GCC) and European Free Trade Association (EFTA) (Switzerland, Norway, Iceland, and Liechtenstein). It is the second agreement concluded by the GCC countries outside the Arab and regional line, and the first to join between the GCC countries and a group of states. The signature of the Free Trade Agreement with EFTA is considered an important step towards widening the export horizon of UAE’s commodities and services in order to enhance the economy and develop relations with EFTA namely the investment environment and this due to the large fields covered by this agreement. The signature of the agreement came along with 3

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the initiatives of the Ministry of Foreign Trade aiming at negotiating with the major trade partners of the country in order to liberate trade to allow the access of UAE’s commodities to the markets of these countries in comparative advantages. The issue of the present study on the UAE’s export opportunities to the EFTA countries comes as an implementation of the ministry’s plan concerning defining the free trade agreements by issuing definite evidences of the economic promotion of the state, and establishing analyzing studies for the situation of foreign trade in order to enlighten the private sector of the opportunities in global markets and arrange all means to open the market for the UAE’s productions. EFTA is constituted of Iceland, Norway, Switzerland, and Liechtenstein. The association was founded in 1960 on the base that free trade is a way to reach growth and development in the member states, as well as promoting and strengthening the economic cooperation between the countries in west Europe and participating in expanding trade all over the world. EFTA used to enclose the following seven states: Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom. In 1961, Finland joined the association, Iceland in 1970 and Liechtenstein in 1991. But in the year 1973 the United Kingdom and Denmark left the EFTA, Portugal left in 1986 and Austria, Finland and Sweden in 1995; so that the countries in the association became Iceland, Liechtenstein, Norway and Switzerland. It is well known that the international trade has a major influence on the course of the majority of economies in the world through the clearance of excess in commodities and services by exporting them as well as through meeting the needs to commodities and services locally unavailable by importing them in addition to the influences on production, revenue, employment, and financial and monetary markets which could not be ignored. The agreements of trade liberalization enhanced the interaction on the 4

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international and regional scale between the states through increasing the flux of commodities and fund, what showed their major influence on the economy of these states. Iceland republic is an island situated north the Atlantic which economy has grown rapidly since the republic signed the European Free Trade Agreement and which market depends on the free market system. In fact, during the year 2007 Iceland occupied the first position in the most advanced countries index according to the UN Human development index, and is considered the fourth state in the world in terms of per capita income. The island was joined to Europe due to the economic, cultural and lingual similarity. As for the political system in Iceland, it is based on the representative democracy system (parliament) which is a consultative corps for the King, and is considered the older parliamentary democracy in the world. Liechtenstein is a small European country, located in Central Europe between the western Austria and eastern Switzerland, and do not have an access to the sea. The kingdom of Norway is located north the European continent and shares its frontiers with Sweden, Finland and Russia and has a sea border with the United Kingdom and Denmark. Norway enjoys a moderated policy where the population refused to join the European Union. Switzerland is a federal republic in central Europe bordered by Germany from the north, France from the west, Italy from the south, and Austria and Liechtenstein from the east. Its Foreign policy is based on neutrality. The city of Zurich is the largest city and stayed for eight years until 2008 the best city to live in the world. Switzerland occupies the first place in the world in terms of scientific publications, and has the largest number of creators that received a Nobel Prize. 5

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First: Economy of EFTA countries The GDP of EFTA countries reached nearly 664 billion Euros in 2008; both Switzerland and Norway forming 98% of the member states’ GDP. Iceland's economy is characterized by its fast growth and use of free market system. The country is one of the socially and technically developed countries but suffered during the year 2008 a failure in the banking system what caused an economic recession and political turmoil, prompting the International Monetary Fund to support them. The GDP reached approximately 10.3 billion Euros in 2008. Liechtenstein’s economy depends mainly on financial services institutions, the tourism sector, electronics industries and food industries, and does not possess large natural resources. The number of registered companies is larger than the number of population due to low taxes. The GDP reached approximately 3.2 billion Euros in 2008. As for Norway’s economy, it follows the capitalist social system, where the state still controls several strategic sectors such as oil. Norway is also the largest oil producer in Europe and the third in terms of global export after Saudi Arabia and Russia. The government is moving toward privatization that started in several companies during 2000. The GDP reached approximately 309.3 billion Euros in 2008. Norway has an advanced transport network such as trains and roads; highways are just about the big cities. Norway has a huge fleet of ships and is considered one of the world's largest countries in navigation.

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As for Switzerland’s economy, the GDP reached approximately 341.3 billion Euros in 2008. The country is considered one of the developed countries and one of the world’s richest countries in terms of the per capita income. It is characterized by the diversity of its economic activities as it produces almost 50% of its need of agricultural products and exports large quantities of dairy products. Despite the fact that Switzerland is a poor country in natural and energy resources, it is considered an energy-rich country in electricity generated from waterfalls, is famous for its fine industries such as watches, fine instruments, medical, chemical and electric devices, and has an active tourism which is an important resource for the local income.

Second: EFTA trade agreements Free Trade Agreements are bilateral agreement between a state and another/ a group of states or groups of states between them, aiming at promoting trade and economic relations and building bridges of cooperation and coordination between them through removing trade barriers and enhancing bilateral economic relations and mutual benefit. Under these agreements, custom duties are gradually eliminated and economic barriers are removed on commodities and services between the contracting states for specified periods, what leads to complete the free trade zone between the contracting states, for it is known that trade plays an important role in the economy of nations. We will highlight the contracting states with the EFTA on free trade agreements, as well as those involved in negotiations to sign free trade agreements. What makes this association more important is that its members except Switzerland are members of the European Economic Area. 7

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The first free trade agreement was negotiated between the EFTA states and Spain, than Poland, Romania, Bulgaria, Hungary and Czechoslovakia entered the agreements. Negotiations were also launched with Israel and Turkey in 1995 and the EFTA states showed their interest to build free trade relations outside Europe to maintain the policy of parallelism and consistency with the European Union states taking into account the "Barcelona process" launched by the European Union in 1995. The cooperation with Egypt, Tunisia, Morocco, Palestine, Jordan and Lebanon was announced and has since developed into free trade agreements. EFTA extended the agreements network in Central and Eastern Europe and continued at the same time with Slovenia and the three Baltic States, Latvia, Lithuania and Estonia, followed by Macedonia and Croatia as a result of expanding membership of the European Union in 2004 and 2007. Since then, EFTA expanded the free trade agreements to include the countries of Latin America, Asia and Africa, and the number of free trade agreements signed by the EFTA reached 20 trade agreements with 29 countries. All EFTA states are members of the World Trade Organization and attaches the highest priority for a proper functioning of global trade system.

1- EFTA Free Trade Agreements : • Albania signed on 17/12/2009. • Gulf Cooperation Council (GCC) signed on 22/6/2009. • Colombia signed on 25/11/2008. • Serbia signed on 17/12/2009. • Canada entry into force on 1/7/2009. • Customs Union of South Africa (SACU) entry into force on 1/5/2008. • Egypt entry into force on 1/8/2007. • Lebanon entry into force on 1/1/2007. • Republic of South Korea entry into force on 1/9/2006. • Tunisia entry into force in 2005/2006. 8

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• Chile entry into force on 1/12/2004. • Singapore entry into force on 1/1/2003. • Jordan entry into force on 1/9/2002. • Macedonia entry into force on 1/5/2002. • Croatia entry into force on 1/4/2002. • Mexico entry into force on 1/7/2001. • Morocco entry into force on 1/12/1999. • Palestinian Authority entry into force on 1/7/1999. • Israel entry into force on 1/1/1993. • Turkey entry into force on 1/4/1992. As for the states being negotiated with to sign free trade agreements with EFTA are Algeria, Hong Kong, China, India, Peru, Thailand and Ukraine. The states wishing to negotiate with the EFTA to sign free trade agreements are Indonesia, Malaysia, Russia and Vietnam. There are several EFTA agreements that aim to promote the economic partnership in different cooperation fields with Algeria, Mauritius, Mercosur Group, Mongolia, Peru, and Ukraine.

2- Free Trade Agreement between the GCC and EFTA Regional states and blocs as well as international organizations are trying to find ways to develop the trade and economic relations. In fact, since the foundation of the GCC on May 25, 1981, began the implementation of a long term strategy related to launching negotiations and developing the relations with states and blocs including the EFTA states, where one of the major goals of the GCC is to achieve coordination, integration and interdependence among countries in all fields, including policies and trade relations coordination with other states, blocs, and regional and 9

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international economic groupings in order to strengthen their negotiating positions and competitiveness in global markets. Since the first meeting held between officials of the GCC Secretariat and EFTA, the EFTA states showed their willingness to reach, with the council states, a version of declaration on principles for cooperation between the two parties. On May 23, 2000 the council and EFTA states signed a joint cooperation agreement that stipulates the establishment of a joint committee on cooperation. The agreement was adopted by the Supreme Council in its twenty-first session (December 2000). The joint committee on cooperation held two meetings during which it reviewed the cooperation fields stipulated in the declaration and studied the way to achieve it. Moreover, a meeting for the specialists from both parties was held at the headquarters of the Secretariat of the Council in Riyadh on February 2006 during which was discussed the mechanism of starting negotiations to establish a free trade zone between the council and EFTA states. The negotiations to reach a draft for the agreement started with a meeting for the specialists of both parties and the committee held five rounds of trade negotiations that started on February 2006 and ended on April 2008. The agreement was signed on June 22, 2009, covered several fields including trade in commodities, services, governmental procurement and competitiveness as well as dispute settlement and established a joint committee to control the implementation of the provisions of the agreement. By virtue of the agreement, industrial commodities and fish products of GCC states shall enter the markets of EFTA states exempt from custom 10

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duties starting the first day of the agreement's entry into force. The majority of the EFTA states’ commodities will be exempt from custom duties once the agreement enters into force, other commodities will be exempt from taxation after five years and others are excluded from the scope of the agreement. The provisions of services trade was mentioned in an independent chapter of the agreement mainly based on the provisions of the General Agreement on Trade in Services (GATS). The scope and level of commitments of the two parties stipulated in this chapter go beyond those stipulated under the World Trade Organization by virtue of the GATS. As for the investment and institution, the two parties agreed to start negotiation in order to include a chapter concerning instituting subjects not related to the service sector such as industry and agriculture sectors within two years of the agreement’s entry into force. A special annex of the electronic trade was included. Moreover, the agreement encloses other aspects such as competition and establishment of a joint committee to revise the provisions of competition, intellectual property rights, government procurement, and the establishment of a committee for the management of the agreement and dispute settlement. It is constituted of 93 articles and 16 annexes. It is worth mentioning that bilateral agreements were concluded between three states of the EFTA and Council states in the field of agricultural products, and these agreements constitutes an integral part of the free trade agreement concluded between the two parties.

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The agreement and its articles could be found on the website of the Ministry of Foreign Trade on the following link: http://moft.gov.ae/wto/index.php?option=com_content&view=article&id=1 2&Itemid=19&lang=ar

3- UAE’s Agreements with EFTA The most important agreements concluded between the United Arab Emirates and EFTA or one of its states: - 1998: investment protection agreement with Switzerland. - 1993: agreement to establish flights between the two countries with Switzerland. - 1992: ban double taxation in the field of air transport with Switzerland - 2000: signing a joint cooperation between the EFTA states and the GCC states, and following-up the implementation through the establishment of the joint committee on cooperation. - Signing a free trade agreement between GCC states and the EFTA states, on 22/6/2009 in the city of Hamar, Norway.

Third: EFTA's foreign trade Foreign trade in commodities and services of EFTA reached approximately 594.3 billion Euros during the year 2008, with 256.4 billion Euros for commodity exports, 89.4 billion Euros for exports of services, 192.7 billion Euros for commodity imports and 56.0 billion Euros for imports of services, so that the balance of trade reached about 97.1 billion Euros according to data of EFTA website. 12

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According to Trade Map, EFTA’s commodity imports from the world reached approximately 228.0 billion dollars during the year 2009 and about 278.7 billion dollars in 2008 forming 1.7% of total world imports for 2008. The average of growth for the period between 2004 and 2008 reached about 12%, 17% and 14% for Switzerland, Norway and Iceland respectively and it is worth mentioning that foreign trade data of Liechtenstein are included within Switzerland’s data. As for EFTA’s commodity exports to the world, they reached about 297.8 billion dollars during 2009 and 373.8 billion dollars in 2008 forming 2.3% of total world exports for 2008. The average of growth for the period between 2004 and 2008 reached about 13%, 18% and 19% for Switzerland, Norway and Iceland respectively. The list of major EFTA suppliers shows that The United Arab Emirates occupied the second place on the middle-east level after Turkey and the second place on the Arab level after Libya during the year 2009. The list also shows that UAE is ranked 40 on the level of the states supplying for EFTA in the world during 2009 forming 0.2% of total EFTA’s imports, with a 42 rank in 2008 and 44 in 2007. EFTA’s imports from Germany, Italy, France, America, Sweden, China, Netherlands and Britain reached approximately 66.4% of total imports during 2009. EFTA’s imports from Germany account for 26.3% of total imports for 2009. EFTA’s major imports are: • Machineries and equipment, electrical equipment, and their parts, voice recorders and radios, picture and voice recording and diffusion in visual radio (television) as well as their parts and accessories. • Pharmaceutical products. • Motor vehicles, tractors, bicycles and other ground vehicles as well as their parts and accessories. • Mineral fuel, mineral oils and their distillation products, continental material and metal candles. 13

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In terms of major receptors of EFTA’s exports the United Arab Emirates occupied the first place on the middle-east and Arab countries level during year 2009. UAE also occupied the 21 rank on the global level of receptor countries of EFTA’s exports during the year 2009 with 0.8% of total EFTA’s exports where it occupied the 21 rank in 2007 and 26 in 2006 on the global level. EFTA’s major exports are: • Mineral fuel, mineral oils and their distillation products, continental material and metal candles. • Pharmaceutical products. • Machineries and equipment, electrical equipment, and their parts, voice recorders and radios, picture and voice recording and diffusion in visual radio (television) as well as their parts and accessories. • Organic chemical products.

When analyzing EFTA’s trade with council states we find that EFTA’s exports to council states formed 1.8% of its total exports during 2009. UAE accounted for 44% of these exports. It is also noticed that EFTA’s imports form council states formed 0.4% of its total imports during 2009. UAE accounted for 53% of these exports during the same year.

GCC states’ major exports to EFTA (EFTA’s imports from GCC states) include: • Natural or cultured pearls, precious or semi-precious stones, precious metals, ordinary metals covered with precious metals or their products, seduction jewels (fake), money. 14

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• Brands of clocks industry and their parts. • Organic chemical products. • Mineral fuel, mineral oils and their distillation products, continental material and metal candles. • Plastics and their products. • Work of art, collections pieces and artifacts. • Boilers, machineries, equipment and machine tools as well as their parts. • Tools and equipment for optics, photography or cinematography, or for measuring or testing, fine tools and instruments, tools and devices for medicine or surgery, parts and accessories for these tools and devices. • Aluminum and its products.

GCC states’ major imports from EFTA (EFTA’s exports to GCC states) include: • Natural or cultured pearls, precious or semi-precious stones, precious metals, ordinary metals covered with precious metals or their products, seduction jewels (fake), money. • Machineries and equipment, electrical equipment, and their parts, voice recorders and radios, picture and voice recording and diffusion in visual radio (television) as well as their parts and accessories. • Brands of clocks industry and their parts. • Pharmaceutical products. • Boilers, machineries, equipment and machine tools as well as their parts. • Tools and equipment for optics, photography or cinematography, or for measuring or testing, fine tools and instruments, tools and devices for medicine or surgery, parts and accessories for these tools and devices. 15

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Fourth: UAE’s foreign trade with EFTA Foreign trade sector between the United Arab Emirates and EFTA witnessed a remarkable development during the past years especially in 2009. Despite the repercussions of the global financial crisis, the total exports (non-oil exports + re-export) reached during 2009 about 3495.8 million dollars with a 27.5% growth in comparison with the year 2008 due to a growth of non-oil exports of approximately 221.3% during 2009 in comparison with 2008 reaching about 2.4 billion dollars. As for the re-export, it dropped to about 1.1 billion dollars during 2009 with a decline percentage of 44.1% in comparison with 2008. Imports also dropped by 49.8% for the year 2009 in comparison with 2008 what led to a decrease in total non-oil foreign trade to reach about 6.5 billion dollars declining thus by 25.6% from the year 2008. This could be seen in the table and Figure (1)

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Table No. (1) The development of foreign trade volume between the UAE and EFTA during the period (2005-2008) (million dollars) Growth rate in 2005

2006

2007

2008

* 2009

2009 in

comparison with 2008

3.6

89.4

175.8

740.0

2377.8

221.3

Re-Export

998.5

1907.8

1648.3

2001.5

1118.0

-44.1

Total Export

1002.1

1997.1

1824.2

2741.5

3495.8

27.5

Import

1922.2

2311.4

3137.7

5991.3

3004.8

-49.8

Trade Balance

-920.2

-314.3

-1313.5

-3249.8

491.0

-115.1

Total Foreign Trade Volume

2924.3

4308.5

4961.9

8732.8

6500.6

-25.6

Non – Oil Export

Source: Ministry of Foreign Trade * Preliminary data

Figure No. (1) UAE’s foreign trade development with EFTA countries

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It is noted that the contribution of non-oil exports constituted about 36.6% from the total foreign trade of the country with EFTA during 2009, where it formed 8.5% in 2008. Re-export constituted 17.2% during 2009, but its decrease didn’t affect its contribution to foreign trade accounting for 22.9% of total foreign trade during the year 2008. In terms of the imports, they formed 68.6% of total foreign trade during 2008 than decreased to 46.2% in 2009. This decrease led to transforming the deficit in the balance of trade during 2008 attaining 3.2 billion dollars to a surplus of 491.0 million dollars, which is an indicator on the success of the state’s policy to support and develop non-oil exports sector, promotion policy and opening the international markets to UAE’s products, for the deficit in the balance of trade was reduce by 115.1% during 2009 in comparison with 2008. Hereinafter figures a record of most important trade commodities between the United Arab Emirates and EFTA states during 2008 according to the chapters of the harmonized system for( non-oil exports, re-export and imports).

UAE’s non-oil exports to the EFTA states: Through analyzing the commodity structure in accordance with the articles of the harmonized system for six entries which data are available in the global trade database for EFTA’s imports, we could figure out the available opportunities for 30 UAE’s commodity from non-oil exports once the free trade agreement enters into force. During this section and through the table No. (2), we will focus on the most important 30 UAE’s commodities leading the non-oil exports of the state.

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Through analyzing the commodity structure of non-oil exports of the state of the articles of the harmonized system for six entries as well as EFTA’s imports specifically from these articles and finding opportunities for non-oil exports to the EFTA states, in order to maximize the benefit from the free trade agreement once it enters into force, which are showed in table No. (2), we find that the state is ranked in the first position in terms of imports from item No. 680100 for example which is related to “Paving stones and roads paving, of natural stone (except the slate stone)”. This article formed 83.3% from global imports during 2008 with expected custom duties of 0.84% for Switzerland and 10% for Iceland in case the UAE was the country of origin. The United Arab Emirates occupied the eighth position in terms of countries exporting the item No. 390120 related to “Polyethylene with specific weight of 0.94 or more” with a specific weight of about 3.8% from global exports during 2008. EFTA states paid during 2008 approximately 336 million dollars to import this item. In terms of the item No. 251710 related to “Pebbles and bruised or broken stones of types commonly used for concretes or paving roads or railways or other types of pavement, beaches and granite stones, although heat-treated”, the UAE came in the first position in the list of exporters of these commodities on the global level during 2008 with a specific weight of approximately 25%. EFTA states paid during 2009 about 80 million dollars to import this item and approximately the same amount in 2008. In terms of the item No. 170199 related to “Refined sugar (purified), in solid or other different forms” the UAE occupied during 2008 the seventh position in the list of exporters of these commodities on the global level with a specific weight of about 3.8%. EFTA states paid during 2008 approximately 203 million dollars to import this article. The expected custom duties from this item 19

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reached 17.94% for Switzerland and 11.16% for Norway in case the UAE was the country of origin. In terms of the item No. 760110 related to “Unalloyed unprocessed Aluminum (crude)” the UAE occupied during 2008 the 23th position in the list of exporters of these commodities on the global level with a specific weight of about 0.7%. EFTA states paid during 2008 approximately 1.4 billion dollars to import this article and 643 million dollars during 2009. The expected custom duties from this item reached 3.10% for Switzerland and 0% for Norway in case the UAE was the country of origin. In terms of the item No. 760120 related to “unprocessed Aluminum” the UAE occupied during 2008 the 35th position in the list of exporters of these commodities on the global level with a specific weight of about 0.4%. EFTA states paid during 2008 approximately 357 million dollars to import this article and 305 million dollars during 2009. The expected custom duties from this item reached 4.31% for Switzerland and 0% for Norway and Iceland in case the UAE was the country of origin.

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Table No. (2) Non-oil exports of the UAE to world in 2008 articles of the harmonized system for six entries as well as EFTA’s imports specifically from these articles.(million dollars) Articles of the harmonized system (6 items)

EFTA’s imports value description

UAE’s exports value for 2008

2007

2008

2009

Crude gold and non-monetary gold Paving stones, flagstones and curbstones, of natural stone (except the slate stone)

11

4

2

45

54

45

390120

Polyethylene with specific weight of 0.94 or more

295

336

210

881

271019

Lubricating oils for various light distillate

5120

8308

5441

692

79

80

81

231 174 1619 144

203 177 1401 136

186 78 643 92

339 307 188 157

274

265

211

150

123 113

100 130

53 107

128 104

3405

4499

4000

189

279

276

710812 680100

760200

Pebbles, gravel, broken or crushed stone, of a kind commonly used for concrete aggregates, for road metalling or for railway or other ballast, shingle and flint, whether or not heat-treated. Refined sugar (purified), in solid or other different forms. Waste and Scrap Metal of Iron and unalloyed iron or steel. Unalloyed unprocessed Aluminum (crude) poly(ethylene terephthalate) Flagstones and ceramic tiles for flooring or to cover walls or chimneys for example Copper Waste and Scrap Miscellaneous printed materials Trinkets, jewelry and their parts, from precious metals or ordinary metals covered by layer of precious metals barrels, boxes, cases and similar utensils (including firm or flexible tubular utensils) for all materials (except compressed or liquefied gas) of aluminum with a capacity not exceeding 300 liters even if they were lined or heat-insulating, not equipped with mechanical or thermal equipment Chocolate and other food products containing cocoa in pieces, tablets or fingers no more than 2 kg Unprocessed Aluminum (crude) Cigarettes containing tobacco Perfumes and Beauty Water (toilet) Polyethylene with a specific weight less than 0.94 Huge flasks, bottles, beakers, jars, kettles and other similar dispensers of glass, to carry or pack the products, glass conserving jars. Aluminum waste and scrap

392020

Sheets and rolls, tapes and other cleats from polymers of propylene

161

191

147

540249

Twisted and untwisted strings Asphalt manufactures or from similar materials (e.g.: petroleum bitumen or coal tar pitch) Woven fabrics of cleats or similar forms Post (pads) and similar equipment for scaffolding, temporary building structures or mine pillars Fats, vegetable oils and their molecules Prefabricated buildings Unfrozen snaps and beans Local biscuit

11

18

9

11

10

10

6

7

6

169

188

147

19 698 5 104

28 759 5 122

23 463 7 118

251710 170199 720449 760110 390760 690890 740400 491199 711319

761290

180631 760120 240220 330300 390110 701090

680790 540720 730840 151620 940600 200551 190531

6410 2131

545

99

96 55

63

58

451 103 224 233

357 137 272 241

305 120 257 164

197

232

207

145

164

74

95 95 85 72 70 68 67 62 59 48 47 44 42 42 40 39

Source: Ministry of Foreign Trade 21

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We can rely on the previous table to build a knowledge base for decisionmakers in the state to guide the exporters of these commodities to the necessity of entering the EFTA’s market and benefiting from the preference given to UAE’s exporters once the free trade agreement between the GCC states and EFTA states enters into force.

After analyzing the rank of EFTA states in comparison with UAE’s foreign trade for the year 2008, the results were summarized in the table No. (3) as follows: Table No. (3) EFTA states’ rank and their foreign trade value with UAE for 2008 (million dollars) Non-oil exports

Re-export

Imports

Total foreign trade

Rank

Value

Rank

Value

Rank

Value

Rank

Value

Switzerland

4

736.8

4

1992

9

5642.7

6

8371.5

Norway

99

3.1

111

9

42

346.6

58

358.7

Iceland

156

0.1

156

0.6

129

2.1

157

2.8

Liechtenstein

191

0.0

190

0.0

156

0.3

175

0.3

Source: Ministry of Foreign Trade The previous table shows that Switzerland is the most important EFTA state in the field of foreign trade with UAE since it formed 87.2% of EFTA’s trade with GCC states during 2008 according to EFTA’s statistics.

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Switzerland occupied during 2009 the second position after India in receiving non-oil exports progressing thus from the fourth position in 2008 of the most attracting country of non-oil exports and the ninth position in 2007. In terms of re-export, Switzerland occupied the fourth position in 2007 and 2008 but dropped to the sixth in 2009.

UAE’s imports from EFTA states In terms of imports Switzerland occupied the ninth position for major importing developed countries, progressing thus from the tenth position of year 2007 and regressing for the eleventh position during 2009. Switzerland is followed by Norway, Iceland and then Liechtenstein. UAE’s imports from EFTA states were focused during 2009 on the chapter 71 related to " Natural or cultured pearls, precious or semi-precious stones, precious metals, ordinary metals covered with precious metals or their products, seduction jewels (fake), money" and chapter 91 related to " Brands of clocks industry and their parts" and 84 and 85 which from the section number 6 of the harmonized system related to “Machineries and equipments, electrical equipments, and their parts, voice recorders and radios, picture and voice recording and diffusion in visual radio (television) as well as their parts and accessories”. Hereinafter are mentioned the major trade commodities between the United Arab Emirates and EFTA states for each party aside according to the major chapters of the harmonized system for non-oil exports, re-export and imports during 2008. The table No. (4) shows the major trade commodities between UAE and Switzerland, table No. (5) between UAE and Norway, No.(6) between UAE and Iceland and No. (7) between UAE and Liechtenstein. 23

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Table No. (4) Major trade commodities between UAE and Switzerland Exported commodities

Re-exported commodities

Imported commodities

Natural or cultured pearls, precious or semi-precious stones, precious metals, ordinary metals covered with precious metals or their products, seduction jewels (fake), money. Plastics and their products.

Natural or cultured pearls, precious or semi-precious stones, precious metals, ordinary metals covered with precious metals or their products, seduction jewels (fake), money. Brands of clocks industry and their parts.

Natural or cultured pearls, precious or semi-precious stones, precious metals, ordinary metals covered with precious metals or their products, seduction jewels (fake), money. Brands of clocks industry and their parts. Machineries and equipments, electrical equipments, and their parts, voice recorders and radios, picture and voice recording and diffusion in visual radio (television) as well as their parts and accessories.

Clothes and their supplements

Perfume oil and extracts from resin materials (Resinoid), perfumery and softening products (cosmetics) or cosmetology (toilet)

Table No. (5) Major trade commodities between UAE and Norway Exported commodities Natural or cultured pearls, precious or semi-precious stones, precious metals, ordinary metals covered with precious metals or their products, seduction jewels (fake), money.

Re-exported commodities

Imported commodities

Machineries, equipments and machine tools as well as their parts.

Machineries, equipments and machine tools as well as their parts.

Abstracts for tanning and dyeing; tannins and their derivatives; dyes, pigments, other colored materials; paints and varnishes; pastes; ink

Products of cast iron, iron or steel

Machineries and equipments, electrical equipments, and their parts, voice recorders and radios, picture and voice recording and diffusion in visual radio (television) as well as their parts and accessories.

Plastics and their products

Natural or cultured pearls, precious or semi-precious stones, precious metals, ordinary metals covered with precious metals or their products, seduction jewels (fake), money.

Tools and equipments for optics, photography or cinematography, or for measuring or testing, fine tools and instruments, tools and devices for medicine or surgery, parts and accessories for these tools and devices

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Table No. (6) Major trade commodities between UAE and Iceland Exported commodities

Re-exported commodities

Furniture, beds, mattresses, Holder Mattresses, cushions and similar filled items, lighting devices are not listed or included elsewhere; traffic lights and illuminated signboards and similar articles; prefabricated installations.

Fertilizers

Cast iron, iron or steel

Plastics and their products

Beverages, alcohol and Vinegar

Ores, slag and ash

Imported commodities Inorganic chemical products, organic or inorganic compounds from precious metals, rare-earth metals, radioactive elements or isotopes. Salt; sulfur; dust and stones; Plaster; lime and cement Pharmaceutical products

Table No. (7) Major trade commodities between UAE and Liechtenstein Exported commodities

Clothes and their supplements

Copper and its products

Kits and tools, cutting tools and tableware from simple metals.

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Re-exported commodities

Imported commodities

Machineries and equipments, electrical equipments, and their parts, Clothes and their voice recorders and radios, picture and supplements voice recording and diffusion in visual radio (television) as well as their parts and accessories. Machineries, equipments and machine Copper and its products tools as well as their parts. Tools and equipments for optics, photography or cinematography, or for Kits and tools, cutting measuring or testing, fine tools and tools and tableware from instruments, tools and devices for simple metals. medicine or surgery, parts and accessories for these tools and devices

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Fifth: UAE’s investments with EFTA states All countries in the world are working and competing to attract investments by taking many procedures such as creating and improving the investment environment through establishing programs of institutional and legislative reform, diversifying the incentives, guarantees, reductions and taxes exemption, as well as building partnerships and blocs through signing the agreements, establishing free zones and industrial estates, processing infrastructures for ports and airports as well as pursuing the development of existing ones for their essential role due to their several benefits in exporting or bringing investments; thereby helping to transfer knowledge, integration, expertise, skills and widening trade and money investment what is positively reflected in increasing the level of production and supporting competiveness. Therefore, investment is considered the primary tool and way to achieve the economic development especially in the light of liberalization of global economy and increasing global production and trade so that the foreign direct investment continued to increase in recent years. Figures mentioned in the World Investment Report 2009 show that UAE kept its level in 2008 in comparison with 2007 despite the dramatic decline in global investment flows. The report also rated UAE as the best third desired state for investment in the western Asia region, the first in the said region in terms of mergers and acquisitions and was considered a successful model in the field of attracting foreign direct investments. EFTA’s direct investments in UAE during 2006 reached about 584 million dollars with a growth percentage of 190% in comparison with 2005, to form 3.1% from total direct investments in the state during the year 2006, noting 26

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that these investments reached approximately 19 billion dollars according to the data of the Ministry of Economy and about 34 billion dollars in 2007. EFTA’s investments are concentrated in the extractive industry, financial intermediation, insurance and other activities. According to a survey on foreign direct investment of the National Statistics Centre 2007-2008 Iceland occupied the fifth position in the list of major investments in UAE with 7% in 2007. The number of EFTA’s commercial companies in the country reached approximately 112 companies (87 for Switzerland, 19 for Norway and 6 for Liechtenstein), the number of trade agencies reached 232 agencies (193 for Switzerland, 38 for Norway and one for Liechtenstein) and the number of trademarks reached 3721 trademarks all for Switzerland. Iceland did not appear in the statistics of companies, agencies and registered trademarks in the country. Among the reasons to invest in the United Arab Emirates are the political and economic stability, the strategic geographical position of the state as a door to regional markets, the opportunities for investment in all sectors, as well as the easy procedures for investment, the available infrastructure and other factors. Switzerland and Norway sought establishing business councils: the Norwegian Business Council and the Swiss Business Council in order to enhance communication and relation to serve the investors in the region in the aim of increasing the share of commodities, services and technologies of these states in UAE and the region through developing the trade relations to become more effective and permanent and building bridges between Norwegian and Swiss companies on one hand and the companies in the state in particular and the Middle-east region in general on the other hand since the UAE enjoys a unique geographical location and an excellent one on the trade map especially in the 27

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field of re-export as a center of commodities’ distribution between the production and consumption centers in the world. In addition to the importance of the geographical location, the good prepare of the foreign trade sector especially re-export through providing logistic services from world-class ports and airports, free zones and trade services had a major role in converting the natural advantage of the state to an acquired competitive advantage with a high value-added of the national economy of UAE which contributes effectively in advancing the growth and development. A Swiss trade center was also inaugurated in Dubai in February 2005 and Switzerland continue attending the exposition in the UAE such as the Arab Health Exhibition held in Dubai in January 2009 by participating through 27 companies. Switzerland also opened the first hospital in the Gulf which is the private Swiss hospital “Zonhov” in Ras AL-Khaimah in 2004. The UAE’s investments in EFTA states are multiple and mostly concentrated in Switzerland where a group of companies from the UAE invested during 2006 more than 1.5 billion dollar to own 90% of capital of the Swiss aircrafts maintenance company “SR Technics” and the Abu Dhabi National Bank purchased a building in Geneva to establish a financial company with a capital of 92 million dollars in addition to its work in Switzerland. Abar company for investment concluded a purchase deal of “AIG Private” from the parent company which owns the American International Group and the new name of the bank became “Falcon Private Bank Ltd.” With a main headquarter in Switzerland and representation offices in Geneva, Hong Kong, Singapore, Shanghai, and Dubai. The investment environment in Switzerland is characterized by the laws that affect the local and foreign investments due to their transparency, fairness in application and non-discrimination. The banking sector is considered one of 28

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the most important sectors in the Swiss economy. The laws governing the banking system, especially bank secrecy, ensure a broad protection equally for both local and foreign investors. The Swiss banking system is worldly known for the quality of its services. The Swiss government presents some high-level incentives to possible investors, and these incentives are equally given for local and foreign investors. Similarly to the UAE, there is in Switzerland a total freedom to transfer the investment income, profits and capital. And there are no government policies or laws that regulate or restrict the flow or outflow of capital, for foreign exchange markets enjoy freedom without any control on foreign exchange. The Swiss foreign exchange markets are characterized by their development and precision with no need for an equivalent system to repatriate capitals or profits and Switzerland is therefore considered among the major countries in the world in terms of attracting foreign investments.

Recommendations and Conclusion The phase to come is a phase of work and building on all levels to take maximum advantage of the agreement once it enters into force. There is an urgent need to work on promoting the investment cooperation between the state and EFTA, attracting investments and maximizing the profit from the signed agreements. The agreement is the result of negotiations that started on February 2006 and ended on April 2008 in order to liberate trade, promote investments opportunities and conclude partnerships between the two parties. The agreement is considered an example of the new generation of free trade agreements characterized by comprehensive covered topics that are not limited to the liberalization of trade in commodities as in the old agreements, since it also encloses the liberalization of trade in services in addition to the protection of intellectual property, government procurement, 29

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electronic trade, disputes settlement and opening the door to negotiate two years after the agreement’s entry into force on the subject of investment. Therefore, once the agreement enters into force, custom duties will be removed of approximately all trade between the two parties and tariffs will be reduced on most agricultural commodities. Concerning trade in services, the agreement will lead to improve the opportunities to access the markets of service sectors of interest to both parties surpassing thus what is available under the World Trade Organization. The agreement also provides opportunities for the companies of both parties to contribute to the government procurement within transparency in procedures and according to specified rules. The other important point to mention is to benefit from the unique geographical location of the United Arab Emirates in developing re-export with EFTA since the UAE is in the center of South-East Asia, Middle East and Africa and has seaports characterized by high efficiency in cargo and storage with all necessary facilities. Another strength to profit from is the strategic location of EFTA’s states and their association to the European Union. The benefit from the Arab Free Trade Area between the Arab states could also be maximized, for a complete liberalization of trade in commodities between the Arab states was achieved and was exempt from custom duties and taxes that have the same effect as the ones imposed by foreign states in commodities in 2005. Therefore, investment and establishment of joint industrial projects between the two parties in the UAE will provide the EFTA’s state with marketing advantage in various Arab states and this forms a call for companies to benefit from this opportunity. Moreover, the United Arab Emirates has the competitive potentials to be capable of facing the challenges and the continued inflow of foreign 30

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investment where there are currently 26 free zones in the state that allow full ownership of investment projects in addition to the policy of economic trade and investment openness followed by the government, the 100% free transfer of capitals and profits, the vitality of industries and non-oil sectors, the easy access to raw materials and cheap energy sources, the absence of taxes on profits and personal income, the abolition of the minimum requirement of capital to establish limited liability companies and other potentials that make the work environment in the UAE more competitive on the global level. It is worth highlighting the development of the UAE in the field of building industrial, technological and technique developed base in addition to the remarkable progress in renewable energy especially with Abu Dhabi hosting the headquarter of International Renewable Energy Agency (IRENA). During the next phase, we must increase our exports to EFTA’s states through the benefit of EFTA’s markets from the distinctive UAE’s commodities such as aluminum, urea, ceramic, sugar and other products noting that many UAE’s industries rival the foreign industries in terms of their good quality and obtained international quality certificates. We must also care for the investment in the renewable energy sector which is considered one of the prominent new sectors that play a vital role in strengthening the efforts of the United Arab Emirates in economic diversification, where the state owns global projects in the field of renewable energy despite being a major oil producer in the world which confirms the State's keenness to diversify the sources of renewable energy and provide the future needs of clean energy. We have to organize trade fairs, particularly the specialized ones and introduce the local industrial products.

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