Turkiye – UAE Bilateral Trade: 2023-24 Status and Prospects

By Farzad Ramezani Bonesh

Since the beginning of the 21st century, Turkiye’s relations with the
UAE have gained more dimensions with the strengthening of political and economic relations. But political and ideological differences, tensions in relations, and fallout over the alleged murder of Jamal Khashoggi reduced the trade turnover to about US$7 billion in 2018.
However, five years on, between Abu Dhabi and Ankara have taken a wider turn and have turned into the normalization of relations and reduction of tension and good friendship.

Joint bilateral statements, the visit of Sheikh Mohammed bin Zayed Al Nahyan to Ankara in November 2021 and the reciprocal visit of Turkish President Recep Tayyip Erdogan (for the first time in a decade), the expansion of meetings between the officials of the two countries, the UAE’s assistance to the massive earthquake in Turkiye earlier this year have all played roles in expanding the relations between the two countries.

In fact, geopolitical changes and many international and regional reasons have paved the ground for economic growth. Abu Dhabi and Ankara are preparing for a lesser role of the United States in the Middle East. Using trade and investment to expand relations is a type of diplomacy for both actors.

This has led to the conclusion of agreements and protocols in various fields, including a US$5 billion currency swap agreement, and the conclusion of a Comprehensive Economic Partnership Agreement (CEPA). During a recent meeting of senior leaders from both countries, the signing of more than a dozen agreements in the fields of energy, finance and trade, industry, technology, agriculture, and trade took place. This has resulted in non-oil trade alone between the two countries reaching US$13.7 billion in 2021.

Mutual Motivations and Goals
Some of Ankara’s reasons for increasing trade relations with Abu Dhabi are countering the devaluation of the Turkish Lira and to help change Turkiye’s economic outlook from negative to positive. Using the UAE’s investment power (the second largest economy in the GCC) is Ankara’s way of countering the decline of foreign investment in Turkiye.

President Erdogan hopes to make his country’s economic situation more favorable after the recent 2023 elections. Therefore, the coordination center of the Turkish Cooperation and Coordination Agency (TIKA), the Foreign Economic Relations Board (DEIK), and joint trade councils now play a more important role in Turkish business.

The UAE has also adopted a series of policies aimed at accelerating the country’s transition toward sustainable economic development.
Abu Dhabi plans to double the size of its economy by 2030. The UAE seeks to remove unnecessary trade barriers, increase access to markets and commercial joint ventures with partners and sign comprehensive economic partnership agreements, attract more investment, and diversify its economy. It seeks to access more markets and diversify and focus more on the non-oil sector.

From the perspective of Abu Dhabi, Turkiye is a regional, significant emerging economy. Therefore, the expansion of the UAE’s trade with Turkiye is part of the national, continuous strategy to pursue and promote free trade to stabilize and consolidate its position in the global supply chain and the competition of great powers.

Bilateral Trade Development
The UAE has announced a US$10 billion fund for assisting UAE investment into Turkiye. Abu Dhabi directly invested US$5 billion in Turkiye in 2020 and wants to see economic returns from this. Ankara can also continue to attract a lot of investment from the UAE.
The visit of President Erdogan to the UAE in February 2022 led to the signing of about 72 agreements, and MoU in various fields. The signed agreements, such as the exchange of financial information, cooperation between stock exchanges, central banks, environment and energy fields, participation in customs affairs, and so on is in the interest of both parties.

Turkey and the UAE also recently signed a Comprehensive Economic Partnership Agreement (CEPA). That aims to take economic relations between the two countries to a new phase and increase bilateral trade to around US$40 billion (TL756.8 billion) in the next five years.

From Erdoğan’s point of view, the agreement will enter a new phase of economic and trade relations between the two countries, stimulate long-term, sustainable economic growth, and eliminate or reduce customs duties on 82% of goods and products between the two countries.

The CEPA focus is on strategic sectors such as agriculture and AgriTech, food security, clean energy, adoption of digital technologies, and construction and real estate, with appropriate mechanisms for selecting projects and investments.

This is to be implemented from Q3 2023 and will have a positive impact on the work of investors and strengthen trade and investment and new bilateral job opportunities. This agreement also improves access to the Turkish market for Emirati exporters. CEPA is the UAE’s fourth agreement with other countries with the aim of increasing non-oil bilateral trade and implementing strategic plans, strengthening international partnerships with strategic markets around the world, and strengthening the commercial and logistics position, and follows a highly successful CEPA agreement the UAE reached with India.

Logistics & Transport Corridors
Ankara, by using CEPA, can ensure more profit from the UAE’s position as an active logistics player to reach the markets of Asia and Africa and the UAE’s own developed technological infrastructure.
In this regard, Abu Dhabi and Ankara are also cooperating in transit. In the past, the trade between the UAE and Turkiye was through the Bab al-Mandeb straits and the Red Sea Suez Canal.

However, the opening of the Emirates-Iran-Turkey transit corridor (Ras Al Khaimah-Bandar Abbas-Iran-Iskenderun) has made the economic transit route of the two countries much shorter as the INSTC routes via Iran begin to have an impact.

Apart from the development of transit through Iran, the potential of Iraq is still being considered, th developments in air cooperation and the airlines of all sides having significant capacities for cooperation.

Mutual Investments
Emirati investments in Turkiye by the end of 2021 reached about US$7.8 billion in various sectors, including financial services, real estate, transportation, renewable energy, ports, and logistics. Companies such as ADQ, Emirates NBD Bank, Emaar, (IHC), ADIA, and Mubadala are present in Turkiye.

Previously, Emirati financial resources have helped to reduce the pressure on Turkiye’s strained economy and hard currency. But now Ankara is looking for cash and expecting more UAE investment in Turkiye’s economy.

This is while the foreign exchange reserves of the Turkish Central Bank have reached negative territories, while costly efforts have been made to stabilize the lira and strengthen the currency. Ankara needs more Emirati investors and Emirati banks.

Abu Dhabi meanwhile is one of the largest buyers of Turkish weapons. Unlike the UAE’s defense purchases from other countries, the low price of Turkish defense products is an important motivation.
Currently, the purchase of shares of Turkish military industries, mutual investment in defense industries, and direct investment in Turkiye’s energy and defense sectors are still being discussed.

In energy, due to the complementarity and the energy policy of the two countries, there are many opportunities for cooperation. Also, the rich resources of the UAE can be a source for Turkiye’s energy supply and receive energy transit rights in energy diplomacy, especially as Turkiye is looking to build an energy hub along with Russian involvement to collect and transit Central Asian and Middle Eastern gas supplies to the European Union.

Elsewhere, the UAE has construction potential and opportunities for Turkish contractors. Turkish agricultural, made garments, electronics, steel, and machinery sectors also have capacities to cooperate with the UAE.

In 2021, Turkiye exported US$5.83 billion of products to the UAE, with the major items being gold (US$2.08 billion), jewelry (US$1.5 billion), and carpets. Also in 2021, the UAE exported US$2.73 billion to Turkiye, with the major products being gold (US$1.52 billion), aluminum (US$227 million), and jewelry (US$221 million).
Subsequent bilateral trade between the UAE and Turkiye grew to US$18.9 billion in 2022.

A Mutual Vision
The Turkish government continues to struggle with domestic economic problems. Despite some improvements in Erdogan’s economic policy, Turkiye’s sharp decline in foreign exchange reserves, annual inflation, and trade deficit will have trade consequences.
In the meantime, should political tensions re-occur, economic relations may decrease, and investments may become negative. However, the relations between Turkiye and the UAE have gained momentum with mutual visits and agreements signed in recent years, and the two countries have high hopes for the future of relations and the increase in future trade volume.

In the meantime, according to the economic potential of the two countries, their geographical location, and their numerous programs, the dimensions of cooperation in various sectors of transportation, renewable energy, tourism, construction, and new perspectives will surely accelerate.

Dezan Shira & Associates assist foreign investors into the Middle East and have an office in the UAE and a partner firm in Turkiye. For assistance in these markets, please email us at info@dezshira.com

Related Reading

• Establishing A Representative Office In Turkiye
• Establishing A Representative Office In The UAE

• Previous Article The UAE & Saudi Arabia’s Potential BRICS Membership
• Next Article The GCC – China Free Trade Agreement – Latest Updates From Saudi Arabia