South Korea and UAE Formally Sign CEPA Trade Deal, Reaffirm US$30 Bn Investment Commitment

The UAE and South Korea formally signed their free trade agreement, officially called the Comprehensive Economic Partnership Agreement (CEPA), on May 29, during the official visit of President Mohamed bin Zayed Al Nahyan to the Republic of Korea. After ratification, the CEPA is set to eventually remove tariffs on 90 percent of imports. The UAE also reinforced its investment commitments with Seoul.

UAE, South Korea CEPA deal signed – next step will be ratification

In a landmark summit on May 29, 2024, South Korea and the United Arab Emirates (UAE) solidified their economic ties by formally signing the Comprehensive Economic Partnership Agreement (CEPA) agreed to in October last year that will drastically reduce import duties and foster closer business and investment relations. This summit marked UAE President Sheikh Mohammed bin Zayed Al Nahyan’s first state visit to Seoul, reciprocating South Korean President Yoon Suk Yeol’s visit to Abu Dhabi in 2023.

Advancing strategic and economic partnerships

“The special bond between the two leaders serves as an opportunity to advance the countries’ strategic partnership,” stated the office of President Yoon Suk Yeol. The Seoul summit, which concentrated on energy and defense sectors, highlights South Korea’s strategic move to leverage the UAE’s robust investment potential in frontier sectors.

Significant investment and trade goals

Officials indicated that Emirati investments will be spearheaded by the UAE’s sovereign wealth funds, including Mubadala Investment Co. Alongside Mubadala, the Abu Dhabi Investment Authority and the Investment Corporation of Dubai are also expected to invest in various Korean sectors. Collectively, these three UAE sovereign funds manage a total of US$1.4 trillion in assets globally.

During the summit, the UAE reaffirmed its US$30 billion investment pledge to South Korean businesses, spanning sectors from nuclear power and defense to hydrogen and solar energy. A notable development was the Abu Dhabi National Oil Company’s letter of intent with Hanwha Ocean and Samsung Heavy Industries to construct at least six LNG carriers, valued at approximately US$1.5 billion.

Once the CEPA deal gets ratified, it will eliminate all tariffs on South Korean arms exports. This agreement is part of South Korea’s broader ambition to become the world’s fourth-largest defense exporter by 2027.

Bilateral trade between the UAE and South Korea reached nearly US$21 billion in 2023.

Per a government statement, the deal could contribute 1.17 percent to the UAE GDP and 2.37 percent to South Korea’s GDP by 2032.

Tariff reductions and economic synergies

The CEPA will also gradually remove import duties on automobiles over the next decade and eliminate tariffs on South Korea’s crude oil imports. Overall, more than 90 percent of imports between the two nations will eventually be tariff-free. Cheong In-kyo, South Korea’s Minister of Trade, highlighted the nation’s dependence on energy imports and projected that crude oil imports from the UAE would be facilitated under the deal.

Expanding regional economic cooperation

Looking beyond South Korea, UAE’s Minister of Foreign Trade, Thani bin Ahmed Al Zeyoudi, also announced plans to sign CEPAs with Malaysia, Vietnam, and the Philippines in the coming months. This broader strategy underscores the UAE’s commitment to deepening economic ties across Asia.

UAE-Korea Business and Investment Forum

On the sidelines of President Al Nahyan’s official visit, the UAE-Korea Business and Investment Forum was held in Seoul. This event, attended by a high-level UAE delegation including Dr. Thani bin Ahmed Al Zeyoudi, was organized to bolster trade and commercial relations between the two nations in high-growth sectors, such as energy, ICT, logistics, and manufacturing.

During the forum, Dr. Al Zeyoudi highlighted the robust growth of economic ties between the UAE and South Korea, attributing it to the strong leadership on both sides. He pointed to the Forum’s role in enhancing bilateral trade, facilitating two-way foreign direct investment (FDI), and promoting collaboration in various economic sectors. including advanced manufacturing, technology, food security, and healthcare.

Dr. Al Zeyoudi lauded South Korea’s advanced, digitized economy and its world-leading manufacturing sector, identifying the country as a crucial trade and investment partner for the UAE.

Cheong, South Korea’s Trade Minister, echoed these sentiments, emphasizing the significance of the Business Forum as a platform for business leaders from both countries to explore new opportunities for investment and cooperation. He assured that the South Korean government would continue to support initiatives to ensure long-term tangible results from the strengthened bilateral relations.

Conclusion

The recent UAE-Korea CEPA deal, bilateral business collaboration agreements, and investment discussions reflect a deepening economic partnership between South Korea and the UAE that is poised to bring substantial benefits to both nations.

With commitments to reduce trade barriers and inject FDI into South Korea’s critical sectors, the UAE’s commitments set a strong foundation for its future economic growth and high-quality development.

• Previous Article UAE Corporate Tax Incentives in Free Zones
• Next Article Saudi Arabia Introduces Penalties for Overstay of Visit Visa Holders