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Sun 13 Aug 2006 04:00 AM

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Trade shift as UAE looks East, not West

The trade balance between Britain and the UAE has shifted firmly in favour of the United Kingdom, according to statistics from the Dubai Chamber of Commerce and Industry.

The trade balance between Britain and the UAE has shifted firmly in favour of the United Kingdom, according to statistics from the Dubai Chamber of Commerce and Industry.

Total trade between the two nations rose 66% in the first quarter of 2006. However, whilst the UK’s exports to the UAE increased by 100% - from US$1.24bn in the equivalent period 2005 to US$2.49bn this year – the Gulf nation’s exports to the UK dropped by 7.1% over the same time frame. In the first three months of 2005, their value reached US$569m, compared to just US$528m this year.

Of total UK exports to the UAE, an overwhelming 84% - US$354m - were destined for Dubai. Just 4% of imports were meant for Abu Dhabi, the capital of the UAE, and the remaining 12% of total imports were spilt between the other emirates.

Around 73% of the UK’s exports to the UAE belong to the ‘machinery and electrical and electronic equipment’ group, with machineries accounting for 20% of this figure, and electrical and electronic equipment for the remaining 80%.

This figure marks a 129% increase from the equivalent period last year, and according to the report more than 87% of such products were destined for Dubai. A further 10% were destined for Sharjah, and just 2.4% for Abu Dhabi.

“I would say that this growth is largely cyclical,” Steve Brice, Regional Head of Research for MEPA and South Asia at Standard Chartered bank, told Arabian Business. “We saw last year extremely strong demand on the back of very strong growth, and on the business side, that growth is still there.

“As a result, anything that is related towards investment over the next few years will remain very strong,” he continued. “For example construction equipment – which might explain the machinery sector’s growth. This should remain robust at least for the next one or two years. Whether it’s sustained any longer is probably dependent on the oil price as much as anything else.”

Imports of textiles and textile products from the UK to the UAE posted a strong growth of 48%, up from US$20m to US$30m in the first quarter of 2006. A total of 89% of exports of textiles and textile articles went to Dubai, and 10% to Sharjah and the other emirates. Less than 1% were shipped directly to Abu Dhabi.

By contrast, Dubai’s share was lower in the ‘plastics and rubber products’ (56%), ‘base metals and products thereof’ (53%), and ‘optical, medical, measuring and musical instruments’ (61%) sectors. Sharjah received shares of 34%, 42% and 23% respectively, whilst Abu Dhabi received shares of 9%, 5% and 16% respectively.

Total imports into the UK from the UAE during the same period were valued at US$77m, of which 65% originated from Dubai, while 17% were from Abu Dhabi and 18% came from the other emirates. The 7.1% decline in the total imports to the UK from the UAE for the first quarter of 2006 was primarily due to a 30% decline in the value of ‘mineral products’ imports, which dropped from US$231m in the first quarter of 2005.

“The decline in exports to the UK, certainly on the minerals side, is probably sustainable,” said Brice. “There is a focus on Asia as a new partner for the Gulf region, and we are directing more of those resources to the East. Everybody is courting China as there is a huge demand coming from China, and this shift is not merely cyclical. Focusing more on that region makes sense for the Middle East region.

“There may also be the chance that the political side is coming into it,” he added. “The UK are seen as close allies of the US, and it’s possible that China is seen as more friendly to this region than the West at this moment – and maybe developments in Lebanon are reinforcing that.”

In addition, there was a 59% decline in UK imports of ‘precious/semi-precious stones and metals and jewellery’ from the UAE. This sector was valued at US$64m during the equivalent period last year.

“We can expect the gap to widen, but this shouldn’t necessarily be seen as a negative development because it’s part of an increasing shift towards the East,” concluded Brice. “It seems to be a strategic shift, rather than the UAE losing competitiveness.”

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