Korea, UAE ink comprehensive economic partnership pact

[Photo provided by Presidential Office]

South Korea and the United Arab Emirates (UAE) signed a bilateral comprehensive economic partnership agreement (CEPA) on Wednesday, as President Yoon Suk Yeol and his UAE counterpart Sheikh Mohammed bin Zayed Al Nahyan held a summit in Seoul to explore expanding bilateral trade and economic partnerships.

The two countries also signed a total of two agreements and 17 memorandums of understanding (MoUs) to solidify bilateral economic cooperation.

“The two leaders assessed during the summit that the commitments made during Yoon‘s state visit to the UAE in January 2023 are proceeding smoothly to develop the special strategic partnership to the highest levels,” Principal Deputy National Security Adviser Kim Tae-hyo said in a briefing on Wednesday. “The leaders also reached a consensus on the special nature of their bilateral relationship.”

Kim added that the $30 billion worth of investment secured during Yoon’s visit is also on track, and quoted Yoon as saying at the latest summit, “The fact that the results of our bilateral cooperation are emerging this quickly, with reciprocal state visits within just a year and four months, shows that our bilateral relationship is at its best place.”

For his part, Sheikh Mohammed said that he was “proud of the relationship between Korea and the UAE, which is irreplaceable,“ and expressed his hope to elevate the relationship even higher, according to Kim.

The most significant achievement of the summit was the signing of the CEPA. Korean Minister of Trade, Industry and Energy Ahn Duk-geun and UAE Minister of State for Foreign Trade Thani bin Ahmed Al Zeyoudi formally signed the agreement in the presence of both leaders at the presidential office in Seoul.

The CEPA is a type of free trade agreement that includes comprehensive cooperation to open markets for goods and services between countries. The UAE is the first Arab nation to sign a CEPA with Korea, as well as Korea‘s 14th largest trading partner as of 2023 and a logistics hub connecting the Middle East, Africa, and South Asia, which is expected to help Korean companies expand their presence in these regions.

“It will vastly improve the export conditions for our companies, compared to major competitors such as the United States, the European Union, Japan, and China, which have not signed CEPAs with the UAE yet,” an official from the Ministry of Trade, Industry, and Energy said.

Tariffs on eco-friendly cars with high growth potential, such as electric and hybrid cars, will also be eliminated within 10 years of the agreement taking effect.

The elimination of tariffs on crude oil imports is also expected to stabilize prices and tariffs on imports of UAE crude oil will be gradually eliminated over 10 years after the agreement takes effect. The tariff on naphtha, a primary raw material for petrochemical products, will also be reduced from 0.5 percent to 0.25 percent over five years, enhancing the price competitiveness of the Korean petrochemical industry.

[Photo provided by Presidential Office]

The Korea-UAE CEPA also grants access to the online gaming services market, which the UAE has not opened in its FTAs with other countries. The Ministry of Economy and Finance and Abu Dhabi-based investment company Mubadala signed an MoU to strengthen strategic cooperation and expand investments in future-oriented sectors of the Korean economy on the same day.

“This MOU will enhance the continuity and sustainability of bilateral investment cooperation and contribute to further consolidating the special strategic partnership between our two countries,” Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok said.

The two countries also agreed to build on their partnership via the UAE-based Barakah nuclear power plant and will continue to explore cooperation possibilities in areas such as the construction of follow-on nuclear power plants, nuclear fuel supply chains, and small modular reactors (SMRs). They also agreed to cooperate in third-country joint ventures in advanced technologies such as artificial intelligence, energy, infrastructure, and nuclear power, as well as in sectors like small and medium-sized ventures and intellectual property.

Korean business leaders also took steps to expand economic cooperation with the UAE. Major corporate leaders, including Samsung Electronics Co. Executive Chairman Jay Y. Lee, met with Sheikh Mohammed for two consecutive days during his state visit, first at Lotte Hotel in central Seoul and then at a state luncheon at the Blue House.

Korean conglomerates are seeking cooperation with UAE companies in areas such as clean hydrogen, shipbuilding, and petrochemicals. Samsung plans to continue cooperation in clean hydrogen and shipbuilding projects while Samsung Heavy Industries Co. and Hanwha Ocean Co. signed a letter of intent with Abu Dhabi National Oil Co. (ADNOC) for the construction of liquefied natural gas (LNG) carriers. If the final contract is concluded, the two companies will build six LNG carriers, with the order amounting to $1.5 billion.

Hyundai Motor Group and SK Group expect that cooperation with the UAE will gain further momentum with Sheikh Mohammed’s visit, which observers say has helped elevate the relationship between the two countries to its strongest points since the two countries established diplomatic ties in 1980.

A turning point in the Korea-UAE relationship was the export of the Barakah nuclear power plant during the Lee Myung-bak administration in 2009, with the massive $18.6 billion nuclear power plant project the starting point for a full-scale bilateral exchange. Korea also deployed the Akh Unit to the UAE in 2011 to train its troops and protect Korean nationals in the region.