The Comprehensive Economic Partnership Agreement between India and the UAE will boost the remittance corridor between the two countries as well as create a supportive environment to build interoperable digital solutions, according to leading financial services company LuLu Financial Holdings.
The Abu Dhabi-headquartered LuLu Financial Holdings, which is into cross-border payments among other areas, has substantial investments in the UAE and India. It has presence in 11 countries and manages transactions worth over USD 8 billion annually.
The CEPA between India and the UAE was signed on February 18, and came into force from May 1. The agreement covers trade in goods, rules of origin, trade in services, Technical Barriers to Trade (TBT), Sanitary and Phytosanitary (SPS) measures, dispute settlement and digital trade, among other areas.
“The relationship between UAE and India is at the highest peak at this time… there is a lot of interest by UAE companies to invest in India… CEPA is going to be the foundation on which things are going to be built,” LuLu Financial Holdings’ Managing Director Adeeb Ahamed told PTI.
Ahamed, who is in the national capital as part of a high-level UAE delegation visiting India, said it was all about creating that underlying foundation from which many sectors can benefit — trade, goods, services and digital.
According to him, CEPA will create a supportive environment for investors and existing players in both countries to build interoperable digital solutions keeping the huge potential of the two economies.
With the fintech industry growing significantly in India and UAE, he said it was imperative to make payments affordable for the masses and that requires greater access to critical technologies, new investments and homegrown solutions that can enable real-time money transfer on mobile payment solutions.
The CEPA, which also considers the prospects of digital trade between the two countries, mentions about offering service providers with an open and non-discriminatory environment for cross-border trade in financial and insurance services.
Noting that the agreement represents an ongoing effort to ease the multi-billion trade corridor between the two countries, Ahamed said that from a payments industry perspective, it will help boost the UAE-India remittance corridor.
“At USD 20 billion plus, this is the world’s second largest corridor after US-Mexico and contributes 33 per cent of the inward remittance volume to India,” he pointed out.
Creating a favourable ecosystem to serve financial services, will lead to greater data protection, and lower financial crime as well, Ahamed said, adding that both countries might well aspire to become a springboard for companies looking to build meaningful solutions, for both MENA and the South Asian regions.
MENA refers to the Middle East and North Africa.
With respect to cross-border payments, as per estimates, fees imposed on transactions in the UAE-India corridor is among the lowest globally at around 5.31 per cent, which is below the global average of 6.3 per cent for sending USD 200.
Studies have suggested that cutting prices by at least 5 percentage points can save up to USD 16 billion a year in savings globally, and considering the volume of transactions conducted annually, fintech holds the potential to lower transaction costs even further, Ahamed noted.
Before signing the pact with the UAE, India had last inked a CEPA with Malaysia back in 2011.
The latest CEPA covers almost all the tariff lines dealt in by India (11,908 tariff lines) and the UAE (7,581 tariff lines), respectively. India will benefit from preferential market access provided by the UAE on over 97 per cent of its tariff lines which account for 99 per cent of Indian exports to the UAE in value terms, according to a release issued by India’s commerce and industry ministry in March.
India will also be offering preferential access to the UAE on more than 90 per cent of its tariff lines, including lines of export interest to the UAE.
Yusuffali MA, Chairman of Lulu Group and Vice-Chairman of Abu Dhabi Chamber of Commerce, said that with the signing of CEPA, many new avenues of collaborations will open and will benefit businesses from both countries and beyond as UAE is a key gateway to Middle East and Africa. “The current bilateral trade volume of USD 53 billion is expected to double to USD 100 billion in five years”.
“As a UAE-based business group with a sizeable presence in India, especially in the retail and food processing sectors, we are hoping that our imports from India will see new levels of growth which will further strengthen the food security of UAE,” he said in a statement.