Australian companies must harness new UAE free trade agreement

The UAE’s business attractiveness is on the way up

Australia’s signing of a free trade agreement with the United Arab Emirates will be a boon for forward-looking firms seeking diversified growth.

While it may be another six months before the agreement comes into effect, the clock to start initiating plans to grab the growth on offer has already started ­ticking.

For many, the UAE as a trade corridor remains the great unknown. This is reflected in the fact that Australia and the UAE have already enjoyed 50 years of existing bilateral ties but it only ranks 19th among Australia’s trade and investment partners.

We expect the Australia-UAE Comprehensive Economic Partnership (CEPA) to supercharge activity and reverse this trend, given more than 99 per cent of Australian products entering the market will be tariff-free, placing nearly all Australian sectors on a stronger footing compared to many global peers.

And it comes at a time when the UAE’s attractiveness as a business destination is on the way up. In line with the UAE Vision 2031 plan, the UAE is seeking to modernise and diversify its economy with an aim to achieve greater economic transformation and global integration.

More specifically, the UAE has been rolling out a slew of policies to make inbound investment easy and attractive, including legal reforms around foreign ownership, tax incentives, and ease of business measures. Taken together, the reforms have propelled the UAE up the global trade and investment rankings from 18th to eighth in Kearney’s 2024 FDI Confidence Index.

All of this means it is opportune for Australian companies to begin mapping plans to realise the ­potential, particularly those sectors with the most unique offering – sustainability, agriculture and digital.

The UAE has been very public about its focus on building a knowledge economy supported by advanced technology and clean energy. This commitment to ­diversification and sustainable ­development complements Australia’s innovation in renewable technologies, agriculture and leading educational and research capabilities.

What the UAE needs, Australia can supply, including contributing to clean hydrogen, carbon capture, waste-to-value, and putting renewable energy on to the grid.

And quite fittingly, the funding that Australian clean tech firms need, the UAE can supply through its sovereign wealth funds that carry an ambitious climate transition mandate. Leveraging the business-friendly reforms and available capital, Australian clean tech firms will find a like-minded investment market that is open to supporting the scale they need.

The duty-free shopping zone in Dubai airport’s Sheikh Rashid Terminal.

Apart from green energy, food export will also benefit from the CEPA with Australian farmers and producers being able to access the UAE’s affluent population and their growing preference for premium food.

Australia’s reputation for top-grade and high-quality produce, including beef, coupled with the likely tariff saving of $50m annually on food and agriculture exports, will place Australian farmers and food producers in the global box seat.

Despite the CEPA, the UAE will still maintain tariff thresholds with Australia. And once these quotas are reached, higher tariffs will once again apply to Australian producers, reducing profitability.

To stay ahead, Australian producers of goods should act swiftly to ensure their exports are among the early arrivals that fall within the initial (tariff-free) threshold. Practical steps can include deploying sales representatives to the UAE now to build relationships with buyers and provide samples before the CEPA is formalised. Additionally, suppliers must stay informed about traceability requirements, licensing and quality assurance to understand the UAE’s compliance requirements.

Digital and e-commerce will be another sector winner under the new trade agreement, which has upward domestic momentum.

Under its Digital Economy Strategy, the UAE aims to double the contribution of the digital economy to the UAE’s GDP from 9.7 per cent in 2022 to 19.4 per cent within 10 years, and the CEPA will further enhance opportunities for Australian tech companies to expand in the region.

More broadly, areas such as cyber, payments, healthcare and education are emerging as key sector growth areas for the UAE, and these are areas of technological competitiveness for many Australian firms.

Despite the opportunities, it’s important to note that Australia is not the only country being enticed to capture the UAE’s growth ambitions. Indeed, the UAE has signed similar agreements with at least 17 markets in the past 10 years. When put into this context, it is clear Australian firms need to consider how they move to grab part of the economic pie.

For growth-oriented Australian companies that are looking for customer and revenue diversity, now is the time to start kicking the tyres on exploring the UAE as their next expansion ­destination.

Antony Shaw is CEO of HSBC Australia and New Zealand and chair of Business Council of Australia’s global engagement committee; and Mohamed Al Marzooqi is CEO, UAE, HSBC Bank Middle East