Overview of Trade Relationship between UAE and Japan

Rocket Carrying the first UAE made satellite launched from the Tanegashima space center in Japan (Image Credit: www.arabnews.com, WAM)

Introduction to the UAE – Japan Relationship

The diplomatic ties between UAE and Japan date back to the 1970s and the country considers Japan as one of its top trade partners in the world. The UAE embassy was opened in Tokyo, Japan in 1973. and in 1974, the Japanese Embassy was opened in Abu Dhabi. UAE and Japan have been enjoying bilateral relationship since 1961. The first shipments were crude oil from Umm-Al-Shaif offshore field in UAE to Japan. Since then, the trade between the UAE and Japan has been rapidly growing. The UAE has exported goods worth an approximate value of $26.1 billion to Japan and imported approximately worth $7.17 billion in 2019.

Many Japanese companies and the government itself have invested in the development of the UAE infrastructure, especially in healthcare, aviation, advanced technology, etc. The countries have been collaborating on various other fronts too, including space technology. UAE launched its satellite, KhalifaSat into outer space from Tanegashima space center in Japan in 2018. In 2020, UAE has launched an unmanned probe, Al-Amal to Mars from the same space center in Japan. The UAE is one of the top 2 suppliers of oil to Japan. In 2019, 23% of the total oil imports in Japan were from the UAE. 40-year oil concessions have been acquired by japan in 2018.

The UAE has a considerable Japanese expat population living mostly in Dubai and Abu Dhabi and on similar lines, many Emiratis are living in Japan for investments and educational purposes.

Volume & Growth of UAE – Japan Trade Relationship

UAE and Japan trade relations have been growing in recent years with strong business and governmental partnerships. Automobiles and related sectors including cars, buses, trucks, vehicle spares, etc are the top products imported to UAE from japan. Machinery, metals, rubbers & electric products are the other top import products to the country from Japan. In 2018, automobiles (including cars, trucks, and vehicle parts) worth $5 billion were imported to UAE from japan.

When it comes to export from UAE to Japan, the main products exported are petroleum, LPG, Aluminium, etc. Crude petroleum generated the highest revenue of $23.1 billion in 2018, followed by Refined Petroleum with a revenue of $3.8 billion in 2018 for UAE. The main products exported to Japan from the UAE are petroleum, LPG, and Aluminium. Crude oil worth $23.1 billion and refined petroleum worth $3.8 Billion was exported to Japan.

UAE – Japan Bilateral Agreements

UAE has always strived to improve its economic and trade relations with various Asian countries based on strategic partnership and mutual benefits. Within the framework of the GCC, UAE took part in the free trade agreement to enhance the country’s positions as an investment destination and trade hub.

Leaders of the two countries after signing the Crude Oil storage deal (Image Credit: www.gulfnews.com, WAM)

Some of the major agreements between the UAE and Japan in the last decade are

Agreement between Japan and the United Arab Emirates Concerning the Avoidance of Double Taxation

The Agreement which was signed in 2013 deals with income taxes and taxes withheld. Under the agreement, taxes from international transportation business has been decided to be eliminated in the source country. The Treaty will also prevent the abuse of the agreement and provision on mutual agreement and information exchange.

Japan-UAE Investment Agreement

The agreement signed in 2018 aims at the protection and promotion of investment between the two countries. The agreement intends to create favourable and transparent investment conditions to improve further strengthen the economic relationship between UAE and Japan

Government Support to Facilitate Trade

UAE and Japan have been praising each other for the increase in trade volume over the years. Today both countries are exploring ways to enhance their business, investments, and trade in areas like advanced vehicles, IoT, medical equipment, AI, healthcare, advanced robotics, and renewable energy. Japan invested around AED 14.5 Billion in 2019 in UAE for development, especially in sectors like transportation, renewable energy, logistics, aviation, advanced technology to improve trade relations, and gain mutual benefits. UAE has attracted more than 10000 Japanese companies, brands, and agencies due to its strategic location and investment ecosystem provide by the Government. Some of the other initiatives include the following.

• The governments of the two countries recognized the UAE as a strategic hub for the entire world. And as a result, both countries have renewed their commitments to improve the business and diversify into the non-energy sector as well.
• Japan and UAE are ready to take advantage of the UAE’s free zone initiatives to confirm their willingness to encourage the exchange of business among various small and medium companies between the countries.
• Japan and UAE have launched new initiatives for a strategic economic partnership forum between the two countries. They have also signed agreements for protecting and promoting investments
• Both Japan and UAE have been working on a strategy to combat the issue related to fake products and Intellectual property rights.

Since the beginning of the millennium, the expansion of Japanese companies into the UAE market has seen an uptrend. Compared to other countries in the middle east, the UAE has been the most exciting destination for Japanese companies. The RAG Business group is a team of widely experienced business consultants in UAE providing solutions to business aspirants seeking opportunities to kick start a company in the UAE. Contact us +971 55 979 4009 or write to: info@ragroup.ae to know how we can support you with this.