India, UAE ink investment pact

Investments from UAE set to increase, India to tap UAE's sovereign wealth fund

India and the United Arab Emirates (UAE) on Thursday signed a bilateral investment promotion and protection agreement (Bippa) that seeks to accelerate fresh capital inflows from the Emirates and provide a thrust to stalled projects.

The deal was signed between Obaid Humaid Al Tayer, UAE’s minister of state for financial affairs, and Union Minister of State for Finance Namo Narain Meena.

The move, less than a week after the Cabinet Committee on Economic Affairs (CCEA) gave its nod, comes amid the visit of UAE’s Foreign Minister, Zayed Al Nahyan.

While the Centre was engaged in revising all Bippas with various countries, it had “worked out an exception” with the UAE, sources told Business Standard. UAE controls the second-largest sovereign wealth fund (SWF) in the world, under the Abu Dhabi Investment Authority (assets worth $627 billion). India had been keen to tap the SWF to finance major infrastructure projects. However, the UAE hadn’t shown interest in the absence of a Bippa, sources said.

With the agreement being signed, it is expected the Abu Dhabi National Energy Company might invest $700 million in Himachal Pradesh. Earlier, Dubai Ports World had kept its expansion plans in India on the back-burner, as it was awaiting the Bippa to be signed.

It is also expected the stalled free trade agreement between India and the Gulf Cooperation Council will be concluded. Under this agreement, India is seeking preferential access for its textiles exports to the UAE. The agreement had became a major bone of contention between India and the UAE, especially after the Jet-Etihad Airways deal came under the scanner due to allegations Indian foreign direct investment rules were flouted.

UAE’s telecom major, Etisalat, had to wrap up operations in India, after the Supreme Court cancelled its licences in 2012, in connection with the 2G telecom spectrum scam.

To ensure adequate protection for its investors, the UAE has been pushing India to sign a Bippa. The matter was raised and discussed during the visits of Finance Minister P Chidambaram, Commerce and Industry Minister Anand Sharma and External Affairs Minister Salman Khurshid to the UAE earlier this year.

The UAE is India’s largest trading partner. Trade between the two countries stood at $75.45 billion in 2012-13. However, investment from the UAE in India has been only $3.68 billion.