GS Paper II

News Excerpt: 

The Union Cabinet has approved an investment treaty with the United Arab Emirates (UAE) that will significantly boost bilateral economic engagement.

• Both countries implemented a free trade agreement in May 2022.

What is a Bilateral Investment Treaty (BIT): 

• Bilateral Investment Treaties (BITs) are reciprocal agreements between two countries to promote and protect foreign private investments in each other’s territories.  
• BITs establish minimum guarantees between the two countries on the following matters: 
• Regarding the treatment of foreign investments, such as national treatment (treating foreign investors at par with domestic companies)
• Fair and equitable treatment (in accordance with international law) 
• Protection from expropriation (limiting each country’s ability to take over foreign investments in its territory)

Status of BITs in India:

• Till 2015, India had signed BITs with 83 countries (of which 74 were in force).  
• These BITs were negotiated based on the Indian Model BIT of 1993.   India revised its Model BIT text in 2015.  
• Since 2015, India has: 
• signed new BITs/Investment Agreements with only four countries and is negotiating with 37 countries/blocks, and 
• terminated its older BITs with 77 countries (i.e., older BITs with only six countries are in force).

Benefits of BIT with UAE:

• Improve the confidence of investors, especially large investors, resulting in an increase in foreign investments and overseas direct investment opportunities.
• Positive impact on employment generation and would also help promote investments between the two countries.
• Increase investments in India and help in realizing the goal of Atmanirbhar Bharat by encouraging domestic manufacturing, reducing import dependence, and increasing exports.

Importance of UAE for India:

• Indian expatriate community is the largest ethnic community in UAE constituting roughly 30 per cent of the country’s population. The number of resident Indian Nationals is estimated to be 3.5 million in 2021 as per UAE records. 
• The Indian community has played a major role in the economic development of the UAE. 
• The Indian community is respected for its technical competence, sense of discipline and its almost absence of involvement with criminal activity compared to other expatriate communities. 
• In view of these qualities, Indian expatriates enjoy an advantage over other nationalities.
• There is a significant business community from India. The Indian community has played a major role in the economic development of the UAE.
• UAE, which accounts for 18 per cent of India's total remittances and is the second-largest source of them after the US.
• India’s exports to the UAE are: well diversified with a large basket. India‟s major export items to the UAE are: Petroleum Products, Precious Metals, Stones, Gems & Jewellery, Minerals, Food Items (Cereals, Sugar, Fruits & Vegetables, Tea, Meat, and Seafood), Textiles (Garments, Apparel, Synthetic fibre, Cotton, Yarn) and Engineering & Machinery Products and Chemicals.
• India‟s major import items from the UAE are: Petroleum and Petroleum Products, Precious Metals, Stones, Gems & Jewellery, Minerals, Chemicals, Wood & Wood Products.

About UAE:

• The United Arab Emirates (UAE) is a federation of seven states that has grown from a quiet backwater to one of the Middle East's most important economic centres.
• Although traditionally conservative and authoritarian in government, the UAE is one of the most liberal countries in the Gulf.
• In 2020, it became the first Gulf state to establish diplomatic relations with Israel.
• Relations with neighbouring Iran have been tense because of an ongoing territorial dispute over Gulf islands. 
• The UAE was one of only three countries to recognise Taliban rule in Afghanistan.
• Before oil was discovered in the 1950s the UAE's economy depended on fishing and a declining pearl industry. But since oil exports began in 1962, the country's society and economy have been transformed.
• The UAE has diversified and has become a regional trading and tourism hub. UAE firms have invested heavily abroad.

Conclusion:

The approval of the Bilateral Investment Treaty (BIT) between India and the UAE by the Union Cabinet aims to increase investor confidence, attract more foreign direct investments, and align with Atmanirbhar Bharat's goals by promoting domestic manufacturing. The positive impact on employment and the existing free trade agreement strengthens the foundation for mutual growth and prosperity for both nations.