Introduction
Following the currently experienced globalization, world economies are becoming more interdependent through trade and foreign investment. As it has been revealed, this economic integration among nations has largely been triggered by the increasing technology in the information system which has facilitated easy communication and financial partnerships among countries.
As the world trade becomes more open and highly liberated, foreign investors and international traders have been quite opportunistic to venture in different international businesses; since the new face of global financialization has been intertwined with investment trends. This paper will discuss the ultimate relationship between Japan and United Arabs Emirates in terms of foreign trade and investment.
According to Ramavarman (431), foreign trade has been one of the most significant economic boosters in Japan, through imports and exports with various countries, UAE being the dominant. The bilateral trade between Japan and UAE has reportedly been a potential anchor for the two economies’ stability.
Between the year 2007 and 2009, the foreign trade between Japan and UAE was adversely affected due the global financial crisis whose origin was in US. It should be noted that, the great depression resulted into contracted consumption due to increased housing bubble, making consumers to cut their consumption.
As a result, international trade among nations was adversely affected since the level of global consumption had declined. Mainly this was the main reason why foreign trade between Japan and UAE has not been performing well until the first quarter of the year 2010.
As reported by Schaefer (43) the first quarter of the year 2010 was remarked by 12% and 55% increase in Japan’s exports and imports respectively from UAE as the global economy had now started recovering from the depression conditions. The main exports of Japan to UAE have been motors vehicles, consumer durable goods and capital equipments like machinery.
On the other hand, its main imports from UAE have been industrial supplies, predominantly petroleum and metal minerals. It is important to note that, these countries have largely been interdependent in the way each country depends on very sensitive commodities for its economic development.
More specifically, the main imports and exports involved in the bilateral trade between Japan and UAE are largely based on the industrial sector which forms a fundamental part of production in various sectors of their economies (Watt 89). With the increased exchange between the two countries in terms of imports and exports, their economic performance is anticipated to increase significantly.
As it has been revealed, the progressive development of the railway transport structure in Dubai there has been great boost of Japans exports in terms of equipments and materials required for rail construction has boosted Japan’s economy largely. For instance, the value of the material Japan exported to UAE in the year 2009 was valued at $ 262 million, which was 21% increase from similar previous exports in the year 2008.
Quite importantly, most of the infrastructure development plans in UAE have been entrusted to Japanese contractors. The advancement in the transport system in UAE is also anticipated to create larger volume of trade between UAE and Japan, by facilitating easy supply of goods and services from the main trading centers to the interior states of the country (Watt 94).
Despite the economic crisis and the overall slump in Japan’s exports in the year 2009, the United Arabs Emirates remained its major export market for construction equipments like cranes, bulldozers and truck loaders among others.
With the major exports in Japan to UAE remaining mainly capital equipments, there are high chances of the bilateral trade between the two countries, as industrialization takes effect in most global economies.
According to Schaefer (46), the decline in global consumption during the year 2009 in UAE resulted into significant decline in Japan’s exports for consumer products, which was further reinforced by the appreciation of Japanese Yen. More so, Ramavarman (438) considers the adverse economic conditions in the year 2009 as having contributed to decreased usage of personal transport vessels, since fuels were adversely affected.
As a result, cars exports from Japan decreased by 6% in the UAE, as large vehicles becoming the major vessels for transport. For in stance, passenger cars in the category above 3000 cc increased by 49% to $ 674 million in the year 2009. This was an implication that, the Japanese manufacturers of vehicles under the category below 3000 cc were adversely affected since they could not find enough markets in the international markets.
As noted by Watt (106), the decline in fuel supplies in the world in the year 2009 impacted a lot on Japan’s overall imports from UAE. During the year 2009 Japan’s imports were valued at $ 23 billion, which was a significant drop by 53% from the previous year. This is reflected in the Japan’s total imports from UAE during that year, which constituted 77% of the total value of the overall imports.
The global surge of oil prices triggered the subsequent increase in the oil prices, resulting into oil imports from UAE for Japan constituting of the highest percentage in terms of cost. Compared to the raw materials and metal products, which constituted of Japans major exports to UAE in the year 2009, mineral fuels from UAE to Japan remained higher.
As noted by Schaefer (51), the UAE’s supplies of mineral fuels to Japan in the year 2009 constituted of 11% of the overall Japan’s imports. This is a clear indication that, Japan and UAE have been highly linked through trade, which has facilitated their ultimate economic stability, especially after the 2009 crisis.
With the rise of e-commerce, the trade between UAE and Japan has been reinforced, since it has been easier to make virtual transactions between business organizations between the countries. Notably, most of the financial institutions like banks have been reinstated to enhancer and process international transactions, with the rise of massive financialization among nations.
For is stance, UAE and Japan have been engaging in more productive agreements between governments and the financial services industry for a more stable tax system, higher performance among corporations would be realized. With the ‘new boom’ era, corporations have realized the importance of a more sustainable tax system in the long-run, so as to enable them to plan for their investment plans effectively (Schaefer 51).
This stable tax system is meant to ensure a more supportive flexible capital markets which would further facilitate expansion of the investments or establishment of new investments. This would largely increase the investors’ confidence between the tow countries, since the fiscal systems would be more stable to enhance more productive interactions among the nations.
With regard to Watt (98), the governments of Japan and UAE have been reportedly planning to expand strategic relationships in trading and investment affairs by liberating their trading conditions. Quite significantly, the bilateral trade between United Arabs Emirates and Japan has its anchor on common economic interests; both in trading and investment trends.
Since UAE is one of the largest mineral oils producers, Japan on the other hand has been prospective in the production of industrial capital goods. As a result, the major products of these two countries have largely been considered as complements, resulting into their ultimate inter-relationships in trade and investments.
On this basis, the ultimate relationship between United Arabs Emirates and Japan in economic affairs is anticipated to stay for long time, since the current trend of industrial production expansion would largely require the inter-relationship to continue for longer time. As a result, the two countries seem to base their ultimate economic success on their similar economic interests.
As reported by Schaefer (53), the shared strategic relationship between UAE and Japan has enhanced continuous increase in direct investments in Abu Dhabi from Japan. The outstanding high rate of foreign investment in Dubai has largely been contributed by Japanese investors, constituting of 31% of direct foreign investment in the country.
In the current efforts to conserve energy by introducing renewable energy among nations, UAE and Japan have strategically combined to introduce innovations and inventions in the energy conservation in various ways.
According to Ramavarman (432), the senior assistant minister of economy of the UAE has reportedly been advocating for the friendly relationship between Japan and UAE to motivate the private sector in energy conservation programs.
Expertises from Japan have been outsourced by UAE manufacturers to enhance the incorporation of energy conservation production strategies in UAE industries. Particularly, about 34% of the foreign expertises in UAE are Japanese, implying the mutual relationship between the two countries in terms of trade and investment.
One of the main factors which has contributed to the mutual relationship between Japan and UAE is the free economic and trade policies in UAE. In the entire Great Gulf region, UAE is strategically positioned, making it easy to access for ideal foreign trade and investment.
With sophisticated communication and transport infrastructure, Dubai has for long remained as one of the most prospective cities in UAE. On this basis, Japan has ultimately utilized the opportunity of the free economic zone policy in UAE to establish various investments in the country.
For instance, many private organizations have been observed to open branches in UAE, with an aim of expanding their markets while reducing export expenses.
As revealed by Ramavarman (435), UAE’s oil supply across the world seems promising since its oil wells are rich enough to sustain petroleum and supply to its major markets for the next fifty years. As a result, the relationship between Japan and UAE trade and investment basis is anticipated to take course for long period.
Conclusion
As it has been observed, foreign trade between UAE and Japan has been one of the most significant economic boosters between these two countries. With advancing trend of industrialization, the mutual strategic alliances between Japan and UAE in trade and investment have largely enhanced their industrial growth.
It has been revealed that, 34% of UAE’s imports of industrial capital goods are Japanese products, implying considerable significance of Japanese products in UAE. More so, textile and automobile products from Japanese have for long been major imports of United Arabs Emirates.
On the other hand, Japanese has largely been relying on UAE for sustained petroleum products. As a result, the trend of trade and investment between UAE and Japan has been revealed to be long-ranged, considering the type of products involved in their trade.
Though the 2007/09 crisis resulted into significant decline in trade between UAE and Japan, their mutual relationship was still sustained until the global economy recovered. As depicted in the first quarter of the year 2010, the mutual exchange in terms of trade and investment between these two countries started increasing significantly.
The restructuring of transport and industrial infrastructure in UAE boosted Japan’s economy very much, since most pf the equipments required in UAE were ultimately imported from Japan. Further, most of expertise labor required in inventions and innovations in the UAE industrial sector relied on Japanese largely. As a result, there has been sustained relationship between these two countries in terms of trade and investment.
Works Cited
Ramavarman, Thomas. UAE, Japan Plan to Extend Trade Ties. Business Review. 31.7, (2010): 431-457.
Schaefer, Hacker. International Economic Trend Analysis. London: Routledge Publishers, 2010.
Watt, Richard. Recent Trends in Global Economics. Washington, DC: Edward Elgar Publishing, 2011.