Japanese trade with the UAE during the year 2004

Exports to the UAE grew by 27.14% to US$ 4.6 billion and imports by 28.33% to US$ 18.3 billion. UAE had been enjoying comfortable trade surpluses for years, due to its supply of mineral fuels to Japan. Attributed mainly to the surge in crude oil prices, UAE had increased her trade surplus with Japan by 28.73% to US$ 13.71 billion in 2004, compared to US$ 10.66 billion in 2003.

UAE was Japan's 22th largest export market in the world in 2004, with a number of commodities finding UAE as the topmost market. United States of America was Japan's largest export market, covering 22.4% of all her exports, followed by China (13.1%) and South Korea (7.8%). Japanese trade with the UAE has been growing for many years now, with more and more Japanese companies entering into UAE's market with the intension of trading in goods and services and for investment. Existing excellent bilateral relationship between the two countries is positively contributing to the growth in the two-way trade. UAE has over 150 Japanese companies operating from within the country, a majority of them concentrated in the Jebel Ali Free Zone. Japanese companies are showing increasing interest in investments in the UAE by way of participating in the country's infrastructure developments.

Japan's exports to the UAE:

Reflecting UAE's economic boom, Japan's exports to the UAE grew by 27.14% in 2004. 96.2% of the exports to the UAE were constituted of manufactured products. Foodstuff, raw materials and mineral fuels constituted the remaining 3.8%. From the export of manufactured products, which was valued at US$ 4.43 billion, 77.8% were covered by machinery & equipment (US$ 3.58 billion) that included general machinery, electrical machinery, transport equipment and precision instruments. Export of chemicals materials surged by 20% to US$ 50.22 million in 2004 from 41.85 million in the previous year.

Export of general machinery surged by 31.78% to US $ 764.96 million, compared to US $ 582.52 million in 2003. Parts of vapor turbines saw a vertical jump in exports, making UAE Japan's 2nd largest export destination for this item after China. The export value of this particular commodity shot from less than a million US dollars in 2003 to around US$ 73 million in 2004. Exports of gasoline and diesel engines for vehicles surged by 51.69 and 33.85 per cent respectively. Similarly export of mechanical shovels jumped from US$ 54.67 million in 2003 to US$ 86.00 million in 2004, an increase by more than 57 per cent. Since the civil engineering and construction industry in the UAE is experiencing a boom, machinery exports from Japan to the UAE is expected to soar in the coming years.

Export of electrical machinery shot up by 68.71% to US$ 826.02 million from 489.63 million in 2003. For most of the items in this category, such as liquid transformers, vacuum cleaners, food grinders, electric smoothing irons, microwave ovens, line telephone sets, automatic circuit breakers etc., UAE happened to be Japan's number one export market. Some others like, spark plugs, facsimile machines, video camera recorders, color televisions, color video monitors and video projectors, UAE was among the top markets for Japan. Export of video projectors surged by 93.12% to US$ 17.04 million in 2004 from just 8.82 million in 2003. The only major item that saw a decline in exports, with obvious reasons, was facsimile machines, which dived from US$ 11.85 million in 2003 to $ 6.64 million in 2004.

A major item of Japan's exports to the UAE is transport equipment, which has more than doubled in the past five years. Vehicle exports from Japan to the UAE has been on the increase for the past many years, reflecting the continued economic expansion in the country. Export of passenger motorcars with gasoline engine topped the list of transport machinery, with the value climbing to US$1,256.68 million in 2004, a 21.28% surge over the previous year. Export of goods wagon also surged by 26.62% to US$ 280.12 million in 2004, compared to 221.22 million in 2003. However, export of passenger cars with diesel engines showed a drop in 2004, which could be attributed to the removal of government subsidy to diesel sold in the UAE. Export value of passenger cars of diesel engine had come down to US$ 72.32 million in 2004, from US$ 84.46 million in 2003.

There had been a general increase in the exports of precision instruments to the UAE in 2004. The average increase was over 21%. Major items that saw increase in exports were wrist watches, measuring instruments, electrical balances, voltmeters and developing or printing apparatus for photography. Total exports of precision instruments were valued at US$ 78.56 million in 2004, compared to US$ 64.62 million in 2003.

After few years of stagnation, demand for Japanese textiles in the UAE seemed to be looking up in 2004 with a 14.84% increase in the value of exports. UAE, as a re-export hub, has been a major market of Japanese textiles traditionally. However, in recent years, textiles from China, Hong Kong, Thailand, Korea, Taiwan, Singapore and India gained prominence in the UAE market, affecting Japan's textile exports to this country. Japan is still occupying the position of number one supplier of certain textile materials to the UAE, such as woven fabrics of acrylic staple fiber, woven fabric of polyester staple fiber and similar. The value of Japan's total textile exports to the UAE stood at US$ 132.11 million in 2004, compared to 115.04 million in 2003.

Metal products as a whole, posted 5.72% decline in exports. The export value was down to US$ 206.77million in 2004, from US$ 219.32 million in 2003. Semi-manufactured iron and steel products that formed majority of the metal products exported to the UAE, suffered a 17.10% decline in exports. Export of tubes/pipes & hollow profiles of cast iron fell by 96.28% to a meager 1.56 million US dollars from around 42 million in 2003. However, at the same time, export of seamless line pipes for oil and gas surged by 185.49% to post the export value at US$ 31.09 million from 10.89 million in 2003. Japan was also the number one supplier of this commodity to the UAE during the year 2004. Non-ferrous metal products, including nickel alloy pipes and tubes, aluminium alloy plates etc. made substantial gains in exports.

Among the non-metallic mineral products that saw a general surge in exports, glassware for table and kitchen posted a near-100% increase in exports, making UAE as Japan's largest export market for this commodity in the world. The growth has been steep and steady for the past three years; from 9.01 million in 2002 and 18.22 million in 2003 to 36.29 million US dollars in 2004.

Under rubber products, export of new pneumatic tires for cars and lories increased by 24.84% to US$ 226.03 million in 2004, compared to 172.05 million in 2003.

In addition to the above-described direct imports from Japan, Japanese branded goods are imported into the UAE in large quantities from other far-eastern countries such as Australia, Malaysia, Thailand and others. Due to Japan's globalization strategy, major manufacturers have moved to overseas locations to reduce their production costs. Though the products manufactured in such overseas facilities are technically not Japanese, they are essentially Japanese, having high reputation in the UAE and other world market places, as Japanese products. This is because of the basic Japanese quality standards that the producers are trying to maintain in their overseas facilities.

Japan's imports from the UAE:

Japan's imports from the United Arab Emirates surged by 28.33% to US$ 18.32 billion in 2004, compared to US$ 14.28 billion in 2003. This larger than usual surge is mainly attributed to the rise in the price of crude oils that Japan imported from the UAE during the year 2004. Import of mineral fuels constituted 98.7% of Japan's total imports from the UAE. Crude oils alone constituted 78.9%. The average import price of crude oils in 2004 had gone up by 27.48% to US$ 37.48 per barrel, in the place of US $ 29.40 per barrel in 2003. An increase in the volume of crude oil imports in 2004 had also contributed to the jump in the value of total imports. Japan imported a total of 385.72 million barrels of crude oil from the UAE during the year 2004, 4.05% higher than the volume in 2003.

The average import price of light oils and their preparations were also on the higher side, with an import volume of 27.17 million barrels at a price of US$ 41.67 per barrel in 2004. The total value of import of this commodity in 2004 stood at US$ 1.13 billion. For a comparison, Japan imported 22.36 million barrels of light oils at an average price of US$ 25.10 per barrel in 2002, and 22.98 million barrels at an average price of US$ 30.69 per barrel in 2003.

Japan, almost entirely depending on foreign counties for her fuel oil needs, had imported a total of 1,538.94 million barrels of crude oils from the world over, in 2004, at a total cost of US $ 55.96 billion. UAE and Saudi Arabia were the two top suppliers of crude oils to Japan, covering more than half of her entire crude oil requirement. Saudi Arabia stood first with a share of 26.8%, closely followed by UAE with a share of 25.8%. Iran was the 3rd largest supplier of crude oil with a share of 14.2%. UAE was the top supplier to Japan of liquefied butanes, with a share of 28.1% followed by Saudi Arabia with 22.7%. For liquefied propane (LPG), UAE's position was 2nd to Saudi Arabia with 18.8% and 44.2% respectively. For liquefied natural gas (LNG), UAE's position was 6th, compared to no exports from Saudi Arabia.

The increase in the volume of imports of crude oils, in the backdrop of their substantial price increase in 2004, was indicating the change in Japan's economic outlook. Japan's real GDP in 2004 grew 2.6% over 2003, with both exports and imports soaring by double digits. Government authorities and economists in Japan had also been forecasting moderate economic growth in 2004. Robust world economy, especially that of the United States of America and China also helped Japan boost its exports and imports.

The 2nd largest commodity of import to Japan from the UAE, as usual, was semi-finished aluminum. The ups and downs in the volume of aluminium imports into Japan, has been related to Japan's economic situation. As a raw material for manufacturing automobiles, electronics, etc., demand for this commodity tends to increase along with increase in Japan's exports of finished products. In 2004, Japan's import of semi-manufactured aluminium, both unwrought aluminium and unwrought aluminium alloy, expanded by around 22% to US$ 177.51 million, against 145.68 million in 2003.