India-UAE FTA steers clear of credible access to govt procurement

India and the UAE have remained cautious in granting each other access to the sensitive public procurement segment under the free trade agreement (FTA) signed in February.

Official sources told FE that both the sides have refrained from extending any credible access. For its part, New Delhi wanted to safeguard the interest of domestic small and medium businesses participating in government procurement tenders.

“Whatever has been granted is more in terms of simplification of procedures, etc, than in terms of opening up the segment,” explained a senior government official.

He also refuted speculations by some analysts that any concession granted to the UAE will be automatically extended to Japan under the terms of New Delhi’s earlier FTA with Tokyo. As per the provisions of the Comprehensive Economic Partnership Agreement (CEPA) with Japan, Tokyo can get such an access from New Delhi only through negotiations, subject to India’s agreement (which is unlikely to happen unless Japan commits something important in return). “They (Japan) can’t ask for concession, granted by India to a third country under an FTA, as a matter of right,” said the official.

Moreover, the UAE players have to comply with all domestic rules stipulated by New Delhi. India has already disallowed global tenders in government purchases up to Rs 200 crore, a move that is aimed at benefitting domestic MSMEs. Even beyond this threshold, the government has stated that domestic manufacturers will have the edge.

Another source said the UAE, too, didn’t wish to grant much access in public procurement. “So both the sides focussed on the facilitation aspect of government procurement, rather than any credible market access,” he added.

However, including procurement in the FTA framework suggests India’s willingness to offer access to this sensitive segment if it gets credible counter offers in return.

For instance, India is open to negotiations with Australia on government procurement if it gets good reciprocal offers. New Delhi this month signed an interim trade deal with Canberra and both the sides are expected to soon launch talks for a broader FTA.

Both India and the UAE are aiming for a bilateral trade (both goods and services) of $100 billion in the next five years from about $60 billion in the pre-pandemic year of FY20. The India-UAE CEPA will come into force on May 1.

According to the pact, the UAE will allow as many as 99% of Indian goods (in value term) at zero duty in five years from about 90% in the first year. Similarly, India would allow duty-free access to 80% of goods from the UAE now and it would go up to 90% in ten years.