S. Korea, UAE’s deals poised to boost ties, ranging from energy to investment

May 29, 2024

South Korea and the United Arab Emirates agreed to expand bilateral exchanges Wednesday, encompassing a wide array of areas from energy to investment, as the two countries aim to strengthen their relationship.

The signing ceremony of the Comprehensive Economic Partnership Agreement (CEPA) held in Seoul came around seven months after the two countries struck the deal in October, according to the Ministry of Trade, Industry and Energy.

The event came in line with UAE President Mohamed bin Zayed Al Nahyan’s two-day visit to South Korea, which started the previous day, for a summit with President Yoon Suk Yeol.

The CEPA is a type of free trade agreement that emphasizes a broader scope of economic cooperation and exchanges in addition to market opening. It marks the first time South Korea has clinched a free trade agreement with a Middle Eastern nation.

Under the agreement, the two countries will lift tariffs on more than 90 percent of goods traded over the next 10 years.

The UAE will especially lift tariffs on South Korea’s major export goods, including cars, auto parts, defense items, fruits and instant noodles.

The government anticipates that the free trade agreement with the UAE will significantly boost South Korean carmakers’ presence in the Middle East.

South Korea’s automobile exports to the UAE reached US$483 million in 2023, marking a 43 percent increase from the previous year.

The CEPA will gradually eliminate the 3 percent tariffs on crude imports from the UAE over the next 10 years. The UAE currently accounts for 11 percent of South Korea’s total crude imports.

The agreement is expected to help South Korea secure a stable supply of crude, enhancing the price competitiveness of oil refiners as well.

The UAE also agreed to open its market to online gaming content and medical services.

The two countries are anticipated to bolster exchanges in the energy, supply chain, digital and biotechnology sectors to seek future-oriented economic cooperation through the CEPA, the ministry added.

In a separate agreement, the finance ministry also inked a memorandum of understanding (MOU) with Mubadala Investment Co., a sovereign wealth fund of the UAE, to seek joint opportunities in future-oriented business fields.

Under the MOU, South Korea will support Mubadala’s efforts to explore new investment opportunities in the country, including those in future technologies and small and medium-sized enterprises.

“The Republic of Korea remains one of the world’s most vibrant and dynamic economies, with a wide range of investment opportunities that offer compelling financial returns,” Mubadala CEO Khaldoon Khalifa Al Mubarak said in a statement, referring to South Korea by its official name.

Finance Minister Choi Sang-mok noted that the agreement “underscores the robust and flourishing partnership” between the two countries and that it will “enhance the continuity and sustainability of bilateral investment cooperation.”

Other significant agreements signed Wednesday include an MOU centered on cooperation for carbon capture and storage projects. The MOU aims to collaboratively establish a supply chain for clean hydrogen and reduce carbon emissions.

Under the deal, South Korea and the UAE will explore methods to capture and store CO2 generated during the production of clean hydrogen using liquefied natural gas.

The agreement is expected to facilitate securing overseas storage facilities for domestically captured CO2.

The state-run Korea Electric Power Corp. and the Emirates Nuclear Energy Corporation also inked an agreement to seek opportunities to build nuclear reactors in a third country.

The UAE stood as South Korea’s 14th-largest trade partner as of 2023. Following Saudi Arabia, it is the second-biggest partner for Asia’s fourth-largest economy in the Middle East.