Turkey and the United Arab Emirates are getting closer again. But why now?
In the decade since the Arab Spring, Turkey and the United Arab Emirates (UAE) have been locked in a rivalry, taking divergent stances on Egypt, Libya and Qatar, to name a few issues. . The political tension has had a considerable impact on their economic ties and reduced investment activity. However, Turkish President Recep Tayyip Erdogan’s February 14 visit to the United Arab Emirates – during which the two countries signed thirteen agreements in the fields of defence, trade, technology, agriculture and other sectors – indicates that the merger is well underway. Strategic and economic factors drive this change and many benefits can flow from closer ties.
Strategic and economic factors bring Turkey and the UAE closer together
From a strategic point of view, the transition of American policy in the Middle East towards a more practical, less assertive approach and with less ambitious objectives has had an impact on Turkish-Emirati relations. US policy change is not new and has occurred to varying degrees in consecutive administrations, culminating in the chaotic withdrawal from Afghanistan in August 2021. The intention is to focus on stability – as opposed to democracy promotion – because the United States wants and needs to focus on other issues, such as China, Russia, and national challenges such as the economy. The United States also supports the improvement of relations between Turkey and the United Arab Emirates, which only motivates both parties.
As for the UAE, part of its strategic calculation is a desire to expand alliances and not rely solely on the United States. Thus, we are witnessing more and more attempts by the United Arab Emirates and other Middle Eastern governments to promote regional diplomacy in the face of conflicts and to increase trade and economic ties in order to strengthen the position of the region. as a whole vis-à-vis big players like China.
Similarly, over the past year, Turkey has continued extensive diplomatic efforts to normalize its relations with countries in the region, including Israel, Egypt, Saudi Arabia, Armenia and the United Arab Emirates. , in response to the changing geopolitical landscape. So far, efforts with the United Arab Emirates have made the most progress, with reciprocal visits by heads of state to the two capitals.
Domestic issues are also a salient force behind the warming Turkish-Emirati relations. The pandemic has created and exposed economic problems that need to be solved and both countries understandably want to focus on themselves to solve them.
Turkey’s recent economic problems, including the steep fall in the value of the Turkish Lira, stem from the country’s erratic economic policy change and have been exacerbated by global inflation and the prospect of US rate hikes. United. Unemployment is also a challenge in Turkey, which stands at 11.2%. However, the recently released economic growth figures for 2021, if sustainable, raise hopes that the Turkish economy will start creating jobs again. On the other hand, the recent Ukraine-Russia conflict is expected to cast a new shadow on the Turkish economy by decreasing its tourism revenue. Turkey will hold elections in 2023, so President Erdogan wants to make tangible progress on economic issues by then and also highlight his progress in improving international relations, as Turkey needs foreign investment to develop and create jobs.
The UAE has long recognized that diversification is vital for its long-term survival, given declining oil and resource prices. For this reason, the United Arab Emirates has adopted dynamic policies that have encouraged businesses and entrepreneurs to prepare for a post-oil economic future, where the most valuable asset is human talent that drives innovation and growth. technology. During the pandemic, the country has accelerated reforms to maintain its regional hub and fend off Saudi Arabia’s resurgence. Turkey fits perfectly with the UAE’s diversification goals as one of the largest regional markets. with a large educated population and a strategic location.
A history of significant business ties, despite tensions
Turkey and the United Arab Emirates have shared significant economic ties over the past two decades. Despite political conflicts over disagreements in Egypt and Libya (to name a few), the UAE was an investor in Turkey and the country benefited from the rise of the UAE as a regional hub, with Turkish companies participating in construction, real estate, hospitality and logistics. .
In fact, the Gulf region has been the most reliable and aggressive investor in Turkey over the past decades due to opportunities in the financial sector, technology sector, industrial sector and construction and construction sectors. real estate. In terms of foreign direct investment (FDI), the Gulf now accounts for 7% of Turkey’s FDI. In comparison, the United States, a much larger economy, accounts for a similar amount: 8% of Turkey’s FDI. Although political disagreements had an impact on FDI, the overall impact was not severe, as Qatar increased its investments in Turkey during this period, somewhat mitigating the UAE’s decline. Recent investments from the UAE have given the green light to private sector companies keen to re-engage in Turkey’s vast economy.
To look forward
The pandemic has been a wake-up call for the region to reduce tensions, accelerate cooperation and increase economic integration for mutual benefit. Countries struggling with growing debt, inflation, rising interest rates, currency volatility, broken supply chains and global uncertainty – given the great power conflict between the states- States and China – look inward to build economic resilience and growth.
This rapprochement can be a catalyst for positive change and can lead to interesting outcomes, namely:
- The renewed engagement between Turkey and the UAE could pave the way for further economic cooperation in the region. Turkey and the UAE should strive to integrate major economies, such as Egypt and Saudi Arabia, into regional economic integration efforts. In doing so, the countries are creating a massive bloc to counter China’s increased activity in the region and provide trade and economic benefits to the region as a whole.
- Now that official relations between Turkey and the United Arab Emirates are improving, the private sector must resume dialogue to ensure that it can benefit from the political stability that will come from these agreements. There is a pent-up demand for increased investment and business activity on both sides which should be unleashed given this further easing.
- Saudi Arabia’s economic awakening and planned transition over the next decade – through its Vision 2030 framework – represents a tremendous opportunity for Turkish construction, real estate and tourism businesses. Turkey’s size and rich talent pool in leadership, management and skilled workers would be a boon for the Gulf states.
- Renewed support and investment from the Gulf Cooperation Council (GCC) could help stabilize the Turkish lira, given that Turkey implements the right economic policies. GCC support can influence positive policy changes that will help increase Turkey’s FDI.
Amjad Ahmed is director and principal researcher of the Atlantic Council’s empowerME initiative at the Rafik Hariri Center for the Middle East. Amjad is also a managing partner at venture capital firm Precinct Partners and sits on the boards of Homzmart, Tapal Tea, RSA Global, Mr. Usta and The Luxury Closet. follow him @AmjadAhmadVC
Defne Arslan is Senior Director of the Atlantic Council IN TURKEY & Turkey Programs at the Atlantic Council. She was previously Chief Economist for Turkey and Senior Energy Expert on Regional Policies at the US State Department working through the US Embassy in Ankara, as well as the founding Project Funding Coordinator of the US Department of State. Turkish International Cooperation Agency. Am here @defnesadiklar
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