Many of us are still in amazement at the recent deal between the UAE and India, where UAE entitled India to retain two-thirds of the crude oil it is storing on behalf of the well-known ADNOC. What other shapes does UAE’s investment in India take? Read with our team of top lawyers in UAE to understand UAE’s Outbound Investment in India.
Foreign Direct Investment (FDI) is best understood as investments between states that take place through foreign ownership of companies; this ownership can be understood through ownership and transfers of cash, technological capital, and investments through the sale and purchase of shares.
FDI is typically done through 2 broad categories:
- Vertical FDI consists of providing specialized tasks abroad. The most notable and readily apparent example would be a telecommunications company which produces the wiring required in one country, is based in another country, and outsources its customer support calls to a third country.
- Horizontal FDI consists of establishing a company which carries out the same functions as the home company. For example, a makeup manufacturer will carry out its same tasks in both states.
- Conglomerate FDI consists of making investments (whether it be through business setup or buying shares) in a foreign country which is unrelated to that of an associated established business in the home country. If one can attribute altruism to such investments, this form of investment may perhaps heed the least self-interest.
While remittances, the practice of sending money as a payment or gift, often to family members in one’s home country, are not typically what was understand as FDI, it is the second largest source of cash flows between states. Owing to the largest population of expatriates in the UAE, the Indian labor force is responsible for a large outflow of remittances from the UAE to their home country. This economic force has built a strong and lasting relationship between the states, along with a long and varied history existing between the peoples of each state. For the above reasons, the UAE and India enjoy a strong relationship upon which investments built upon trust can truly flourish. The trade relationship between UAE and India is like that which we have never seen before, at present. One could liken the flow of wealth to that of the international spice trade. The present time can truly be seen as a golden age of trade relations, upon which both states may benefit.