IMEC to cut transaction costs, paving way for FTA with GCC: Observer Research Foundation

The India, Middle East and Europe Economic Corridor (IMEC) will help reduce transaction costs by as much as 30% and set the stage for a free trade agreement with the Gulf Co-operation Council (GCC), according to a top official of Observer Research Foundation."The IMEC is very important for India and also from the perspective of its integration with the GCC," Dr Nilanjan Ghosh, director, Observer Research Foundation, told Doha Forum Sunday.The proposed IMEC not only creates opportunity but also reduces transaction cost of doing business, he said."We create a much better regulatory framework or unified regulatory framework because in most cases, what happens is that the trading costs are enhanced somehow by differential regulatory frameworks by around 29% to 30%," he said, quoting the World Trade Organisation.The G20 summit in New Delhi in September 2023 saw the announcement of IMEC. The European Union, France, Germany, India, Italy, Saudi Arabia, the UAE and the US pledged to work together to upgrade and harmonise trade infrastructure between India, the GCC and Europe.The indicative estimates suggest that the IMEC could cut the time to send goods from India to Europe by 40% and slash transit costs by 30%.Terming that IMEC as an extension of the UAE-India comprehensive economic partnership agreement signed in 2022, Ghosh highlighted about the complementarities between the economies of India and the GCC in terms of trade.The IMEC represents an important shift in US and EU efforts to promote trade in the Middle East. Unlike past trade initiatives, it encompasses a broader coalition of regional and non-regional participants.He said the proposed IMEC creates product and factor markets, which enhance the scope of investments from the Middle East whether it’s in renewable energy, grain, hydrogen, solar, wind or creating food parks in India.Highlighting the complementarity between India and the GCC, Ghosh said it’s not merely an India-GCC kind of framework because IMEC looks at European market, finally backed up by the US."This creates an entire factor market framework here to cater to the broader product market framework in Europe," he said, adding this is going to be crucial when it comes to the India-GCC relationship."We are fully endorsing the Road and Belt Initiative from China and the last initiative from India to the Gulf and then forward to Europe," Dr Abdulaziz Sager, chairman, Gulf Research Center, said, adding that the GCC considers it important in terms of logistics hubs region wise.Lisa McGeough, co-head, Global Banking Coverage, HSBC, recently said Qatar is ideally placed to take advantage of the IMEC.