Arabic and English text in PostgreSQL database
The Windows console doesn't speak Unicode of any form by default, it speaks a "native" codepage. Which codepage depends on your Windows install's language settings.
If you chcp 65001 then it'll switch into utf-8.
Overall, though, text encoding handling in batch/cmd files and the Windows command line is absolutely awful. I generally recommend that you instead put anything that isn't basically 7-bit ASCII into a separate .sql file and execute it via psql -f with a suitable client_encoding; the PGCLIENTENCODING environment variable is useful for this.
So try:
SET PGCLIENTENCODING=utf-8psql.exe --username=postgres --dbname=dbname -f populate.sql