Q&A with Sultan Nasser Al Suwaidi:
The Importance of an Open Economy
Published by Daily Star on 2003-10-29
Sultan Nasser Al Suwaidi is Governor of the Central Bank of the United Arab Emirates. Educated in the United States as an economist, he is widely regarded as among the global financial system's most thoughtful figures. The following excerpts are from an interview some time ago at the governor's office in Abu Dhabi:
What explains the dynamism of the UAE economy?
President His Highness Sheikh Zayed, and the other rulers of the seven emirates that constitute the UAE, decided from its inception in 1971 that the country should have an open economy--open borders for imports and exports. That's why, among other things, there has been no inflation since then. When you close your borders, you create inflation. Closed borders also create corruption and low wages. We kept building on the wealth which we accumulated over the years. Our emphasis from the start was on economic progress. We also placed emphasis on education, and on encouraging bright young people to enter government service. It is a policy to put the right people, qualified people, in the right place. And, of course, the younger people, the younger generation, are the most qualified people to run these institutions.
Is there anything special about running this economy or its monetary policy?
The most important thing is to have an open economy, and a market based economy, which really depends on the forces of supply and demand. Therefore, we put minimum restrictions on our banks in doing their business. That allows them to really grow and flourish. And it also allows other economic institutions to grow and flourish as well. This has created a bigger banking sector in the UAE than in other countries in the region. And that, of course, has helped the economy. It helped the economy diversify by providing the required credit lines to manufacturing and other businesses. Our non-oil sector represents 70 percent of the GDP--and it is growing. Manufacturing is also growing.
How do you see the Emirates shaping up in this globalized economy?
We have certain comparative advantages that we use. For example, industries that are oil related--we have a comparative advantage, for instance, with gas. And we are a young country that has minimum restrictions on movement of labor in or out. We have no currency controls. We have simple systems for approving new businesses, or manufacturing plants and so on. So we are more flexible, I would say, than other countries. In this region there are countries that have strict currency controls or that have no real tolerance for a foreign workforce.
What about tourism?
Tourism has been growing rapidly, although it started small. We have something like five million tourists a year, and that is a significant number for a country like the UAE. We have very nice beaches, nice islands, mountains, deserts and we can provide a safe and clean environment. Tourism is very important, I think, for the UAE, and we can provide a very good environment for six or seven months a year, offering all kinds of sports, desert sports, water sports, scuba diving.
Are you concerned that there may be overreliance on oil revenues in the UAE?
What concerns us in the UAE, and in the region really... is that industrialized countries are given the right to put all kinds of restrictions, to stop the flow of exports from developing countries into industrialized countries. It seems as if there is an unwritten charter which says that developing countries should be only producers of raw materials and not of manufactured goods, even the simple ones that they can produce.
Senior Writer and Global-Affairs Columnist