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. His firm stand against money laundering
has won him applause worldwide. Following are excerpts
from a recent interview at the governor's office
in Abu Dhabi:
Beyond
the obvious explanation, which is, of course, "oil
revenues," what explains the drive and 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. That's why you see that a lot
of the institutions in this country are run
by young people.
Is there anything special about running
this economy or its monetary policy that
you would like to highlight?
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 even at times
when the oil prices are under pressure. Manufacturing
is also growing.
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 providea 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.
All that we can provide. We have two coasts
and can provide shallow water diving on the
Western coast, and deep-sea diving in the
Indian Ocean, on the East coast.
In this globalized economy, how do you see
the Emirates shaping up in a newly edgy competition?
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. As you know, in this
region there are countries that have strict
currency controls or that have no real tolerance
for a foreign workforce, and they put restrictions
on foreign workers.
Given what's happening to the global economy,
the volatility of oil prices and so on, is
there a concern in your mind that there's
an overreliance on oil as revenues in the
UAE?
What concerns us in the UAE, and in the
region really, is that the World Trade Organization
is still ineffective when it comes to exports
from Third World countries to industrialized
countries. And 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. This is worrying,
actually. As I see it now, the world is not
becoming more open as a result of WTO. I
would say that it is becoming aware of more
issues and, therefore, more restrictive.
Despite your concern, is the situation having
a major impact on UAE?
I don't think it should impact the UAE very
much because the UAE has installed a state-of-the
art system for producing other products.
Everything we produce here is in accordance
with international standards. But the issue
affects other countries in the region, other
poor countries, I think this is not only
my personal worry but it is shared by many
people in the international forums, which
I attend, such as the IMF. I hear the worry
expressed especially from the developing
countries. And it doesn't seem that the industrialized
developed countries are really doing much
about it. They are not just not listening
sometimes.
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