For UAE economy, picture will become clearer with more statistics

I often hear advice given by the likes of the IMF and other national economy research institutions that the UAE has too many Emiratis working in the Government, and that the Government should incentivise them to work in the private sector. Someone reading such conclusions from world-respected researchers might automatically think that this makes good sense. I, on the other hand, am automatically suspicious of foreign institutions giving unsolicited advice.

The trouble with looking at a single statistic is that it is like driving by looking only at your rear-view mirror. It is important but certainly not enough to drive safely.

The idea behind the advice to incentivise Emiratis to work in the private sector is that, first, it reduces the budget burden on the government and, second, that private enterprise is more efficient at commercial activities than government institutions.


The first point only makes sense if the proportion of Emiratis employed by the Government is greater than the government’s share of GDP. In our country, it is clear the Government has a much higher proportion of GDP than countries with less commodities, and which are not growing as fast. The idea of advising that there are too many Emiratis employed by the Government needs to at least be compared with the statistic of the government’s share of GDP.

If such a statistic exists, it certainly isn’t in the IMF report.

The second idea that private enterprise is more efficient than the Government is something I discussed in a previous article based on an IMF country report on the UAE. One response to my article is that the goals of a government are not commercial in nature, but include many other factors such as quality of life. That is a valid point. One example is the Cleveland Clinic Abu Dhabi, which offers world-class service for me individually. I do not know how it is doing commercially, but non-financial metrics such as quality of life should be included in measuring the overall success of such projects. I look forward to see how the Minister of Happiness helps create statistics that measure the well-being of the nation.

The Central Bank of the UAE provides excellent statistics. Its last published statistics, for example, show how the banking system increased its overall loans to the market. On first inspection this seems a good thing. But to be sure, it is important to know whether these are new loans, which would grow the economy, or old loans that couldn’t be repaid and have been restructured, which would indicate a less optimistic outlook. Perhaps Al Etihad Credit Bureau could team up with the Central Bank to expand on what is already an excellent start to the statistical understanding of the banking system.

A major statistic for the health of the economy is GDP per capita. I have previously compared our GDP per capita (US$43,048) with Singapore’s ($55,182) and concluded that we were lagging.

Using the thinking above, how might such a comparison be improved? One thought is that we are a much younger country and we are still developing a lot of physical infrastructure such as buildings and roads. This requires a large number of blue-collar workers relative to a country like Singapore. Once our physical infrastructure reaches our full potential, this large number of blue-collar workers will reduce substantially, which in turn will automatically increase the GDP per capita.

The foreigners giving advice mean well, but they can never understand us or our country as well as we do. If we are to understand where we are going and how we are performing, we have to continue asking the questions that are relevant to our unique situation, and then collect the statistics to answer those questions.

If the Federal Competitiveness and Statistics Authority continues its work with the enthusiasm it has shown so far, I have high hopes that our way will become clearer much sooner.

Sabah Al Binali is an active investor and entrepreneurial leader with a track record of growing companies in the Mena region. You can read more of his thoughts at al-binali.com

This column is also being published in our sister paper, Aletihad

business@thenational.ae

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