By Joanna Hartley
GCC could emerge from global crisis as economic power, says GCC official.
The GCC is pushing ahead with plans to achieve monetary union by 2010 in a bid to strengthen it economic position in the aftermath of the global crisis, it was reported on Wednesday. A common currency would allow the GCC to play a more active role in the international economic arena, according to Mohammed Al Mazroui, assistant secretary-general at the GCC Secretariat.
With a common currency and market, the GCC would be able to strengthen its sphere of influence in the global financial markets, he told UAE daily Khaleej Times.
The GCC owns 45 percent of the global oil reserves and 20 percent of the natural gas reserves, giving it the resources to become an important economic power, Al Mazroui said.
"They will also have a stronger say in the affairs of the international funding institutions like the World Bank and the International Monetary Fund,” he added.
However, the technical committee, set up to develop the monetary plan, would have to wait for each country’s respective government’s to approve the union before forging ahead with its implementation.
After ratification each of the GCC countries had to propose a nominee to the Gulf monetary council, which none of the countries had done yet, Al Mazroui said.
“We are making all-out efforts to achieve the target on time with the support of the governments of GCC countries. But this might take some time as each country has to go through their respective legislative bodies to get the approval,” he said.
The technical committee is holding a meeting this week to fine-tune the plans in Kuwait, which has succeeded Qatar recently as the head of the technical committee.
However, GCC countries have yet to decide where to headquarter the proposed central bank of the monetary union. “The ministers of finance and economy of the GCC countries had a round of discussion on this issue in Riyad last month, but a decision has been deferred to the next round of discussions,’’Al Mazroui confirmed.
It was also likely that the new GCC currency would be linked to the dollar as it was five out of six Gulf states now, he told the newspaper.
I have written a paper in 2008 showing why 2010 is not an achievable timeline for the GCC to reach a common currency. These are some points of it:The main reason for the delay in the finalization of the GCC customs union was the unilateral decision by Oman, preceded by Bahrain, to sign a free trade agreement with the USA. Bahrainâ€™s move in particular was met with considerable disquiet, and was considered to be against the spirit of previously signed GCC economic agreements. Oman argument was that it cannot afford the luxury of taking years to implement economic reforms and the bilateral FTA with the USA becomes more understandable. Being part of a stronger unified currency, Omanâ€™s nascent non-oil export oriented industries will suffer because its products will be less competitive. Also as a tourist destination, Oman will be less attractive to higher-end European visitors if euros buy less GCC currency that they currently do Omani riyals. The 2010 deadline does not give much time for the necessary reforms which will involve devolving some decision-making powers to pan-GCC bodies, coordinating economic policies, improving data transparency, exercising fiscal restraint and opening up budgetary plans to outside scrutiny. The EU has the European Commission, the council of the EU, the European Parliament and the court of justice to deal with such matters. In the GCC, no such exists so far.