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Sun 7 Nov 2010 03:10 PM

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Gulf Arab customs union in final stages - UAE

GCC members are eyeing a deal on how to distribute revenues from customs duties

Gulf Arab customs union in final stages - UAE
Besides the Saudi Arabia and the UAE (above), other GCC members such as Kuwait, Qatar, Oman and Bahrain also take part in the customs union. (ITP Images)

Gulf Arab oil producing countries are in the final stages of reaching a deal on how to distribute revenues from customs duties, a senior official at the UAE finance ministry said on Sunday.

The introduction of a customs union in 2003 had been hailed by officials as a major achievement countering critics' claims that the Gulf Arab bloc would be unable to realise economic integration in the world's biggest oil exporting region.

But differences have delayed an agreement on how to introduce a permanent system to distribute custom receipts among six members of the Gulf Cooperation Council (GCC).

"The customs were unified in 2003 at five percent and a common market would require the customs barriers to be removed," said Younis Al Khouri, undersecretary and director general at the UAE finance ministry told Reuters in an interview.

"We are still in the final stages of agreeing on how to distribute the amount received from the customs," he said on the sidelines of a conference about the GCC common market in Dubai.

In September, Kuwait's finance minister said the GCC members have made much progress to clear the last obstacles for the agreement but total completion of the customs union would take two to three years.

"There are so many alternatives on the table, most of the countries have accepted one of the thoughts that will reflect the GDP (gross domestic product) of each," Khouri said.

"The last formula that will add how much of the customs was received already from each country," he said. In May, GCC officials said the UAE, the region's trade hub and the second-largest Arab economy, was unhappy with a quota of receipts proposed by the GCC secretariat but some said that a bigger issue would be to scrap red tape at border crossings.

Trucks transporting goods had been held up for days mainly at the border between Saudi Arabia and the UAE earlier this year, casting doubts about the efficiency of the customs union plan.

GCC officials see the current customs system as temporary as it is expensive to run. The tariff is collected at the first entry point and the revenue is shared according to a final destination of the product.

Besides the bloc's biggest economies Saudi Arabia and the UAE, other GCC members such as Kuwait, Qatar, Oman and Bahrain also take part in the customs union.

The GCC's attempts over the past three decades to emulate the European Union's economic integration have been dogged by delays in a monetary union plan and regional rivalry between Riyadh and Abu Dhabi.

The value of the intra-GCC trade has jumped to over $70bn now, from less than $30bn ahead of the customs union launch in 2003, Abdel Aziz Abu Hamad Aluwaisheg, director general for international economic relations at the GCC Secreatriat General told Reuters at the same event.

Khouri also said the UAE was hoping to attract more foreign investment through introduction of prerequisites for the Gulf common market.

"We have started implementing most of the requirements for the GCC common market," he said. "Hopefully that will attract more foreign direct investment, manufacturing as well as technology to the GCC."

Foreign direct investments to the UAE plunged to AED14.7bn ($4bn) last year, from AED50.4bn in 2008 following the global financial crisis.

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