By Camilla Hall
But central bank boss says free trade must come first; no plans to rejoin union project.
The UAE, which pulled out of a planned monetary union in the Persian Gulf last year, said it remains committed to the concept of a single currency, though free trade in the region must come first.
“We are still committed to the single currency, but the timing is the issue,” central bank Governor Sultan bin Nasser al-Suwaidi said in an interview in Abu Dhabi on Monday.
The UAE, the second-biggest Arab economy, withdrew from the currency project in May last year after the Saudi capital, Riyadh was selected as the location for the Monetary Council, the future central bank. The UAE has no plans to rejoin the union project, al-Suwaidi said January 6.
“For the time being of course we are out because the remaining members of the Gulf monetary union, they want to go at a very high speed and they want to go for a single currency regardless of the status of completion of the common market,” al-Suwaidi said.
Kuwait, Saudi Arabia, Bahrain and Qatar on December 15 announced the creation of a Monetary Council, a step toward establishing a shared currency. The board of the council, which will set a timetable for establishing a joint central bank and choose a currency regime, will meet for the first time on March 30. Oman opted out in 2007.
“If we establish a common currency before a common market then a common currency won’t help us, it will not create for us new growth engines,” al-Suwaidi said. “You need to fix the borders, entry and exit through the borders, you need to fix company laws to implement similar company laws, commercial laws, labor laws.”
Kuwaiti Foreign Minister Sheikh Mohammed Sabah al-Salem al- Sabah said on December 8 that a single currency may take 10 years to establish. The original target was this year.
The six-member Gulf Cooperation Council agreed in 2001 to create a shared currency to help them integrate economies and pursue a monetary policy more independently of the US All of the council’s members except Kuwait peg their currencies to the dollar.
The regime of the future currency will be decided by the Monetary Council, which will set a “road-map” for the project, Mohammed al-Mazrooei, assistant secretary general for economic affairs at the GCC, said on January 14.
The Gulf states must work to maintain the political will for the union, agree on the design for the new currency and establish measures to protect it from counterfeiting, al-Mazrooei said. The chairman of the future central bank also needs to be chosen, he said. (Bloomberg)
I am sure that most people in the GCC do not support calling it the persian gulf! And since this is Arabian Business it would only be sensible not to name the gulf region as the "persian gulf"!
â€œIf we establish a common currency before a common market then a common currency wonâ€™t help us, it will not create for us new growth engines,â€ al-Suwaidi said How can you have a common market without a common currency?
Ivo, the EU had a common market with out a common currency for long. Even today a number of countries are part of the EU's common market without adopting the Euro. You "just" need to allow free flow of goods and capital, and ideally labor. I would say that is much harder to have a common currency without a common market. And somehow i do not see the GCC states going for this as it would oblige them to tear down most of their protectionist barriers. @MM, there is very active thread on this.
Telco guy, Right, the money changers would suffer a great loss if there were a common currency. As I understand it (Re: Greece), Germany (and France) are still complaining there is no EU common market.
Ivo, yes money changers lose. their lose is the general population win... I am nto sure what you mean by this but in my book removing friction in economy has a net impact. Greece debt situation has nothing to do with a common market. You may be thinking of talk of a "european monetary fund". The EU has has a healthy and functioning common market for long time. Actually htis could be argued has been their only success.
The common market is THE big success of the EU, even if many people don't see it: It has brought down costs for the consumer. I am happy that I can compare prices from Portugal to Germany and there is no gready money changer in between. Another example: I can transfer money within in the EU for a fixed low rate (direct and online, no manual execution), compare that to transfering money in the GCC. What France and Germany complain about is that the want common tax laws to close loop holes. Difficult, but they will get there. Politically it is a different story, they are trying hard, not there yet, but things are moving.