Economies of the regional grouping of Gulf Cooperation Council must address major economic issues in 2010. These include coping with consequences of the global financial crisis, showing progress on regional economic integration efforts and pressing ahead with economic reforms while addressing the job challenge.

The extent of adverse effects of the global financial crisis on GCC economies emerged towards year-end with revelation of Dubai's debt restructuring. At the same time, Saudi Arabia reported budgetary deficit of $12 billion (Dh44 billion) in fiscal year 2009, the first such shortfall since 2002. The Saudi deficit is projected to reach $19 billion in 2010 partly reflecting stronger government spending to deal with the slowdown. The GCC authorities need to show results for their efforts to deal with the predicament.

The second challenge relates to speeding up pace of regional economic integration. The 30th summit held in Kuwait in late December did not provide solutions to some questions, especially customs union. The customs union project started in 2003 calls for a unified trade policy with external parties. Among others, the member countries need a formula to distribute customs revenues.

Also, GCC states have to show the average person the advantages associated with the Gulf common market project. Commencing in 2008, the project allows for free flow of factors of production among member countries. Yet, there are complaints from investors about bureaucratic procedures at borders of some countries, in effect restricting access to local markets.

Ambitious initiative

The Gulf monetary union project, which got underway on last New Year's Day, could not be complete with a third of GCC members staying away. At the moment, the UAE and Oman are not part of this ambitious initiative that aims at unifying monetary and fiscal policies of member countries.

Another challenge related to generating a sufficient number of jobs for nationals notably in Saudi Arabia, Bahrain and Oman. In fact, the Saudi authorities are under pressure to create 160,000 jobs annually. One solution offered is restricting some jobs to nationals.

Over the past few years, Saudi officials banned expatriates from working in more than 30 categories. These include training managers, public relations officers, administrative assistants, purchase managers, secretaries, operators, warehouse supervisors, debt collectors, customer service accountants, tellers, postmen, data handlers, librarians, book sellers, ticket kiosk keepers, taxi drivers, auto salesmen, janitors, internal mail handlers and tour guides.

However, decision-makers in all three countries must be careful with the policy of replacing expatriates with nationals so as to avoid annoying the investors, who in turn could relocate their enterprises to competitive regional places.

Yet, another challenge has to do with maintaining the pace of economic reforms. For good reasons, all GCC governments appreciate opening up their economies to competition, but others may have to do more. For example, Saudi Arabia needs to do away with the negative list that bans foreign investments in numerous sectors.

For its part, Bahrain started the year 2010 with a government-led debate calling for limiting subsidies for petroleum goods to nationals in low-income category. Also, there are plans to make well-to-do nationals pay full price for electricity and water as well as other subsidised products such as red meat. Bahrain authorities seem determined to show discipline in public finance.

Clearly, GCC officials must try this year to address outstanding economic challenges especially regional economic integration.

- The author is Member of Parliament in Bahrain