Business | Opinion
GCC Focus: Electricity grid tops talks
The first phase of the electricity grid will integrate all GCC countries except for the UAE and Oman
- By Dr Jasim Ali, Special to Gulf News
- Published: 00:00 December 21, 2009
- Image Credit: Gulf News
The 30th summit of the Gulf Cooperation Council (GCC) held in Kuwait last week achieved mixed results with regards to economic integration of the six-nation group.
On the positive side, the summit began working on the implementation of the united electricity grid, following a $1.6 billion (Dh5.87 billion) investment.
The first phase of the electricity grid will integrate all GCC countries except for the UAE and Oman. The scheme stands to be tested in the summer of 2010 when demand for electricity reaches its peak. The project aims to provide electricity to GCC countries suffering from a power deficit.
Separately, council members opted to start implementing the ambitious GCC monetary union project in 2010.
During the course of 2009, Saudi Arabia, Kuwait, Qatar and Bahrain endorsed the scheme.
The same year witnessed a decision by the UAE to pull out of the project over what is believed by some to be its objection to the selection of Riyadh as host of the planned GCC central bank.
Oman decided to shun the monetary union in late 2006 for economic reasons.
Omani officials recently reaffirmed their country's position saying that the Sultanate would not join the scheme. Oman wants to have full freedom in its economic choices.
Oman argues that unlike other GCC countries, it has not gained enough opportunity to develop its economy due to the late discovery of oil in 1968.
Conversely, oil was discovered in Bahrain in 1932.
However, the implementation of the monetary union does not automatically guarantee a single common currency.
Such a currency is merely one step — though a vital one — in the process of implementing the monetary union project.
Member countries must also coordinate their economic policies.
The implementation of the monetary union project requires member countries to adhere to five conditions dealing with fiscal and monetary standards, namely limiting public debt to 70 per cent of nominal gross domestic product (GDP) at current prices; restricting their budget deficits to three per cent of the GDP; limiting their inflation rate to two per cent; ascertaining that short-term interest rates do not exceed two per cent; and ensuring that reserves cover all import bills for four months.
Customs union
The summit produced no breakthroughs with regards to the customs union project.
GCC states commenced customs union status at the start of 2003 with the adoption of a unified trading policy with non-members concerning custom duties.
However, the project continues to face numerous obstacles, notably agreement on the distribution of custom revenues amongst member countries. Other obstacles include bureaucratic procedures on the border areas.
The meeting members also made no final decisions on developing a train network linking all member countries or a bank focusing on regional development. Both proposed projects would be subjected to detailed feasibility studies to determine their economic viability.
The summit briefly looked at the Gulf Common Market (GCM) which began in January 2008. The GCM looks at unifying all economic and investment services, dealings in the stock market and the setting up of companies in the public and private sectors.
Besides social insurance among GCC citizens the Kuwait summit added access to technical studies to the list of shared activities. In practice, the GCM focuses on finding a unified regional market through which nationals would benefit from the available opportunities.
Most likely, the next summit in the UAE in late 2010 would further cement economic ties amongst GCC states.
The writer is a Member of Parliament in Bahrain.
More from Business Opinion
More from Business
Business Editor's choice
-
China breaks West's solar monopoly
Some countries in the world, especially Germany and the United States, have made considerable efforts to invest in developing solar energy cells
-
Burberry store spree will cut profit
Trenchcoat maker forges ahead with investment strategy targeting emerging markets
-
Laws needed to spur region bond markets
UAE Central Bank calls for creation of a centralised Sharia board to facilitate the sale of sukuk
