Business | Opinion
New year will present its share of economic challenges
Gulf Cooperation Council (GCC) states must address key economic issues in 2008.
- By Dr Jasim Ali, Special to Gulf News
- Published: 01:15 December 30, 2007
Gulf Cooperation Council (GCC) states must address key economic issues in 2008. The challenges entail making steady progress on regional economic integration projects, concluding free trade deal with European Union, resolving the unemployment problem in several countries and strengthening economic reforms.
One challenge is to speed up the pace of regional economic integration. The six-nation grouping of Saudi Arabia, the UAE, Kuwait, Qatar, Oman, and Bahrain was due to commence implementing the Gulf Common Market (GCM) in January 2008. The decision was made during the 28th summit held in the Qatari capital in December 2007.
The initiative covers all economic and investment services, dealings in the stock market and setting up of companies in the public and private sectors in addition to introducing social insurance among GCC citizens. However, GCC heads of states would review real progress made on GCM project during the next summit scheduled at Omani capital of Muscat by year-end.
Slow progress
The GCC bloc tends to be slow with regards to carrying out common projects. To be sure, the GCC countries started executing the customs union in 2003, but there is no evidence of full implementation of the project. The deal requires member countries to maintain a unified trade policy with external parties. The final communique of the GCC summit in Doha noted that the leaders reviewed progress made on customs union front, without providing further details or hinting of its completion.
Another challenge concerns concluding a free trade agreement (FTA) with the 27-member European Union sometime in 2008. Undoubtedly, the GCC is ready to sign the deal and looks forward to it. However, the EU is delaying any such deal. One such sticking point is the 49 per cent restriction cap on foreign ownership in some GCC states. Still, the EU remains weary of governmental support such as under-priced gas to GCC producers, a matter that grants them unfair advantage against their European counterparts. Conversely, GCC states seek the removal of EU customs on export of aluminum and petrochemicals products.
The third challenge deals with generating a sufficient number of jobs for locals, in turn a serious Saudi Arabia, Bahrain and Oman. Joblessness is a major concern in Bahrain and, in turn, partly blamed for the outbreak of civil disturbances in late 2007.
Saudi authorities are under pressure to create 160,000 jobs annually. The authorities have 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.
Nevertheless, the decision makers must be careful with the policy of replacing expatriates, which can force business owners relocate their enterprises to other regional places.
The fourth challenge relates to 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, including oil. Also, foreign banks must be permitted in the form of a locally incorporated joint stock company or as a branch of an international bank in order to solidify rivalry.
Clearly, GCC leaders and officials must address some serious economic challenges as the new year gets underway. Undoubtedly, firm oil prices in the international markets, which translate into steady revenue, offers concerned GCC states a golden opportunity to address some of the challenges faster than others, notably joblessness headache amongst local residents.
- The writer is a Member of Parliament, Bahrain.
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