The recent rhetoric about the planned monetary union suggests that economic integration among the six-nation GCC bloc in not necessarily possible. It is the case since the GCC states are facing unique economic challenges.

The debate has intensified ever since the 27th GCC summit held in Riyadh in late 2006. Many leaders have affirmed their support for implementing the ambitious monetary union by 2010, even though some observers have called on the authorities to consider postponing the project for several years, at least to appease Oman.

Clearly angered by the decision, Oman decided to pull out of the planned monetary union citing its inability to live up to conditions attached.

The country believes that it cannot live up to conditions such as ensuring that public debt not exceed 60 per cent of the gross domestic product (GDP).

Certainly, Omani officials want to have some liberty in terms of handling the public debt.

Oman is not suffering from a debt problem at the moment. However, Oman may be in need of piling up debt as part of its efforts to generate maximum GDP growth level, and consequently help address the unemployment problem.

Partly because of demographic statistics, many Omani youths will be entering the job market in the years to come. More than 40 per cent of Omani nationals are below 15 years, which puts pressure on the authorities to find jobs that suit the nature of the local workforce.

Oman has been suffering a double-digit unemployment rate. Additionally, the country seems to be interested in maintaining the link of the planned unified currency to the US dollar.

It has been suggested that the unified currency could be linked to a basket of currencies not restricted to the dollar.

Only last week, Sultan Bin Nasser Al Suwaidi, Governor, Central Bank of the UAE, hinted that a decision about the dollar link could be made in the next few weeks. He was referring to the upcoming meeting of the GCC central bank governors in Riyadh in March.

However, Omani officials feel at comfort in maintaining their currency's peg to the greenback. The practice gives investors the confidence in dealing with Oman. Small investors, who are the majority, tend to seek instability, and avoid volatility associated with floating currencies.

Certainly, Oman is not trying to attract large institutional investors. In addition to the stability issue, the link uniquely fits the nature of Omani exports, which are in turn priced in the US dollar.

Oman's merchandise exports primarily comprise crude oil, petroleum products such as diesel, petrochemicals, and textiles.

Omani officials want to avoid the sort of uncertainties associated with making an extraordinary move such as that of having a unified currency.

Monetary union

Local economic situation dictates the decision of not joining the monetary union with the ensuring unified currency.

Oman cannot be blamed for deciding not to join the planned unified currency, at least by looking at the euro experiment. The euro has appreciated in value since its launch in 2002, a matter that has undermined the competitiveness of eurozone economies.

Of all the GCC currencies, the Omani riyal is the least expensive, a matter that helps attract visitors to the sultanate, which is full of scenic places. Also, relatively low-priced currency helps make Omani products more competitive in exports markets.

The GCC's single currency plan can go ahead with the absence of one member state, like in the eurozone where only 13 countries out of the EU's 27 adopted the euro.

The writer is a Member of Parliament, Bahrain.