GCC art
Let some states in the GCC block go ahead and launch new initiatives, and then await others to sign up and launch. A two-track launch will help everyone. Image Credit: Gulf News

Due to an inability in implementing some of the collective agreements approved by relevant entities in the GCC for various reasons - related to administrative, organisational, and legislative aspects - there is a practical way out of the conundrum.

An option would be for such decisions and agreements to be implemented by two or more countries initially and then the other countries join sequentially once the way forward has been paved or when they are convinced of the need to join.

This appears to be an appropriate way to continue with the gradual implementation of Gulf-wide agreements and with all countries being part of this. The proposed solution will help prevent the full obstruction to implementation and removes one of the most significant impediments to delayed uptake of crucial collective agreements. If the proposal gets accepted, it can propel accelerated economic integration for the GCC bloc.

Let us look at some of the agreements implemented by more than one country and then joined in by others, resulting in extremely favourable outcomes. Apart from the Gulf railway project, which we have already mentioned in past columns, there is the VAT agreement, which was implemented five years ago by the UAE and Saudi Arabia, while Bahrain joined after one-and-a-half years and followed by Oman.

Unified Gulf tourism visa can show the way

Due to their individual circumstances, Kuwait and Qatar have not implemented the VAT system, which also applies to excise tax on tobacco and some types of beverages deemed harmful to health. This is also true for the corporate tax, which was implemented in Saudi Arabia and Kuwait and is set to be implemented in the UAE from June.

Another example is the GCC Schengen-style visa, expected to be introduced by Saudi Arabia, the UAE and Bahrain, and followed by the remaining countries as they see fit. Some GCC countries are moving quickly to sign free trade agreements (FTA) with key trade partners to take advantage of the conditions resulting from such deals, such as fast-track increases to exports. The remaining countries can catch up on these agreements as they see the benefits.

Excise taxes

Although there are some negative aspects to such an approach, the overall outcomes would decidedly be in the positive. Because matters will not exist in their absolute state in such circumstances.

At the same time, some negatives can be tackled. Due to the high excise tax rates, which ranges between 100 and 150 per cent, the non-application of the same by some GCC nations, for example, has led to their smuggling operations, particularly of cigarettes moving across borders.

Quite limited as they are, they can be contained further by tightening penalties. This is because it is extremely vital that some exceptional aspects do not hinder the continuing work on this tax, which has become increasingly important for economies that have begun benefiting from its application.

Show them the results

It has become critical to continue working on this method by implementing agreements in several countries that agree to do so - provided that the rest of the nations join in later. The gradual implementation does not belittle the importance of collective agreements at all, but rather serves as a catalyst to facilitate their completion. More so, once the gains are realised, it will persuade the rest to join.

This method is adopted by many global economic blocs, including the EU, because a country’s lack of preparation to join collective agreements should not impede their implementation by the rest. This is because others will join sooner or later due to their being part of the bloc. More so, if economic integration evolves among the group’s members to reach the stage of unified regulation and legislation, thus paving the way for the common market.