UAE takes decision for Riyadh to host central bank in its stride

Joint Gulf Cooperation Council (GCC) action underwent a difficult test last week after the conclusion of the 11th GCC Consultative Summit and the selection of Riyadh as headquarters of the GCC central bank.

The GCC General Secretariat and many joint establishments are based in the Saudi capital.

The UAE, which had the right to host the GCC central bank for many considerations, dealt with the situation with wisdom inherited from the late Shaikh Zayed Bin Sultan Al Nahyan.

The UAE expressed reservation at the decision, because out of the 20 joint GCC establishments, not one is based in the UAE, despite its political and economic weight among member countries.

This is simply because the UAE, whose capital witnessed the establishment of the council, had always dealt with these issues with wisdom and a brotherly spirit.

It never objected to the wishes of another member to host joint GCC establishments and never entered a competition to host any of them.

However, the UAE's determination to host the central bank stems from the high economic status gained by the UAE in the past decade. It had turned into a regional trade and finance hub which attracted most global companies and economic organisations.

Undoubtedly, the selection process had a flaw that must be tackled, while taking into consideration the UAE's wisdom in dealing with the situation.

While the UAE voiced reservation, it put the joint interest of council member countries first, and was keen to protect the council's achievements which are a big gain to everyone.

It is well known that hosting the central bank does not add a big magnitude to the host city, which is seen clearly in the European Union experience.

Many Europeans do not know where the EU central bank is located, and the bank's presence in Frankfurt did not raise the city's economic and financial status, as it had been the economic capital of Germany long before hosting the central bank.

Furthermore, European central banks in their own countries retained their basic duties, which they will continue to do even with the presence of the EU central bank.

The duties of the EU central bank were defined as drawing monetary policies and coordinating the efforts of member countries, and these issues are not decided by the hosting city or the governor of the bank, but by the Monetary Council, which comprises all member countries of the monetary federation.

Technically speaking, the central bank's location has no big impact on the hosting city.

The UAE's political and economic programme will go on, regardless of hosting the GCC central bank or not, but it was simply a matter of rightfulness and fairness in the distribution of GCC joint establishments among member countries.

However, tackling this defect is possible through some regulations, such as excluding the host country from appointing the central bank's governor and giving more jurisdictions to the GCC Monetary Council, which decides the group's monetary policies.

Meanwhile, joint decisions taken by the monetary council must be supported, and mutual trust in joint establishments should be enhanced.

This is one of the responsibilities of the larger economies, which must play a core role in this direction.

Hence, it seems that issuing the single GCC currency will be postponed to rearrange priorities and until pending issues are settled.

These issues include taking the necessary administrative and disciplinary measures, and adopting a more comprehensive system to distribute joint establishments among GCC states, similar to the EU states.

What is most important now is for all parties to work to overcome the new difficulties and take the necessary procedures to issue the single GCC currency, which will add more to the growing GCC economies.

This is because member countries have a distinguished and successful integrated experiment, despite its slowness, and GCC citizens are looking forward to enhancing and developing this experience.

The UAE wisdom in dealing with such developments offers big potential to overcome this obstacle, in order to protect the collective gains which can only be developed through the integration of the GCC group.

This bloc is expected to occupy a leading economic position on the global stage in the coming years, which will reflect positively on all member states.

The writer is a UAE economic expert.