Monetary union's success rests on full participation

Dubai: The Gulf Cooperation Council (GCC) monetary union, expected to take shape during the summit today, should help Gulf countries weather the global economic crisis. However, some economists warned that Arab Gulf economic integration will not materialise without the full participation of all the members of the bloc.

"There is no, and there will be no [Arab Gulf] economic integration without the UAE and Oman," Kuwaiti economist Ali Al Nemash said.

Economists differ on whether there might be some difficulties as the union gets off the ground.

"There are no negatives. It is all positives," Abdul Aziz Aluwaisheg, Director of the Economic integration Department at Economic Affairs section at the headquarters of the GCC in Riyadh, said.

Aluwaisheg rejected the analysis by some economists that member countries where individual income was lowest, would face higher living costs.

"The unified currency plan could raise the cost to the consumer," in these countries, Al Nemash said. Yet, "if I put a scale, I see the positive consequences are many …and… the negatives are limited even if they stay for the long term."

Advantages

Economic integration offers more political and economic weight for member states, provides wider protection to individual countries, create more job opportunities, raise individual income and decrease inflation, he explained.

However, other analysts, including Dubai-based economist Mohammad Al Asoomi, said that "implementation requires long time for some issues."

They include the commitment that annual budget deficits don't exceed three per cent, public debt doesn't exceed 60 per cent of the GDP, and to maintain a certain percentage of the reserves, he explained.

While there are high expectations that the union will be announced at the summit, Aluwaisheg told Gulf News that it is up to the leaders of member-states to declare its formation during the summit.

"There are four countries which endorsed joining the union, and their decisions have passed through all the necessary legal procedures and were approved by their constitutional bodies before their presidents' ratification," he said.

Kuwait signs up

Kuwait last week became the latest GCC country to approve joining the planned monetary union, after Saudi Arabia, Qatar and Bahrain. The Kuwaiti parliament, however, demanded another vote ahead of launching the single Gulf currency.

But both UAE and Oman have opted to stay out.

Kuwaiti Finance Minister Mustafa Al Shimali, who heads the summit preparatory committee, hoped that the two countries would join the union "because this would strengthen the region's economies and make it an economic bloc that would be taken into account at a global level."

The minister said Kuwait would support the membership of Oman and the UAE in the union."

Each member of the GCC has its own distinguishing economic characteristics, Al Nemash said.

For example, while industry is the main feature of the Saudi Arabia economy, the UAE could distinguish itself in tourism and transit trade, Al Nemash said.

"Both Kuwait and Bahrain could be services centres. However, Kuwait seems to be in a better position because of its 15-year-old dream of a new silk road."