Tough road ahead for GCC economic integration
MENAFN - Arab News - 14/02/2010
(MENAFN - Arab News) THE pace of economically integrating the six-nation Gulf Cooperation Council (GCC) has been abysmally slow, ever since the bloc was established back in 1981.
That is despite numerous lofty statements made by Gulf leaders and planners about the common challenges that need to be addressed, the need for mutual trust and good neighborliness. In fact, the implementation of this rhetoric has been missing among Gulf governments despite a growing realization that joint action was only the way forward to promote greater unity, particularly in the economic domain.
Although the GCC appears to have pushed their way out of the global financial crisis and are treading firmly into a healthy 2010 for their respective economies and banking sectors, a coherent functional GCC operating as a powerful economic bloc still seems to be a distant dream.
Probably, as part of the process of self-evaluation, it might be worthwhile to now consider forming a working group of GCC intellectuals that can undertake an independent review, with the objective of making concrete policy recommendations.
However, it does not mean that the Gulf states have not achieved anything or cannot achieve the goal of their unification on an economic front.
In fact, they are better placed to do it now that their economies are projected to record positive growth in 2010 and while their banks are predicted to perform better this year than in the previous turbulent 15 months that followed the global crisis and collapse in oil prices.
Of course, there are also positive announcements from top GCC officials about a common market, common financial policies and a common currency.
GCC Secretary-General Abdulrahman Al-Attiyah said the bloc's central bank governors will hold the first meeting of their joint monetary council on March 30, which is considered a important next step toward a monetary union.
The governors will discuss legal and administrative issues in order "to speed up the single currency" and form a board of directors for the project, he said in a statement released this week.
Al-Attiyah hoped that the UAE, which opted out of the monetary union in May last year in protest over a decision to base the Gulf central bank in Saudi Arabia, would change its mind.
The GCC chief said that a consolidated Gulf approach toward the monetary union or other financial issues of regional and global concerns would allow them to make the most of emerging opportunities around the world and in the region.
Four GCC member states Saudi Arabia, Qatar, Bahrain and Kuwait have signed the agreement, paving the way for a monetary union and a unified regional currency. Al-Attiyah announced that the Gulf single currency whose name is yet to be decided would be pegged to the dollar.
He said the monetary union agreement has 28 articles specifying the features of the unified currency. Al-Attiyah said the document also laid down a general outline for monetary institutions, their functions and responsibilities, adding that there are clear guidelines about the relationship between monetary union institutions and national central banks as well as the legal and legislative responsibilities of GCC countries. He also confirmed that work was in progress to establish the monetary union.
Another major challenge is the GCC common market, which launched at the beginning of 2008.
Monetary policies in the GCC states, laws and regulations related to investment and internal differences are among the main challenges facing the common market.
Strategies need be worked out to surmount these hurdles. Saudi economic experts, however, expressed confidence that the six GCC countries will work through their respective agencies and in collaboration with the GCC General Secretariat to remove these obstacles.
Economic analyst Mansour Al-Abdulaziz said that the GCC common market would grant members strong competitive tools to face global economic challenges.
The common market is the beginning of a new phase for the activation of GCC economic integration. The movement of GCC nationals across borders would increase with the GCC common market in place. There were some obstacles in setting up the common market, which Al-Abdulaziz did not specify.
He however expressed happiness that the private sector in the region was coming of age and begun playing an active role in helping to formulate the economic policies of GCC countries.
"This is a dream come true for the private players and chambers in the GCC," he said.
He said the GCC states are small economies and integration will make them into one big economy that can withstand competition in world markets. He added that the GCC is looking for a single aviation market to ensure a better quality of service and the highest level of safety.
The GCC is working to create a common aviation policy, which would enable GCC carriers to operate freely between cities without any commercial restrictions, including those on the number of flights in operation and fare fixing.
Currently, GCC skies are governed by constraining agreements that restrict the freedom of airlines, and consequently limit the choice of customers. Open skies across the GCC will bring more freedom to customers, remove all restrictions, making the aviation industry more efficient and safe as well as improve its competitiveness.
No doubt important decisions have been made with regard to the implementation of a common aviation policy, the GCC customs union, a common market, a common currency, a Gulf defense pact, and an agreement on counter-terrorism cooperation, but none have been implemented fully.
There has been a greater frequency of meetings and exchange of views among GCC ministers in recent years, thus allowing for a greater convergence of ideas and the establishment of more common ground.
Yet, it cannot be claimed that announcements have been followed by effective implementation by member states. If the customs union still does not function properly after seven years, how will the GCC common currency project take shape?
If a report on the accomplishments of the GCC was to be produced, the outcome would not be very encouraging.
What is required is a bolder and more concrete strategic vision to truly achieve effective economic integration and allow the GCC as an organization to gain more power and relevance.
The Gulf states must also unify their efforts when tackling the issue of food security. With the GCC's population forecast to increase by a third to 53 million people by 2020, governments need to make efforts in improving farming policies, better utilize available arable land and develop existing national agricultural institutions.
They should also support joint Arab agricultural ventures, invest in fertile Arab nations, adopt necessary policies and national programs to curb price increases, create a pan-Arab fund to finance Arab food security projects and set up a joint strategic food stockpile.
The GCC countries, with one of the fastest-growing populations in the world, are grappling with the key issue of how best to provide food to the millions without heavily relying on imports.
The GCC states, which control nearly 45 percent of the world's proven oil deposits, are among the largest food importers in the world as most of their land is desert. The bulk of their food imports come from outside the Arab region, including the United States and other Western countries.
Official figures revealed the GCC's combined farm imports exceeded $60 billion during 2005-2008. They accounted for about 45 percent of the total Arab food import value of $120 billion. That is despite the fact the combined population of the six member countries, about 35 million people, only accounts for around 11 percent of the total Arab population.
A breakdown of the figures shows that Saudi Arabia was the largest Arab food importer, with a value of about $35 billion during 2005-2008. This is followed by the UAE, with total imports of $12 billion, $5 billion in Oman, $4.8 billion in Kuwait, $2 billion in Bahrain and $1.3 billion in Qatar.
M. Ghazanfar Ali Khan
MENAFN - Arab News - 14/02/2010
(MENAFN - Arab News) THE pace of economically integrating the six-nation Gulf Cooperation Council (GCC) has been abysmally slow, ever since the bloc was established back in 1981.
That is despite numerous lofty statements made by Gulf leaders and planners about the common challenges that need to be addressed, the need for mutual trust and good neighborliness. In fact, the implementation of this rhetoric has been missing among Gulf governments despite a growing realization that joint action was only the way forward to promote greater unity, particularly in the economic domain.
Although the GCC appears to have pushed their way out of the global financial crisis and are treading firmly into a healthy 2010 for their respective economies and banking sectors, a coherent functional GCC operating as a powerful economic bloc still seems to be a distant dream.
Probably, as part of the process of self-evaluation, it might be worthwhile to now consider forming a working group of GCC intellectuals that can undertake an independent review, with the objective of making concrete policy recommendations.
However, it does not mean that the Gulf states have not achieved anything or cannot achieve the goal of their unification on an economic front.
In fact, they are better placed to do it now that their economies are projected to record positive growth in 2010 and while their banks are predicted to perform better this year than in the previous turbulent 15 months that followed the global crisis and collapse in oil prices.
Of course, there are also positive announcements from top GCC officials about a common market, common financial policies and a common currency.
GCC Secretary-General Abdulrahman Al-Attiyah said the bloc's central bank governors will hold the first meeting of their joint monetary council on March 30, which is considered a important next step toward a monetary union.
The governors will discuss legal and administrative issues in order "to speed up the single currency" and form a board of directors for the project, he said in a statement released this week.
Al-Attiyah hoped that the UAE, which opted out of the monetary union in May last year in protest over a decision to base the Gulf central bank in Saudi Arabia, would change its mind.
The GCC chief said that a consolidated Gulf approach toward the monetary union or other financial issues of regional and global concerns would allow them to make the most of emerging opportunities around the world and in the region.
Four GCC member states Saudi Arabia, Qatar, Bahrain and Kuwait have signed the agreement, paving the way for a monetary union and a unified regional currency. Al-Attiyah announced that the Gulf single currency whose name is yet to be decided would be pegged to the dollar.
He said the monetary union agreement has 28 articles specifying the features of the unified currency. Al-Attiyah said the document also laid down a general outline for monetary institutions, their functions and responsibilities, adding that there are clear guidelines about the relationship between monetary union institutions and national central banks as well as the legal and legislative responsibilities of GCC countries. He also confirmed that work was in progress to establish the monetary union.
Another major challenge is the GCC common market, which launched at the beginning of 2008.
Monetary policies in the GCC states, laws and regulations related to investment and internal differences are among the main challenges facing the common market.
Strategies need be worked out to surmount these hurdles. Saudi economic experts, however, expressed confidence that the six GCC countries will work through their respective agencies and in collaboration with the GCC General Secretariat to remove these obstacles.
Economic analyst Mansour Al-Abdulaziz said that the GCC common market would grant members strong competitive tools to face global economic challenges.
The common market is the beginning of a new phase for the activation of GCC economic integration. The movement of GCC nationals across borders would increase with the GCC common market in place. There were some obstacles in setting up the common market, which Al-Abdulaziz did not specify.
He however expressed happiness that the private sector in the region was coming of age and begun playing an active role in helping to formulate the economic policies of GCC countries.
"This is a dream come true for the private players and chambers in the GCC," he said.
He said the GCC states are small economies and integration will make them into one big economy that can withstand competition in world markets. He added that the GCC is looking for a single aviation market to ensure a better quality of service and the highest level of safety.
The GCC is working to create a common aviation policy, which would enable GCC carriers to operate freely between cities without any commercial restrictions, including those on the number of flights in operation and fare fixing.
Currently, GCC skies are governed by constraining agreements that restrict the freedom of airlines, and consequently limit the choice of customers. Open skies across the GCC will bring more freedom to customers, remove all restrictions, making the aviation industry more efficient and safe as well as improve its competitiveness.
No doubt important decisions have been made with regard to the implementation of a common aviation policy, the GCC customs union, a common market, a common currency, a Gulf defense pact, and an agreement on counter-terrorism cooperation, but none have been implemented fully.
There has been a greater frequency of meetings and exchange of views among GCC ministers in recent years, thus allowing for a greater convergence of ideas and the establishment of more common ground.
Yet, it cannot be claimed that announcements have been followed by effective implementation by member states. If the customs union still does not function properly after seven years, how will the GCC common currency project take shape?
If a report on the accomplishments of the GCC was to be produced, the outcome would not be very encouraging.
What is required is a bolder and more concrete strategic vision to truly achieve effective economic integration and allow the GCC as an organization to gain more power and relevance.
The Gulf states must also unify their efforts when tackling the issue of food security. With the GCC's population forecast to increase by a third to 53 million people by 2020, governments need to make efforts in improving farming policies, better utilize available arable land and develop existing national agricultural institutions.
They should also support joint Arab agricultural ventures, invest in fertile Arab nations, adopt necessary policies and national programs to curb price increases, create a pan-Arab fund to finance Arab food security projects and set up a joint strategic food stockpile.
The GCC countries, with one of the fastest-growing populations in the world, are grappling with the key issue of how best to provide food to the millions without heavily relying on imports.
The GCC states, which control nearly 45 percent of the world's proven oil deposits, are among the largest food importers in the world as most of their land is desert. The bulk of their food imports come from outside the Arab region, including the United States and other Western countries.
Official figures revealed the GCC's combined farm imports exceeded $60 billion during 2005-2008. They accounted for about 45 percent of the total Arab food import value of $120 billion. That is despite the fact the combined population of the six member countries, about 35 million people, only accounts for around 11 percent of the total Arab population.
A breakdown of the figures shows that Saudi Arabia was the largest Arab food importer, with a value of about $35 billion during 2005-2008. This is followed by the UAE, with total imports of $12 billion, $5 billion in Oman, $4.8 billion in Kuwait, $2 billion in Bahrain and $1.3 billion in Qatar.
M. Ghazanfar Ali Khan