Gulf c.banks to seek ways to push monetary union at Riyadh mtg
March 29, 2010 09:11 am
By Martin Dokoupil
DUBAI, March 29 - Central bank governors from four Gulf states will focus on how to push monetary union forward at a meeting in Saudi Arabia starting Tuesday, rather than how to bring back the United Arab Emirates and Oman, analysts say. Gulf rulers have endorsed a much-delayed plan for monetary union in the world's top oil exporting region despite the absence of the United Arab Emirates -- the bloc's second-biggest economy after Saudi Arabia -- and Oman.
Central bank governors from Saudi Arabia, Kuwait, Qatar and Bahrain are now expected to set an agenda for coming months and pick someone to head the joint monetary council board when they meet for the council's inaugural two-day meeting in Riyadh on Tuesday. "They will discuss organisational matters and set their own agenda," said a senior official from the six-nation Gulf Cooperation Council , who declined to be named.
GCC Secretary General Abdulrahman al-Attiyah has said the governors would discuss legal and administrative issues "to speed up the single currency".
"I do not expect at this stage any announcement about the timeline ... of the monetary union," said John Sfakianakis, chief economist at Banque Saudi Fransi Credit Agricole Group.
"Overall, they will now focus more on technical aspects that are more pressing than on decisions that have a more political tone," he said.
POLITICAL CHALLENGES
The monetary council, which should now convene every two months, is expected to lay the foundations for a regional central bank and prepare the launch of a single currency.
The six members of the GCC, a loose political and economic bloc, started to debate the project, crafted to emulate the euro zone, in 2001 but political rivalries slowed down progress.
Last year, the bloc abandoned an initial 2010 deadline for issuing common notes and coins, saying the joint monetary council would draw a new timeline for the project.
Kuwait, which runs the GCC this year, made bringing the UAE and Oman back a priority of its presidency, and policymakers including from Saudi Arabia have expressed hopes that both countries might change their mind.
"I still hope that the UAE and Oman would give the issue a second chance," Kuwait central bank Governor Sheikh Salem Abdul-Aziz al-Sabah said after a meeting of six GCC central bank chiefs in Kuwait last week.
The UAE, the world's third-largest oil exporter, said last month it was not discussing rejoining, while non-OPEC Oman, which quit in 2006, has repeatedly said it was unlikely to rejoin anytime soon.
A lack of political will and resistance to the dominance of Saudi Arabia, the largest Arab economy and the world's biggest oil exporter, remain a challenge.
"One big challenging thing is the execution," said Daniel Kaye, senior economist at National Bank of Kuwait. "Europe was always backed up by desires of much closer political integration. I do not sense any appetite for that in the Gulf."
The UAE dealt the project a blow when it quit in May 2009 over a decision to locate the council in the Saudi capital, fearing it could give Saudi Arabia more control over the union.
Analysts said appointing a non-Saudi governor to head the monetary council board would send a positive signal to the UAE.
Launching the single currency remains a distant prospect. A Reuters poll showed Gulf states, which mostly peg their currencies to the dollar, are not seen adopting a common unit until 2015.
March 29, 2010 09:11 am
By Martin Dokoupil
DUBAI, March 29 - Central bank governors from four Gulf states will focus on how to push monetary union forward at a meeting in Saudi Arabia starting Tuesday, rather than how to bring back the United Arab Emirates and Oman, analysts say. Gulf rulers have endorsed a much-delayed plan for monetary union in the world's top oil exporting region despite the absence of the United Arab Emirates -- the bloc's second-biggest economy after Saudi Arabia -- and Oman.
Central bank governors from Saudi Arabia, Kuwait, Qatar and Bahrain are now expected to set an agenda for coming months and pick someone to head the joint monetary council board when they meet for the council's inaugural two-day meeting in Riyadh on Tuesday. "They will discuss organisational matters and set their own agenda," said a senior official from the six-nation Gulf Cooperation Council , who declined to be named.
GCC Secretary General Abdulrahman al-Attiyah has said the governors would discuss legal and administrative issues "to speed up the single currency".
"I do not expect at this stage any announcement about the timeline ... of the monetary union," said John Sfakianakis, chief economist at Banque Saudi Fransi Credit Agricole Group.
"Overall, they will now focus more on technical aspects that are more pressing than on decisions that have a more political tone," he said.
POLITICAL CHALLENGES
The monetary council, which should now convene every two months, is expected to lay the foundations for a regional central bank and prepare the launch of a single currency.
The six members of the GCC, a loose political and economic bloc, started to debate the project, crafted to emulate the euro zone, in 2001 but political rivalries slowed down progress.
Last year, the bloc abandoned an initial 2010 deadline for issuing common notes and coins, saying the joint monetary council would draw a new timeline for the project.
Kuwait, which runs the GCC this year, made bringing the UAE and Oman back a priority of its presidency, and policymakers including from Saudi Arabia have expressed hopes that both countries might change their mind.
"I still hope that the UAE and Oman would give the issue a second chance," Kuwait central bank Governor Sheikh Salem Abdul-Aziz al-Sabah said after a meeting of six GCC central bank chiefs in Kuwait last week.
The UAE, the world's third-largest oil exporter, said last month it was not discussing rejoining, while non-OPEC Oman, which quit in 2006, has repeatedly said it was unlikely to rejoin anytime soon.
A lack of political will and resistance to the dominance of Saudi Arabia, the largest Arab economy and the world's biggest oil exporter, remain a challenge.
"One big challenging thing is the execution," said Daniel Kaye, senior economist at National Bank of Kuwait. "Europe was always backed up by desires of much closer political integration. I do not sense any appetite for that in the Gulf."
The UAE dealt the project a blow when it quit in May 2009 over a decision to locate the council in the Saudi capital, fearing it could give Saudi Arabia more control over the union.
Analysts said appointing a non-Saudi governor to head the monetary council board would send a positive signal to the UAE.
Launching the single currency remains a distant prospect. A Reuters poll showed Gulf states, which mostly peg their currencies to the dollar, are not seen adopting a common unit until 2015.