GCC may take years to coin unified Gulf currency

12:51, December 16, 2009      

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by Du Jian

Kuwaiti Finance Minister Mustafa Al-Shamali said Tuesday the Gulf Cooperation Council (GCC)monetary union pact has gone into effect during the 30th GCC leaders' summit in Kuwait City.

In few remarks to the official KUNA news agency, Al-Shamali said the central bank governors of the GCC would hammer out a timetable for the establishment of a central bank that would ultimately issue the Gulf currency.

However, leaders of the bloc apparently tried to play down that initiative during their two-day gathering and issued a declaration without touching upon the currency issue.

Although moved closer toward a euro-style single currency, it may take the oil-exporters years to coordinate and negotiate their stance and monetary policies for that end.

Founded in 1981, the GCC groups Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE).

The six members sit atop the largest crude exporting region in the world and pocket around 45 percent of the global oil reserves and contribute 16 million barrels of crude per day.

The bloc in 2001 decided to materialize a common currency by 2010, in efforts to boost trade between GCC members and outside and cement regional integration.

Sky-rocketing monetary reserves, along with an improvement in the balances of payments are positive factors for creating the single currency.

However, the fluctuating inflation in member countries in recent years and the global financial crisis have delayed the monetary union and preparations for the common currency.

Worries over the side effects of issuing a unified currency on member states' individual economy also hindered their steps forward.

The planned Gulf single currency is unlikely to be launched soon as "sufficient time" is needed for preparations, Al-Shamali said days before the summit.

His view was echoed by the emirate's Deputy Prime Minister and Foreign Minister Sheikh Mohammad Sabah Al-Salem Al-Sabah, who said after the Kuwaiti Parliament approved the agreement that it might take a decade for the full adoption of a single Gulf currency.

As of now, four member states, namely Saudi Arabia, Bahrain, Qatar and Kuwait have ratified the GCC monetary union agreement.

In 2006, Oman shocked the bloc in decision to opt out the initiative, saying it was not ready to meet the preconditions. While the UAE followed suit in May this year to protest against locating the joint central bank in Saudi Arabia.

The pullout of the two, especially the UAE, the Arab world's largest economy after Saudi Arabia and homes to a business hub, cast a shadow over the landmark plan.

GCC Secretary General Abdul Rahman al-Attiyah said before the summit that Oman and UAE "are pioneers in joint Gulf action and always took the lead in implementing resolutions of Gulf summits, so they are always at the center of the common Gulf action."

However, the two countries were still lingering outside the initiative after the two-day summit.

Analysts said the Dubai debt crisis is a negative factor for the UAE to turn around as the emirate would be reluctant to sit behind the negotiating table amid a weak condition.

Source: Xinhua
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