RIYADH, 26 March — Jameel Al-Hujeilan, secretary-general of Gulf Cooperation Council (GCC), has stated that the establishment of a GCC monetary union is one of the important prerequisites for the success of the proposed customs union among the six member states.
Speaking to Arab News, Hujeilan said the formation of a monetary union will eventually lead to the establishment of a GCC common market.
“This means the free exchange of capital, trade and services,” he explained.
A single GCC currency is a basic requirement for the establishment a common market and a customs union. The GCC member states — Saudi Arabia, Qatar, Bahrain, Kuwait, Oman and the UAE — are expected to endorse the single currency by January 2010.
The GCC chief said that the member states must agree on certain economic standards in their bid to set up a joint currency, because “a joint currency will not be possible between two countries, where one is economically weak and the other strong.”
On the strength of the currency, he said: “A joint currency will reflect the economic strength of member states. We hope the GCC economies will continue to flourish to have a strong joint currency by 2010, with which they can deal with the outside world with confidence.”
GCC countries have already adopted a number of resolutions allowing their citizens to carry out various economic activities in any member state.
“By the time the customs union is established in 2005, the ongoing efforts to form a GCC common market will be complete,” he added.
Hujeilan added that the formation of a single currency will facilitate trade exchange, speed up common market and expedite capital movement among the member states. It will also help GCC banks to cut their large hard currency reserves. The move will increase the flow of foreign investment to member states.
Economic analysts believe that a number of factors such as variations in budget deficits and differences in taxation policies might obstruct the joint currency project, unless effective decisions were taken to overcome them.
The GCC ministers of the economy and finance at a meeting in Oman earlier this month cleared the last snag for the creation of the customs union within ten months by agreeing on a mechanism for the collective distribution of import duties and a possible compensation fund.
