The time is now for a unified GCC currency

Rob Wagner

The Gulf Cooperation Council (GCC) has plenty to think about. The crisis in the Gaza Strip more than likely threw a curve for Arab leaders at this week’s annual summit in Muscat.

But while the current violence undoubtedly is a major concern among the GCC participants, perhaps the most pressing long-term financial issue is whether they can come to an agreement over introducing a single GCC currency by 2010 to bring economic unity to the region.

Disagreements among GCC members have derailed previous discussions about a common currency. But Arab leaders recognise that now, more than ever, the necessity of adhering to the schedule to launch a single currency system by 2010.

The current global economic crisis has put an exclamation point on the need to finalise this plan.

GCC members have been kicking around the idea of a unified fund since 2001. If approved this week, as anticipated, the GCC Monetary Union will be a landmark decision with far-reaching implications for the rest of the world.

The GCC has a combined economy of more than US $1 trillion (AED3.7 trillion), controls nearly half of the crude oil and one quarter of the world’s gas reserves.

The common currency will lead to the creation of the GCC Central Bank.

More than likely it will also mean that the unified monetary system will remain pegged to the US dollar.

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While there has been considerable talk among member states to de-peg from the dollar, Saudi Arabia has steadfastly insisted it’s better to ride out the current economic storm and remain loyal to the dollar because it ensures continuity and stability.

Yet, even if all GCC members – Oman remains a hold-out - stay on the same page and agree to a common currency, there is considerable work ahead.

And whether they can meet the self-imposed January 1, 2010, deadline is highly unlikely given that virtually no groundwork has been laid to make the transition. Policies, laws and regulations still must be established.

But the benefits outweigh the risks. The European Union adopted the euro as its official currency on January 1, 2002.

There is more than EUR731 billion in circulation, making the EU the second largest economy in the world. Over the next six years, an additional half-dozen Eastern European countries will join this juggernaut.

Imagine the GCC’s $1 trillion economy exceeding that of the European Union’s euro.

For the GCC a common currency will be attractive to international investors, which the UAE and Saudi Arabia in particular are eager to court, because it projects stability under a strong GCC Central Bank.

It also obviously eliminates currency exchanges, which will be more attractive to travelling GCC nationals doing business throughout the Gulf region.

This bodes well for the construction industry, which thrives on foreign investments and the need of investors to feel secure when determining whether ambitious projects are viable and their money is in safe and strong hands.

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