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Posted on Sustainabilitank.info on March 15th, 2010
by Pincas Jawetz (pj@sustainabilitank.info)

The six-member Gulf Cooperation Council (GCC) agreed in 2001 to create a shared currency to help them integrate economies and pursue a monetary policy more independently of the US.

All of the council’s members except Kuwait peg their currencies to the dollar.

Kuwait, Saudi Arabia, Bahrain and Qatar on December 15 announced the creation of a Monetary Council, a step toward establishing a shared currency. The board of the council, which will set a timetable for establishing a joint central bank and choose a currency regime, will meet for the first time on March 30.

Oman opted out in 2007. The UAE, the second-biggest Arab economy, withdrew from the currency project in May 2009 after the Saudi capital, Riyadh was selected as the location for the Monetary Council, the future central bank.

The UAE has no plans to rejoin the union project, said January 6, 2010 central bank Governor Sultan bin Nasser al-Suwaidi.Today, in Abu Dhabi, he said that the UAE remains committed to the concept of a single currency, though free trade in the region must come first. That is the reason for a Bloomberg new report on the topic.

“For the time being of course we are out because the remaining members of the Gulf monetary union, they want to go at a very high speed and they want to go for a single currency regardless of the status of completion of the common market,” al-Suwaidi said.

“If we establish a common currency before a common market then a common currency won’t help us, it will not create for us new growth engines,” al-Suwaidi said. “You need to fix the borders, entry and exit through the borders, you need to fix company laws to implement similar company laws, commercial laws, labor laws.”

Kuwaiti Foreign Minister Sheikh Mohammed Sabah al-Salem al- Sabah said on December 8, 2010 that a single currency may take 10 years to establish. The original target was this year.

The regime of the future currency will be decided by the Monetary Council, which will set a “road-map” for the project, Mohammed al-Mazrooei, assistant secretary general for economic affairs at the GCC, said on January 14, 2010.

The Gulf states must work to maintain the political will for the union, agree on the design for the new currency and establish measures to protect it from counterfeiting, al-Mazrooei said. The chairman of the future central bank also needs to be chosen, he said.

We post this because it seems to us that the States of the Arab Peninsula seem reluctant to learn from the experience of the EU, that you cannot come up with an effective common policy if you are not ready to cede of your sovereignty to the common market. Also, you do not succeed if you try to set the seat of the new body in the capital of the largest economy of the group you try to unite.

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