Towards a Monetary Union for GCC

1
Towards a Monetary Union for GCC

• Nasser Al Kaud
• The Cooperation Council for the Arab states of
  the Gulf
• Europe ,the Mediterranean and the Euro Conference
• Athens 3,4 February 2003

2
Structure of the Presentation

• GCC establishment and structure
• The process of GCC integration
• F T A 1983
• Custom union
• Steps to achieve GCC common (single) market
  2003-2007
• GCC monetary union 2005-2010
• Concluding remarks

3
GCC Establishment

• The GCC was established on May 25th ,1981.
• Following the Iranian revolution and after the
  start of Iran-Iraq war(1st gulf war ).
• The GCC is a multi purpose organization ,seeking
  integration and inter-connection between member
  states in all fields in order to achieve unity
  between them as stated in the charter.
• GCC membership (Bahrain ,Kuwait ,Oman ,Qatar,
  Saudi Arabia ,United Arab Emirates).

4
GCC Structure

• In 1981 two main documents were adapted.
• A- The charter it sets up the objectives ,rules
  and functions of the GCC and its structure.
• The structure consist of
• 1- The Supreme Council
• heads of the states ,attached to it the
  commission for settlement of dispute.

5
GCC Structure(2)

• 2- Ministerial Council
• foreign affairs ministers.
• 3- the Secretariat General
• 4- in1997 ,advisory commission for the supreme
  council was formed. It consists of 30 members ,5
  from each member state

6
GCC Structure(3)

• B- Unified Economic agreement
• Singed in 1981
• Ratified in 1982
• Its contents and objectives are so broad
• Gradually implemented

7
GCC Structure(4)

• There are other forums where all member states
  are represented such
• Ministerial committees .
• Sub-ministerial committees .
• Technical committees and working groups.

8
GCC Structure(5)

• There are also state- governed ,staff-run
  Institutions
• Gulf investment corporation
• Gulf organization for industrial consulting
  (GOIC)
• Standards organization
• Commercial arbitration center
• Communication center
• Patent office
• GCC electricity grid authority

9
GCC Structure(6)

• Labor ministries executive office
• Health bureau
• Bureau of education
• Others

10
Process of Economic IntegrationFree Trade Area

• GCC free trade area ,FTA ,was implanted 1983 .
• Under FTA ,tariffs on goods of national origin
  is eliminated .
• Definition of national origin.

11
GCC Custom Union

• Since early 80s to early 90s work were towards
  reaching Unified external tariffs
• GCC member states agreed in 1983 on range for the
  external tariffs 4-20
• In 90s the work is shifted towards achieving
  custom union
• 1999 There was an agreement to establish the CU
  no later than March 2005

12
GCC Custom Union(2)

• In 2001 /GCC summit, the process was expedited.
  It has been agreed the CU will be implemented in
  January 1st,?2003?
• In 1/1/2003 CU actually was implemented

13
Steps to Achieve GCC Single Market

• Many gradual steps were taken to achieve this
  end
• -Free movement of GCC nationals.
• - Granting them equal treatment in any of the
  GCC member states with some exceptions
• -Free movement of capital
• -Free to invest, with some restrictions, in
  stock market, real estate

14
Steps to Achieve GCC Single Market(2)

• Article three in the new economic agreement
  specifies 10 areas where complete equality must
  be achieved.
• these areas are
• 1-Movment and residence
• 2-Work in private and government sectors
• 3-Social insurance and pensions schemes
• 4-Education,health and social services

15
Steps to Achieve GCC Single Market(3)

• 5- Exercise of all professions and crafts
• 6- Exercise of all economic ,investment and
  service activities
• 7- Real estate ownership
• 8- Movement of capital
• 9- Tax treatment
• 10-Incorporation and purchases and sale of shares
• (Actual implementation differs from one area of
  economic activity to another).

16
Steps to Achieve GCC Single Market(4)

• Further steps will be taken during 2003 2007 to
  fully implement the GCC single market .

17
Towards GCC Monetary Union

• Harmonization of fiscal and monetary policies.
• Article (22) of economic Agreement (1981) stated
  that
• Member states shall seek to coordinate their
  financial, monetary and banking policies, and
  enhance cooperation between monetary agencies and
  central banks, including the endeavor to
  establish a unified currency in order to further
  their desired economic integration.
• In 1983 the monetary Agencies and Central Banks
  Governors Committee was established.

18
Towards GCC Monetary Union(2)

• This committees main task is to implement
  Article 22.
• Governors committee held its first meeting in
  April 1983 and formed sub-committees to
  coordinate GCC policies in banking supervision,
  payment system, ATMs and prepare for monetary
  union
• Between 1985-1988 the Governors Committee had a
  condense discussion on a common peg for GCC
  currencies.
• Most of member states, then, agreed to peg their
  currency to SDR but there was no concuss.

19
Towards GCC Monetary Union(3)

• monetary union idea was debated in early 90s .
  But governors and finance ministers decided to
  delay the discussion to later date.
• In 2000 GCC summit, heads of states agreed on
  the US dollars as a common peg for GCC at this
  stage.
• They also directed the governors and finance
  ministers to come up ,in the next summit with
  time table for establishing a monetary union and
  launching GCC unified currency.

20
Towards GCC Monetary Union(4)

• -In December 2001 the heads of states agreed upon
  a timetable for establishing a monetary union and
  lunching a single currency.
• The timetable stipulates
• -The GCC states will formally peg their currency
  to the US dollar no later than January 2003 (all
  the six members states had implemented this).

21
Towards GCC Monetary Union(5)

• The single currency for GCC member states will be
  introduced no later than January 2010
• For preparation and implementation of this
  timetable a high level technical committee from
  central banks and finance ministries had been
  formed last year.
• This committee works under the supervision of
  Governors committee and headed by the governor
  of the state that holds the GCC presidency for
  that year.

22
Towards GCC Monetary Union(6)

• This technical committee is meeting regularly to
  study and debate which convergence criteria
  should be applied and on what basis.
• There is close cooperation on this subject
  between the GCC and the European Central Bank
  (ECB)
• Last October, ECB-GCC workshop was held in Riyadh
  and discussed practical aspects of monetary and
  economic Integration.

23
Towards GCC Monetary Union(7)

• -Last month the supreme council had reviewed the
  progress report on the timetable and emphasized
  the adherence to it.
• The supreme council also agreed on establishing
  specialized unit to provide the research and
  technical support for the Monetary Union
  Technical Committee

24
Concluding Remarks

• GCC is an economic, political, social, security,
  regional organization, however the economic side
  has the most attention
• During the first two decades since GCC
  establishment the emphasis was on cooperation and
  coordination related to a number of social and
  economic and political issues. But in the last
  few years the emphasis was shifted towards more
  integration, and the process of integration gains
  momentum

25
Concluding Remarks(2)

• Signing the new Economic Agreement by heads of
  the states in December 2001, and its
  implementation will enhance internal ties and
  improve the competitiveness of GCC economies.

26
Concluding Remarks(3)

• This agreement and the supreme council
  resolutions have set stages and dates to
  implement and achieve high degree of integration
• January 2003 to implement Custom Union.
• No later than 2007 to fully implement the GCC
  Common (single) market.
• No later than January 2010 for establishing GCC
  monetary union.

27

• THANK YOU