(Photo From: malaysiainfocus.com)
By Antonia Dimou
Each of the countries in the Gulf Cooperation Council (GCC) has a central bank with established monetary arrangements with each other in recognition of their common interests. However, current government surpluses in the region coupled with projected increases for the foreseeable future are creating undue pressure on the real estate and stock markets.
Additionally, limited investment opportunities within each state restrict the opportunity to create new jobs and to further diversify the economies of the region.
To this end, a regional, or possibly a GCC central bank, much like the US Federal Reserve in Washington DC, could be established to serve as a common forum and meeting place for the existing central banks, which would continue to have the same functions and accountabilities as they now possess.
A regional central bank would serve as a common forum and meeting place for the region’s existing central banks, leaving the existing banks to continue performing their current functions and maintaining the accountabilities that they now possess. A monthly digest could be assembled, and the new mechanism would facilitate a common GCC currency initially planned for 2010 but the deadline was abandoned earlier this year.
The Gulf monetary union project, designed to emulate the euro zone, has been delayed by old political rivalries as certain states are concerned not to give too much sway to Saudi Arabia, the largest Arab economy and the world's top oil exporter.
On March 30, 2010, the Saudi central bank chief was named to head a Gulf monetary council underlining the Kingdom's dominance in a single currency project and reducing prospects for the United Arab Emirates and Oman to return.
The UAE, the world's third largest oil exporter, withdrew from the project in May 2009 in a protest to place the monetary council in Riyadh, three months later Oman followed suit. Muhammad al-Jasser, head of the Saudi Arabian Monetary Agency (SAMA), will be the first chairman of the joint monetary council, a forerunner for a regional central bank. A recent Reuters poll however, showed that Gulf states are not seen adopting a common unit until 2015.
* Reproduced by Middle East Observer, Issue 2 Vol. 1, April-May 2010
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