x Abu Dhabi, UAEThursday 18 January 2018

Monetary union at top of GCC summit agenda

Despite talks of a common currency, observers say a major challenge for the summit is the crisis along the Saudi-Yemen borders.

Kuwait's deputy prime minister said the summit in Kuwait will be a "launch pad" for a common currency in the GCC.
Kuwait's deputy prime minister said the summit in Kuwait will be a "launch pad" for a common currency in the GCC.

KUWAIT CITY // The top issue on the agenda as leaders of the Gulf Co-operation Council prepare to hold their next summit is the creation of a unified currency for Bahrain, Kuwait, Qatar and Saudi Arabia. The establishment of a common electricity grid and the conflict in Yemen will also be high on the agenda.

The GCC's remaining two states - Oman and the UAE - have currently opted out of monetary union. Kuwait's deputy prime minister and minister of foreign affairs, Sheikh Mohammed Sabah Al Salem Al Sabah, said the two-day summit in Kuwait, beginning on December 14, will be a "launch pad" for a common currency, the state news agency Kuna reported. "The train moved on its way for accrediting the currency in 2010," Sheikh Khaled bin Ahmed Al Khalifa, Bahrain's minister of foreign affairs, said at a press conference last month after meeting Mr Al Sabah.

GCC states have often cited 2010 as the currency's launch date since fomenting the idea in the early 1980s, but analysts have been sceptical that the date can be met. "I doubt they will launch it in the next couple of years," said Majdi Gharzeddeene, the head of the investment research department at Kamco, an asset-management and financial services company in Kuwait. "They have the intention to launch it - they are serious - but they have political problems."

Mr Gharzeddeene said: "They need the legislation and the mechanism to put the currency in place." Riyadh was chosen as the eventual location for a new central bank, but then the UAE, which thought it was better placed to host the bank, pulled out. A new currency could boost trade within the GCC, as well as promote economic diversification and financial integration, according to a report by Calyon, the corporate and investment arm of the Crédit Agricole Group.

The GCC leaders believe the electric grid is part of the solution to the region's power crisis. It will enable utilities within each country to share power during peak periods, reducing the need for expensive new power stations. The grid is expected to be completed in stages over the next two years. As for the crisis in Yemen, Riad Kahwaji, the chief executive officer of Inegma, an institute for Near East and Gulf military analysis based in Dubai, said the leaders would "access the challenges they face" and "the new challenge is the crisis along the borders of Saudi Arabia".

Mr Kahwaji said: "The Saudis and some GCC states believe Iran is undermining their security" by using the Houthis to fight "a proxy war" in northern Yemen. He said the GCC states have strongly supported the Saudis so far and do not have a problem with the Yemeni government, which might be invited to attend the event. The GCC's Supreme Council consists of the heads of each of the six states, and it rotates the presidency in Arabic alphabetical order each year. Even though the leaders might show solidarity with each other in the face of military aggression, Ibrahim Khayat, a Dubai-based economic and strategic affairs analyst, said to become a regional power, the GCC needs to develop stronger institutions such as a regional parliament and tribunals.

"The GCC is working through individuals," Mr Khayat said. "If someone isn't happy with, say, a border dispute, it takes over [the summit]." The GCC has been criticised for its reliance on personal power, infighting and poor implementation of resolutions. But at a recent lecture at the American University of Kuwait, Abdullah Bishara, a Kuwaiti who was the GCC's secretary general for 12 years, highlighted the council's importance.

Mr Bishara said when the GCC was formed, in 1981, there was a war between the "pan-Arab, radical Baath" of Saddam Hussein and the "radical Muslim drive" of Ayatollah Ruhollah Khomeini. He said the GCC was created in this "chaotic environment" to "build a wall against the power of destruction, disorder and confusion that flowed from Tehran and that flowed from Baghdad". Mr Bishara said by acting together strategically and economically the GCC's energy-rich countries joined the "VIP lounge" of international states. He said the GCC might be "slow in many things", but this is because of "cautiousness".

"After 28 years of the GCC, you will see radicalism, pan-Arabism, fundamentalism on the run, and you will see the power of stability and the drive for moderation," he said. "The healthy spot in Arab politics is the GCC." The GCC's website says it is "a practical answer to the challenges of security and economic development in the area" and fulfils "the aspirations of its citizens toward some sort of Arab regional unity".

The council's achievements so far include a joint agricultural policy, a customs union and the launch of a common market. Email:jcalderwood@thenational.ae