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Wan LixinOpinion deputy editor of Shanghai Daily
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Delays to Gulf currency deal as UAE pulls out
Source: Agencies |
June 9, 2009, Tuesday
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Print Edition
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THE signing of a monetary union agreement by just four of the six Gulf Arab states may result in delays for the establishment of a single currency, but the oil-rich region will need to overcome its political infighting to truly achieve its long-elusive goal of economic integration, analysts said yesterday.
In a major step toward setting up a Gulf equivalent of the European Union, foreign ministers from Saudi Arabia, Kuwait, Bahrain and Qatar on Sunday night signed a monetary pact aimed at setting up a central bank and a unified currency. The move came despite the decision by the United Arab Emirates, the second-largest and most diversified of the six-member Gulf Cooperation Council's economies, to withdraw from the plan. Analysts had voiced concerns that the UAE's pullout would doom the integration plans, but officials in Saudi Arabia, the Arab world's largest economy and home to the world's biggest proven reserves of oil, were determined to push ahead.
"This is a good indication that the remaining states will move ahead," said John Sfakianakis, chief economist with SABB, the HSBC Holdings Plc affiliate formerly known as Saudi British Bank. And, while "there is no doubt that the monetary union will be pushed back a few years," Sfakianakis said this delay should not be interpreted as a setback.
"It must be remembered that the European Monetary Union was a project that was 20 years in the making. Hence we should not conclude that because the date is being pushed back that the currency union will not happen," he said. "Obstacles and delays are common."
GCC officials had said they wanted to shift to the common currency by 2010, but that deadline has quickly fallen by the wayside.
The UAE's withdrawal offered a potentially serious blow. The nation, home to boomtown Dubai and oil-rich Abu Dhabi, dropped its backing for the plan after it was passed over in favor of Riyadh as the headquarters for the monetary council, the precursor to the region's central bank.
In a major step toward setting up a Gulf equivalent of the European Union, foreign ministers from Saudi Arabia, Kuwait, Bahrain and Qatar on Sunday night signed a monetary pact aimed at setting up a central bank and a unified currency. The move came despite the decision by the United Arab Emirates, the second-largest and most diversified of the six-member Gulf Cooperation Council's economies, to withdraw from the plan. Analysts had voiced concerns that the UAE's pullout would doom the integration plans, but officials in Saudi Arabia, the Arab world's largest economy and home to the world's biggest proven reserves of oil, were determined to push ahead.
"This is a good indication that the remaining states will move ahead," said John Sfakianakis, chief economist with SABB, the HSBC Holdings Plc affiliate formerly known as Saudi British Bank. And, while "there is no doubt that the monetary union will be pushed back a few years," Sfakianakis said this delay should not be interpreted as a setback.
"It must be remembered that the European Monetary Union was a project that was 20 years in the making. Hence we should not conclude that because the date is being pushed back that the currency union will not happen," he said. "Obstacles and delays are common."
GCC officials had said they wanted to shift to the common currency by 2010, but that deadline has quickly fallen by the wayside.
The UAE's withdrawal offered a potentially serious blow. The nation, home to boomtown Dubai and oil-rich Abu Dhabi, dropped its backing for the plan after it was passed over in favor of Riyadh as the headquarters for the monetary council, the precursor to the region's central bank.
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