Page 49 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

Lines in the Sand: The GCC in the Broader Middle East 33

Disputes that meets if and when it is needed to adjudicate cross-
border issues. The Secretariat-General is based in Riyadh. Unlike
the EU, whose central agencies and departments play a more cru-
cial role in the lives of member countries, the GCC is a relatively
flexible association that reflects a spirit of cooperation and common
identity.
The GCC union has been strongest so far in its economic
actions. A common Customs Union over time was agreed to be
phased in 2003, stimulating the free flow of goods among the GCC
member states. Tariffs on non-GCC imports were envisioned by the
Union to be standardized. Nationals of GCC member states travel
freely between the six countries. Capital and investment flows are
facilitated through relaxed regulation, and GCC nationals may often
invest in equity markets outside of their own. During the stock mar-
ket boom that ended in 2006, for example, it was common to find
Saudi vehicles in the UAE camped out so that their Saudi owners
could be among the first to invest in the latest IPO. GCC companies,
although required to apply for licenses to operate in states other
than their home, increasingly are able to branch out across the Gulf.
The year 2007 had been identified as a target date for creating a
truly common market—though, in reality, some barriers persist.
In 2003, the GCC expressed a commitment to creating a com-
mon currency by 2010. A GCC Monetary Union would, according
to its proponents, aid in creating a common market, standardize
monetary policy, and create greater efficiency in the intra-GCC flow
of capital. In practice, however, the path to a common currency has
been fraught with roadblocks. One key barrier to integration is that
the constituent economies of the GCC have different macroeco-
nomic needs to consider in forming monetary policy. Another fun-
damental challenge is that a common currency would require a
common central bank—something that does not exist today and
would be a delicate entity to create. Oman has publicly stated that
it is not pursuing monetary union with its fellow GCC entities, and
other states have expressed reservations about the timeline. To com-
plicate matters further, in May 2007 Kuwait abandoned the practice
of pegging its currency’s valuation to the dollar, a practice which
the other five GCC nations still maintain. The GCC may one
day have a common currency, but it is unlikely to reach that stage
by 2010.