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Funnel vision—what is holding GCC economic integration?
The EU hasn’t prevented the economic downfall Europe is experiencing today. What about the GCC union? Booz&Co examines what’s been keeping the 30-year-old GCC union behind on their own agenda.
August 14, 2011 2:25 by Eva Fernandes
The future of the European Union is unclear and somewhat dismal at this point of time. There is no denying that it has often served as an example of how economic integration at a regional level can be greatly beneficial. For instance, in the past 15 years, the EU has enjoyed a creation of 2.75 million new jobs and 2.2 percent of additional GDP over a 15 year period. What is more, with the introduction of the Euro, a 5 percent to 10 percent increase in trade can be observed.
In light of the various benefits economic integration can provide a regional block of kinds and as the GCC approaches its 30th birthday, Booz & Co have recently released a report titled “Integrating, not Integrated: A Scorecard of GCC Economic Integration.” The report has a good number of perceptive insights on ways in which the GCC can better integrate, but Kipp found the following two most instructive.
While the report noted that individual members of the GCC like, the UAE and Qatar are investing in education and Research and Development projects, there still is a real lack of collaboration on joint projects. In order to counter this, the report suggested the establishment of a regional research institution, quite like the European Research Council which will help fund and promote regional collaborative projects. Hatem A. Samman Director, Ideation Center said, “The region also needs to involve the private sector in R&D projects via incentives that give companies the opportunity to contribute to transnational research and development.”
Though the target date for the introduction of a common currency was 2010, the date has now been further delayed. The withdrawal of the UAE and Oman from the proposed currency is undoubtedly a setback for the union, however the fact that all members (except Kuwait) have pegged their currency to the US dollar will mean that transition will be smoother than otherwise. In order to get back on track with monetary union plans, Booz & Co highly recommend the establishment of “a robust system of payments and strong links among financial markets, by harmonising legal and regulatory infrastructures. To that end, the GCC countries should invest in compatible statistical institutions at both the national and regional levels, perhaps akin to the Eurostat of the European Union.”
The rest of the points Booz & Co considered indicated upward movement. Progress was seen Intra-regional investment, the management of customs and borders, as well as joint infrastructure.