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Gulf is our future… but maybe not the single currency

Gulf is our future… but maybe not the single currency

The UAE Economy Minister says the country still hopes to join a unified Gulf currency ‘one day.’ He is right that the Gulf is our future, but could be wrong about the currency.

December 5, 2010 2:48 by

As members of the euro, the beleaguered European single currency project, battle desperately to keep the whole ship afloat, there surely couldn’t be any other countries mulling the idea of a new unified currency project, could there?

Well of course there could! As the euro zone puts the finishing touches to Ireland’s rescue package and tries not to think to hard about Portugal, Belgium, Italy, and Spain, and as Germany begins to ponder bringing the whole thing to an inglorious end, the countries of the Gulf continue to timidly amble towards their own currency collaboration.

Now of course, this whole thing has been going for longer than Kipp has. Earlier this year it became clear that the provisional 2015 deadline for the introduction of the currency was ambitious, and latest estimates are that it could be 10 years away. The truth is, though, that the logistics of the union are huge; far better for the GCC to proceed with caution and take its time, in Kipp’s humble opinion.

We reported just a couple of weeks ago that Saudi’s economy is powering ahead. In fact, it’s a bit of a runaway freight train, with economic growth outpacing employment prospects and housing provision. We argued that with such an engine behind the single currency, the question of the UAE’s involvement may be a mute point; does the currency even need the second biggest economy in the GCC?

Well that question still doesn’t have an answer, but we do know one thing: The UAE needs the GCC. That much was confirmed this week by the Economy Minister himself: According to the Gulf News, Sultan Bin Saeed Al Mansouri told Saudi newspaper Al Eqtisadiah, “The Emirates still hope that there will be a single currency for the countries of the (Gulf Cooperation) Council one day.”

The quote is an olive branch to four countries still involved in the currency (Oman, like the UAE, abandoned the project). It could simply be an attempt to ensure a smooth meeting this week, of course, when Gulf rulers gather in Abu Dhabi, but nevertheless Saudi, Kuwait, Bahrain and Qatar are likely to see the comment as evidence the UAE may be persuaded back to the project.

The viability of a single GCC currency remains questionable, particularly in light of the euro’s much publicized travails. In May this year we explained that the whole project was modeled on the euro zone. Abdulrahman Al-Attiyah, secretary-general of the Gulf Cooperation Council, acknowledged as much when he said then that the GCC must draw lessons from the various crises afflicting the euro.

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