Kuwaitis know best…not really

Kuwaitis know best…not really

Kuwaiti politicians say the UAE did not pull out of the monetary union because Saudi Arabia was chosen as the host of the GCC central bank. They’re wrong.

May 24, 2009 1:00 by Dana El Baltaji

Kuwaiti politicians and economists say the UAE’s decision to pull out of the GCC monetary union has nothing to do with the decision to base the GCC central bank in Saudi Arabia, reported Kuwait’s official news agency, KUNA. They agreed that the UAE’s economy is “sturdy” and is an important financial hub in the region.

Interestingly, however, KUNA used quotations from a television interview with the UAE central bank governor Sultan bin Nasser Al Suweidi, where he explicitly states that the “The choice of location for the central bank was political,” adding that the council overlooked the nation’s financial and commercial advantages; he also noted that the UAE was the first to request hosting the GCC central bank in 2004.

“The decision ignored the competitive advantages enjoyed by the UAE and its banking sector, including having the largest number of banks, largest assets and largest deposits in the region. Additionally, UAE contributes 50 percent of the GCC’s international money transfer,” Al Suwaidi said.

But KUNA attributed his comments to ‘local economists’, and implied that Al Suweidi believed the UAE’s pulled out of the monetary union due to disputes in the role of the Gulf Monetary Council, monetary policies and currency agreements.

Nevertheless, there is little doubt in the media that the location of the central bank was a deciding factor in the UAE’s decision to pull out: immediately after the council agreed that Saudi Arabia will host the joint entity, the UAE “expressed reservation.”

GCC nations are keen to dispel rumors of conflicts in the region, although deadlocks over currency names, central bank locations and trade unions indicate growing tension in the region.

It is therefore little surprise that the Saudi Arabia’s Foreign Minister Prince Saud Al Faisal has insisted that “There is no conflict,” and that KUNA gave a positive spin on a story that, frankly, speaks for itself.