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The uncertain future of the ‘Khaleeji’
Things aren’t getting any clearer in the matter of a GCC unified currency. Katherine Azmeh thinks it may be time to put the project on hold.
May 25, 2010 1:37 by Katherine Azmeh
Kipp wasn’t the only one betting the UAE would have a change of heart. In what might best be interpreted as a moment of pride, the UAE announced its speedy departure from the Gulf single currency talks (also known as the ‘khaleeji’) after the announcement that Saudi Arabia would host the union’s future central bank.
Yes, it hurt. But lots of financially savvy types were betting that the GCC’s second largest economy would have the good sense to let financial interest prevail over a bruised ego.
Certainly, as home to the GCC’s largest banking sector, responsible for about a quarter of the region’s GDP in 2007, according to Middleeastforex.com, it seemed that the prideful UAE was pretending not to see the elephant in the room. “The benefits to the UAE will outweigh those for all other countries,” analysts insisted. “The UAE can’t afford to forfeit the benefits of seamless movement of goods and labor,” they cried. “Attracting foreign direct investment will be too hard to pass up.”
But that was May – last year. And 12 months later, the whole matter begs the question: Does the unified currency still make sense? Without Oman and the UAE, the entire affair just feels like three GCC currencies adopting Saudi currency, argued Philippe Dauba-Pantanacce, a senior economist at Standard Chartered.
A year down the road, it seems unlikely that we’re headed for an about-face by the UAE. By the end of March this year, Riyadh was hosting the games, but the UAE still wasn’t playing. UAE Central Bank Governor Sultan Bin Nasser Al Suwaidi said there were no talks aimed at bringing his country into the Gulf monetary union fold, Gulf News reported.
In light of the euro zone travails, it makes more sense than ever for the remaining Kuwait, Qatar and Bahrain, and Saudi Arabia to consider the wisdom behind their union.