UAE Pulls Out of Gulf Monetary Union Project
They apparently did not like the way the game was going, so they picked up their ball and went home!
-----------------------------------------------------
U.A.E. Pulls Out of Gulf Monetary Union Project
By Maher Chmaytelli and Camilla Hall
May 20 (Bloomberg) -- The United Arab Emirates, the second largest Arab economy, has pulled out of the planned monetary union of oil-rich Gulf states, dealing a blow to their goal of establishing a European-style single currency.
“It’s like France saying it wants to pull out of the euro,” Eckart Woertz, an economist with the Dubai-based Gulf Research Center, said today in a telephone interview. “The single currency is dead.”
The U.A.E. has expressed reservations that Riyadh, the Saudi capital, was chosen on May 5 to host the Monetary Council, a precursor to a common central bank. Little progress prior to that decision had been made since September when central bank governors approved the monetary union agreement.
The Gulf Cooperation Council in 2001 agreed to form an EU- style monetary union. Oman pulled out in 2007. Saudi Arabia, the largest Arab economy, Kuwait, Qatar and Bahrain are still part of the project. A single currency would enable Gulf states to pursue a monetary policy that is independent of the U.S., as all except for Kuwait peg their currencies to the dollar. It would also help support a fully integrated economic zone.
Kuwait plans to “go ahead” with the Gulf single currency, Kuwaiti Finance Minister Mustafa al-Shimali said in a phone interview today. He added that Kuwait has not received “anything official” on the U.A.E. pulling out.
Gulf Reactions
The Central Bank of Bahrain supports GCC monetary union as it is in the long term interests of the members, a bank spokeswoman said in a telephone interview, speaking on customary condition of anonymity.
No immediate comment was available from the Saudi Arabian Monetary Agency or the Qatari central bank.
UBS AG said in a May 5 report that the project had “little chance” of meeting its proposed start date of 2010.
“This decision seems to be linked to the decision to locate the GCC Monetary Council in Riyadh,” Tristan Cooper, chief regional economist at Moody’s Investors Service, said by e-mail. “It remains to be seen what the ramifications of this decision will be for the U.A.E.’s bilateral relations with Saudi Arabia, but clearly it is not positive.”
U.A.E. central bank Governor Sultan bin Nasser al-Suwaidi said his country will keep the dirham’s peg to the dollar.
Expansionary Policy
“The U.A.E will continue to maintain its expansionary monetary policy and will keep the exchange rate of the dirham pegged to the dollar,” al-Suwaidi told the state-run news agency WAM. Al-Suwaidi stressed that the U.A.E had been the first country to offer to host the central bank, five years ago and said it doesn’t have any body affiliated with the GCC on its territory. The GCC headquarters is in Riyadh.
“The U.A.E. has decided not to be part of the Gulf monetary union agreement,” a Foreign Ministry spokesman in Abu Dhabi was cited as saying by WAM.
“Emotions and egos are prevailing over rational decision- making and the U.A.E. is voicing its dissatisfaction by going against the union,” said John Sfakianakis, chief economist at the Saudi British Bank in Riyadh. “An important participant is now out. But it doesn’t mean the union is coming to an end, just some convincing has to be done to get them, the U.A.E, to re- enter. I hope they re-enter and emotions will not prevail.”
The U.A.E. officially notified the secretariat of the GCC of its decision to pull out, the Foreign Ministry spokesman said. Nasser al-Kaud, the GCC’s deputy assistant secretary- general for economic affairs, declined to comment.
A common currency in the GCC would be “on a more equal footing with other major currencies,” said chief regional economist Monica Malik, at EFG-Hermes SAE, the biggest publicly traded investment bank in Egypt. “The monetary union was seen as a possible first move to a more flexible trade regime.”
To contact the reporter on this story: Camilla Hall in Riyadh at [email protected] Chmaytelli in Dubai at [email protected]
Last Updated: May 20, 2009 09:08 EDT
They could keep the headquarters a symbolic thing...
Have a big building where most of the work is done in Riyadh, and smaller building in all other countries, rotating the "Headquarters" location.
They've said that they are leaving the door open. Perhaps a solution is that the "headquarters" is rotated amongst the group every five years.
Who to ask, is GCC united???
I guess UAE standing point is correct, the central bank should be located in Dubai due to it's liberal financial, economical and soical policies.
goaboy, not really, they will come back in a few years.
MOST GCC countries do that from time to time, on different issues.
for the unified currency theory
"Arabs agreed on not to agree" :((
[removed by mod - do not advertise on the main forum]
who cares, they weren't also part in the gulf electricity interconnection. Apparently they regret it later, and requested to take part in the second phase of the interchange.
It's a stupid move if the only reason is that they want it to be in Abu Dhabi.
I would suggest that they pin the new currency to USD 1, since we all sell our main source of income in Dollars.
Shopping online would also be much easier with a 1-to-1 relation, you would know the price without any mental math.
Monetary union in the Gulf will continue despite the withdrawal of the UAE, the four remaining GCC countries signed up to the single currency plan have pledged.
Speaking in the aftermath of the UAE’s decision on Wednesday to pull out of the 10 year-old plan, official sources for the GCC, Kuwait, Qatar and Saudi said the union would go ahead
However, they agreed that the union would be weakened by the move, with the UAE being the second GCC member to opt out of the union after Oman pulled out in 2007.
Kuwait's finance minister, Mustapha Al Shamali was among the first to comment on the effect of the UAE’s decision on the future of the union, which is scheduled to come into force by the end of 2010.
"Kuwait and other Gulf Cooperation Council (GCC) countries are still committed with this agreement and we are all going ahead with what we've agreed on. There is no change in the stance of Kuwait."
Meanwhile, a key advisor to the Qatari Amir confirmed to local media that the Gulf state was still on board with the monetary union plan.
"We believe in the common currency for the GCC and we will forge head with the work," Ibrahim Al Ibrahim said in remarks published in an Arabic Qatari newspaper on Thursday.
"Really, it is a regrettable thing for the GCC. There are things that are going positively and others that are going negatively," he added.
The newspaper also cited Naser Al Kaud, deputy assistant secretary-general of the GCC Secretariat, as saying Saudi Arabia, Kuwait, Qatar and Bahrain were still committed to the common currency.
However, he admitted that the UAE's move would weaken the single currency plan.
http://www.arabianbusiness.com/556297-gulf-states-pledge-to-contiune-with-monetary-union
[img_assist|nid=50852|title=hmm|desc=|link=none|align=left|width=|height=0]
I agree. The three should move ahead. Once the benefits are realized, then others may follow suit.
We can still start it with Qatar, Saudi, Bahrain...
i believe so too, i think this monetary union agreement will do good for a fully integrated economic zone. "A single currency would enable Gulf states to pursue a monetary policy that is independent of the U.S."-- this sounds good, doesnt it?
A simple powerplay by Abu Dhabi. Saudi may be the Big Dog, but Abu Dhabi is awash with cash. They want to put one over on the Saudis.
well without Oman, Kuwait and now with UAE out of the plan ...the common currency doesnt seem to be happening!!!
What is it with Arabs and unity? Why is it so hard to work towards a common goal?
This is so childish of the UAE to get upset because they couldn't get their own way and host the bank.