Gulf Financial Markets: Fundamentals vs. Conspiracy, Deutscher Zollverein in Arabia

Saudi Markets:
A report in the Saudi daily Okaz hints that foreign capital movements may be responsible for the consistent Saudi market decline. Others have come up with their own explanations, which include:
1)The authorities have started new trading and transparency measures at the wrong time. (Note: it is always the wrong time to start reforms and changes).
2)The poor quality of professional advice, and the low quality of media analyses.
3)This is the most interesting. An analyst and financial journalist claims that foreigners using Saudis as fronts are responsible for the market weakness. The report hints at dark conspiracies as part of a psychological war against the kingdom. It did not specify who these foreigners work for. Could it be the Zionists in Israel or the Shi’a mullahs in Iran? Or perhaps both. I can imagine some Wahabi/Salafi sheikhs scrambling to whip out their well-thumbed mass-market editions of that venerable best seller of the Tsarist Okhrana ‘The Protocols of the Elders of Zion’.

Some have called for the activation of the Equilibrium Fund that was ordered by King Abdullah earlier this year, with the goal of maintaining market ‘stability’. Others urge that the country’s oil surpluses be invested in the domestic stock market. They claim that even the World Bank has recommended such measures. I am doubtful that the IBRD would recommend such steps, not unless it has been relocated from Washington to beautiful downtown Riyadh- which would require replacing Paul Wolfowitz for obvious reasons which we will not discuss in this age of the New Middle East.

GCC Currency and Customs:
Some reports indicate that Oman has opted out of a unified GCC Gulf currency because of failure to establish a customs union. A UAE official has pointed the finger at Saudi Arabia as the main force behind this failure. He claims that Saudi Arabian trade policies are highly protective, that it imposes extra tariffs of up to 15% on about 300 products, including steel and textiles, when the rate should not be more than 5%.
Another pint of contention is that Bahrain and Oman have signed agreements with the United States on lowering tariffs, something that is controversial to other members of the GCC.
It now looks almost certain that the Gulf currency union will be postponed beyond 2010.
Perhaps the potentates of the GCC, or at least their monetary and economic chiefs, should go back and take another look at the history of that old arrangement, the Deutscher Zollverein of about, oh, 150 years ago. They should learn some important lessons of the ABCs of customs and currency unions.
Cheers
Mohammed