Gulf Currency Union, Issues of Pegging and Trade, Ibn Saud and Demography…….

“Gulf states should implement a monetary union and single currency in phases, Kuwait's central bank governor said in comments published on Sunday, casting further doubt on a 2010 target date. Due to the limited progress achieved so far... I believe that the best way is to work out an administrative plan for the monetary union and single currency and implement it in stages……
“The six-nation Gulf Cooperation Council (GCC) plans to launch monetary union and a single currency in 2010, although many experts believe the target date is too ambitious and unrealistic…….Sheikh Salem said the administrative plan should focus on the institutional requirements of the union including financial, trade, statistical and common market policies. He also said that printing banknotes for the new currency would take three years to complete.

“The GCC states have agreed on a number of monetary union requirements but failed to reach consensus on others. They have also failed to fully implement a customs union launched at the beginning of 2003……..”

He was stating what I knew, what many have known for some time.
Finally, it is good to hear practical public statements, for a change, from GCC officials on the Gulf currency union project. Economically and politically it makes sense to do so. Without implementing some gradual preliminary steps the whole project will be a disaster. It is better, much less costly, to admit short-term failure and work on redrawing plans, than to try to force the issue and create huge problems later on.
I recall some years ago when it was impossible to get everyone in the GCC to peg their currencies to the same anchor. Some preferred the dollar, others the SDR, and one a special basket.

It was absurd to expect anything to be in place by 2010 without first ironing out the differences on such issues as trade, and without reaching the agreement on the grueling and time-consuming process of the actual issue of notes and coins. This is something that I had mentioned earlier on this site. I believe I mentioned Zollverein in Arabia more than once on this site.

It can be shocking how little interest both the GCC general public and politicians have shown in the issue of currency union. It was being treated as a ‘political’ issue that concerns only the officials. It does have political implications, of course, but its immediate impact would be to affect economic issues. Even the legislatures and what passes for legislatures in some countries have rarely ventured to deal with the issue, most likely because they are technically incapable of doing so.

Of course, having the union confined to one large country (Saudi Arabia) and two smaller countries (Kuwait and Bahrain) does have political implications- I expected Qatar to pull out at some point. There are always concerns, valid concerns, about the loss of sovereignty and political independence. After all, the current borders of Saudi Arabia were extended when old Ibn Saud expanded out of his native Najd to swallow several smaller kingdoms and emirates of the Arabian Peninsula during the 20th century.
(Ibn Saud also expanded in another way; demographically, by marrying into almost every tribe he could get his lusty hands on; eventually filling the kingdom with thousands of princelings. But that will be a topic for another day.)
Cheers
Mohammed