GCC unity agenda takes small steps forward

The six Gulf Cooperation Council leaders completed their summit in Kuwait City yesterday with only a wooly agreement on the implementation of monetary union for four of the countries, and with no deadline set currency markets are not going to take this seriously.

Apparently the Gulf monetary union pact has come into effect. That now leaves it up to a new GCC Monetary Council to sort out a timetable for the creation of a GCC Central Bank, and the currency launch.

Given that the UAE and Oman are already out of the union this is unlikely to happen anytime soon, if at all. But there will be the GCC Monetary Council early next year to start the ball rolling, albeit without a timetable to create the new currency.

Dollar peg

The practical value of the new currency is open to question. It will almost inevitably be pegged to the US dollar, with Kuwait giving up its currency basket. So monetary policy will still be effectively set in Washington.

It would be of some use for simplifying internal trade in the Gulf but this is relatively limited in any case, and currency exchange is not much of a barrier to trade. We are left with a symbol of unity then, but in the absence of Oman and the UAE even that is not achieved.

Unity goals

The other two big goals set by the GCC summit have more practical value. The unified electricity grid for the region will help prevent blackouts and reduce electricity costs over time. The Gulf railway is arguably a method of promoting the free movement of goods and people, although whether it will be worth the huge investment is far less certain.

For a transportation initiative to unite the GCC, Air Arabia’s suggestion of an open skies agreement to bring down the cost of air travel has a great deal to be said for it, and costs nothing. Passengers are far more likely to take a plane rather than a train. Railways have not been economic for more than a century.

Goods can also be moved more efficiently by road if decent roads are built. Surely an inter-GCC highway network would be a better investment than the railway.

Nonetheless, as the European Union has demonstrated Rome can not be built in a day. That the GCC leaders meet on a regular basis and have some measure of agreement on big issues of mutual interest is progress. But as with the European Union there is always the feeling that progress is steady but frustratingly slow.