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Higher Colleges of Technology
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Gulf Cooperation Council Assessment
Course:
ECOM310 - E-Business Environment
Prepared For:
Haya al mutleq
Prepared by:
Amina Hussain
1) Research and provide an overview of the GCC.
Gcc stands for the Gulf Cooperation Council and it’s also known as CCASG Council for the
Arab States of the Gulf. It’s a political and economic union which has a many economic and
social objectives and consists of the six Arab states of the Arabian Gulf which are United Arab
Emirates, Bahrain, Kuwait Saudi Arabia, Qatar and Oman. The total area of these countries is
259 million hectares, the aim of this cooperative is to endorse harmonization between member
states to achieve unity. It founded on May 26 1981 in Saudi Arabia ( Riyadh),the GCC was
created to meet the defy necessary by the surrounding circumstances.
The important factors that helped in creating the union of Gcc countries are the similarity of
economic, regulations and social conditions also because the Gcc states are near to each others.
Objectives:
The objectives of this unity are
Shred projects preparation.
Creating Khaleeji common currency by 2010
Setting up shred projects
Build a strength relation between people.
Encouraging cooperation of the private sector
Establishing scientific research centers
Importance of economic integration to UAE Business organizations
eEconomic integration means the Elimination of tariff and non-tariff barriers to the flow of
goods, services, and factors-of-production between a group of nations, or different parts of the
same nation.
The importance of economic integration to the UAE Business organizations is that the policies
will be easier and comfortable for UAE organizations to operate a business in any of GCC states.
Introduction of Khaleeji
The “Khaleeji” was a planned name for the common currency of the member states of the GCC
or Cooperation Council for the Arab States of the Gulf which was aimed to produce in 2010. It’s
Arabic word which means “of the Gulf”, in addition “Dinar” was another suggested name and
Dinar was used in the Arab world in the prophet Mohammed time and also it was mentioned in
the Quran, but until now no official name has been agreed yet.
It was decided in on 5 May 2009 at the GCC consultative summit held in Riyadh, but UAE
didn’t agreed about the Central Bank location which is supposed to be in Saudi Arabia, and UAE
disagree and decided to not to participate in the monetary union (MU). Moreover Saudi Arabia
was chosen for the Central Bank location because It has the most higher number of oil producing
comparing to the other GCC countries.
The UAE was the first country to submit an application to host the GCC Central Bank in 2004,
as part of the arrangements to join the monetary union.
The GCC 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.
Saudi Arabia, Qatar, Kuwait and Bahrain decided to go on with Khaleeji Project, but UAE and
Oman rejected to go throw it.
Riyadh believes that a monetary union with Kuwait, Qatar and Bahrain will contribute to the
promotion of trade in the Gulf and give these countries greater influence on the world stage.
Khaleeji currency project was planned since 10 years and it’s seems like this project need 5 more
years. In addition the financial crises has a big effect on Khaleeji project because Qatar, Saudi
Arabia, Kuwait and Bahrain don’t want to face the financial crises with the Khaleeji currency so
they decided to wait and see what will happen about the financial crises.
Comparison between Euro and Khaleeji currency
Euro:
The European Central Bank (ECB) is the institution of the European Union (EU).
It has a 16 EU members state which are Belgium, Finland, Austria, France, Cyprus, Greece,
Germany, Italy, Ireland, Malta, Portugal, Netherlands, Spain, Slovakia, Luxembourg and
Slovenia. By the treaty of Amsterdam in 1988 the bank was established and the headquarter in
Frankfurt, Germany.
Symbol:
Picture:
Khaleeji :
Supposed to be introduced in 2010 but it seems like it will be introduce in 2015. It was planned
to be created between the 6 GCC countries members but UAE and Oman rejected to
participating with them and the big issue problem was the location of the Central Bank which
must be in Saudi Arabia and UAE didn’t accept this decision. Moreover Khaleeji currency is
expected to be linked to dollar.
Symbol:
Picture:
Advantages and disadvantages of khlaeeji common currency
One of the main factors required for the success of the idea of a common currency among a
group of countries is the need for the high volume of trade between member states and the free
movement of factors of production, capital, and the diversity of the productive base and
economic development of member states, so that contributes to unification of the currencies of
these countries in developing their economies and reach out to advanced stage of sustainable
development through economic integration.
Advantages
1. Standardization of economic policy towards the oil and gas in particular being the
strategic commodity for these countries
2. Unification of the customs regime for goods coming from outside the GCC countries
3. Consolidation of economic systems
4. Removal of tariffs among the Gulf states
5. Possibility of bargaining producing countries of strategic goods such as: rice, sugar and
tea.
6. Consolidation of the tax system in the Gulf States
Disadvantages:
1. Members' loss of independent monetary and exchange rate policies.
2. Less of trade potential within the GCC than in other currency unions because of a lack
of economic diversification.
3. The disadvantages to the UAE business is that the inability of UAE to address its
economic problems far from other GCC countries.
Why the common currency project didn’t achieve?
In order to succeed «monetary union» between a group of States should be the territory of
optimal currency area (Optimal Currency Area), which ensures that benefits are derived from the
single currency far outweigh the economic costs.
What will happen if one of the GCC faces a problem?
When one of the GCC countries face an unexpected problem or it was shocked and this problem
affected this country more than the others, so the other GCC countries will try to help that
country to overcome this problem. Having a common currency will be a great and variable idea
which has a lot of benefits like: provide an opportunity for the Gulf Cooperation Council to
move to more flexible exchange rate, the traveling between the GCC countries will be easier and
flexible.
In conclusion
I think that GCC should move up and solve the currency issue because if they success in the
currency project they will success in many other things. In addition cooperating and working as a
group will give the GCC countries very big value and reputation and the foreign countries will
think about any step that they want to do it to any of GCC countries because each country will be
a combination of 6 countries.
.In my opinion I would suggest to connect the Khaleeji currency with Euro instate of Dollar
because the Euro has more value than dollar nowadays.
The UAE didn’t agree to join the common currency project because they want the Central Bank
location to be in the UAE instated of Saudi Arabia and I think this issue should be solved and all
the GCC states should agree about the solution. Moreover the place of the central bank should
not be a big issue, but the most important thing is to have among the GCC and business
development in the region with one currency and one economy.