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					Gulf Cooperation Council Assessment


                   Date:

            10th December 2009


                  Course:

      ECOM310 - E-Business Environment


               Prepared For:

              Haya al mutleq


               Prepared by:

       Maryam Belshalat - H00052991
                                               TABLE OF CONTENTS




   GCC Overview ................................................................................................................... 1
   The Importance of Economic Integration to UAE Business .............................................. 2
   Introducing Kaleeji ............................................................................................................. 2
   Fixed and Floating exchange rate....................................................................................... 3
   Compare Kaleeji to EURO ................................................................................................. 5
   Future Expectations ............................................................................................................ 6
   Recommendation ................................................................................................................ 6
   References: ......................................................................................................................... 7
       E-Business Environment-ECOM –310                                             Level.05




       GCC Overview

The GCC, stand for Gulf Cooperation Council. GCC is union and that means joining together
more than one country, its economic and political union, connecting six Arab states of the
Persian Gulf with many objectives.
The members of GCC are United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar and
Kuwait.


History
The leaders of the six states meet in Abu Dhabi on 25th May 1981, where they achieved an
accommodating framework connecting the six states to outcome organization, integration and
inter-connection among the Member States in all fields in order to achieve unity.
Not all of the countries near the Persian Gulf are members of GCC. Yemen is discussing to
connect the GCC council by 2016.


Main Objective
There are too many objectives that the six states thought about when they created GCC. These
are the main objective.


      Creating parallel regulations in diverse fields
      Creating technical research centres
      Setting up shared projects or events
      Encouraging collaboration of the private sector
      Increase ties among their popular
      Creating a common currency by 2010 which will be called khaleeji




Maryam Belshalat   - H00052991
Sec:02
                                                                                          1    Page
       E-Business Environment-ECOM –310                                                 Level.05


       The Importance of Economic Integration to UAE Business

The UAE economy is a mild economy and it growth year after year. As the studies about
UAE economy the UAE's economy is projected to grow by 3 per cent this year.


Moreover, force of crisis on UAE economy is calm: The Gulf economies are not opposed to to
the worldwide financial crisis. Governments of the GCC countries should sketch lessons from
this experience and expand new plans to better direct their possessions.



       Introducing Kaleeji

Advantages:

GCC Gulf Cooperation council counties they expected to introduce the khaleeji currency in
2010 which will be a common currency between their members. However, when they decided
to introduce this currency they thought about the advantages and the objective of introducing
the common currency.


There are a lot of advantages; I will talk about some of them. By having a common currency
the GCC area will collect more about more strength. Also, a common currency could get
deeper in addition of capital markets across the Gulf States, boosting foreign direct ventures.


Moreover, the common currency creates and makes it not possible for countries to connect in
aggressive devaluations as happened before the creation of euro. And it lets the pegs further
believable by making it irreparable.


Furthermore, there are some more advantages. For example, the common currency can get rid
of FX risk and decrease business price, so it will support intra- regional trade.


Disadvantages:

Despite the advantages there is one disadvantage that may affect the common currency for
GCC.


Maryam Belshalat    - H00052991
Sec:02
                                                                                              2    Page
       E-Business Environment-ECOM –310                                                Level.05


Global financial crisis can be one the negative aspect of introducing khaleeji currency since
the GCC countries are one of the affected countries from the crisis and the common currency
may create a financial problem and difficulties for GCC’s country.




       Fixed and Floating exchange rate

Fixed exchange rate
A fixed exchange rate is frequently used to steady the currency value and sometimes called a
pegged exchange rate an it’s a sort of exchange rate regime wherein a currency’s price is
coordinated to the price of another single currency.


Moreover, fixed exchange rate also used to manage and organize inflation which means when
the prices increase. On the other hand, as the situation value rises and falls, so does the
currency pegged to it.


Advantages:
There are a lot of advantages of the fixed exchange rate. The first advantage is decrease threat
in global trade. That because by sustaining a fixed rate, buyer and sellers of supplies can
accept a price and not be a focus to the risk if any changes happened in the exchange rate.


The second advantage is bringing in regulation in economic management. Since the load or
pain of adjustment to balance is thrown onto the economy then governments have make in
incentive not to go after inflationary policies.


The third advantage is that fixed rates should get rid of destabilizing conjecture.
The last advantage is joining a fixed exchange rate may be the reason of inflationary
expectations to be lower.


Disadvantages:


Maryam Belshalat    - H00052991
Sec:02
                                                                                              3   Page
          E-Business Environment-ECOM –310                                              Level.05


Although, the fixed exchange rate have a lot of advantages but it have some disadvantages
too.
The first disadvantage is that the fixed exchanges have no automatic balance of payments
adjustment. A floating exchange rate has to contract with disequilibrium in the equilibrium of
payments without government interfering.


The second disadvantage is Loss of liberty in your internal which mean inside policy.


The third disadvantage is Fixed rates are naturally unbalanced. That mean Countries within a
fixed rate frequently go after different economic policies, the result of which be inclined to be
differing rates of inflation.


The last disadvantage it is hard to react to temporary shocks.


Floating exchange rate
A floating exchange rate also it is a sort of exchange rate regime in which a currency's prices
is allowed to fluctuate according to the foreign exchange market. A floating exchange rate
means when currency values keep changing.
A floating currency is the currency which makes use of a floating exchange rate.


Advantages
There are a lot of advantages of the floating exchange rate. The first advantage is Automatic
equilibrium of payments change. Any equilibrium of costs disequilibrium will tend to be
rectified by a change in the exchange rate.
The second advantage is lack of crises. Since fixed rates are frequently characterised by
crises.
The third advantage is flexibility, as the floating rate lets a country to re-adjust more flexibly
to external shocks.
The last advantage is lesser overseas exchange reserves.


Disadvantages



Maryam Belshalat      - H00052991
Sec:02
                                                                                               4   Page
       E-Business Environment-ECOM –310                                               Level.05


There are some disadvantages of the floating exchange rate. For example, Uncertainty is one
of the disadvantages because that the changes in the value from day to day introduce
uncertainty into the trade.


Also, lack of investment could be one of the disadvantages since, the uncertainty can direct to
lack of investment.


Moreover, Speculation is one the disadvantages because it could be a damaging and
destabilizing for the economy


Furthermore, a floating exchange rate could be Inflation



        Compare Kaleeji to EURO

Khaleeji
GCC are expecting to introduce a common currency for their member which called Khaleeji
currency.
There are some conjectures that the khaleeji currency will be reversed by gold since Islamic
economic jurisprudence prohibits interest.
The central bank of GCC for the common currency will host in Riyadh, Saudi Arabia, this
was determined on May 5, 2009 at the Daraeya Palace in Riyadh. The decision of the central
bank which will hold in Saudi Arabia upset the administrators in the UAE since they wanted
to host the bank.
If the khaleeji currency adopt the sole legal tender in Saudi Arabia, Kuwait, Bahrain and
Qatar. The United Arab Emirates and Oman have fixed that they will not take on the new
currency at first.
The new khaleeji currency will be issued in 2013.


Euro
The bureaucrat currency of the European Union called Euro. Euro is use in 16 member states.
The states are Belgium, Finland, Austria, France, Cyprus, Greece, Germany, Italy, Ireland,
Malta, Portugal, Netherlands, Spain, Slovakia, Luxembourg and Slovenia.


Maryam Belshalat      - H00052991
Sec:02
                                                                                            5    Page
      E-Business Environment-ECOM –310                                               Level.05




The Euro is considered as the second largest currency after the US dollar.


The adoption of the name of euro was on 16 December 1995.The euro was bring in to world
financial markets as a common currency on 1 January 1999.
Euro coins and banknotes entered circulation on 1 January 2002.




       Future Expectations

       1. The massive development in the two sectors such as Real Estate and Tourism
           Industries.
       2. The increase growth of population.
       3. Strong relation to work with Global Financial Markets.
       4. Great opportunities for Foreign Investment.
       5. The economy growth regionally and globally.
       6. High records of Demographics.
       7. The existence of large numbers of Investment Institutions.
       8. Having the opportunity with Europe and Asia which can benefit the economy.

       Recommendation

I recommend that the GCC Countries should consider the factors which will contribute in the
growth of the economy in the global markets. Besides, I believe that the GCC countries
should create strong trading relationships with trade countries. Moreover, the GCC countries
shouldn’t rely on one sector, but they should develop on other sectors such as Real Estate and
Agriculture.




Maryam Belshalat   - H00052991
Sec:02
                                                                                           6     Page
      E-Business Environment-ECOM –310                                          Level.05




       References:

"Advantages of Fixed Exchange Rate." economicshelp. Web. 3 Dec 2009.
<http://www.economicshelp.org/macroeconomics/exchangerate/advantages-disadvantages-
fixed.html>.


"Cooperation Council for the Arab States of the Gulf." wikepedia. Web. 7 Dec 2009.
<http://en.wikipedia.org/wiki/Cooperation_Council_for_the_Arab_States_of_the_Gulf>.


"Khaleeji Will Be The Gulf's Common Currency In 2010 ." marketskeptics. Web. 1 Dec 2009.
<http://www.marketskeptics.com/2009/02/khaleeji-will-be-gulfs-common-currency.html>.


"Markets - Foreign exchange market." bized. Web. 9 Dec 2009.
<http://www.bized.co.uk/virtual/bank/economics/markets/foreign/further1.htm>.


"The GCC common currency – monetary disunion? ." economist. Web. 2 Dec 2009.
<http://qfc.economist.com/tabid/82/Default.aspx >.


"The Gulf: No common currency on the horizon." economy-news. Web. 5 Dec 2009.
<http://www.economy-news.co.uk/gulf-currency-0911.html>.




Maryam Belshalat   - H00052991
Sec:02
                                                                                      7    Page

				
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