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Posted On: 30 September 2009 10:52 am
Updated On: 12 November 2020 02:10 pm

GCC single currency ‘a step toward integration’

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Delays in achieving a unified GCC currency should not be looked at as a failure of the whole plan, CNN anchor John Defterios said yesterday. The presenter of the weekly Middle East Marketplace in an interview with the Gulf Times also warned that the GCC countries have no option but go with the single currency. The current global recession is another reason decisions have to be made quickly. “I don’t think they (GCC) have any choice but to go with it. It’s going be a slower process than many were hoping. The architects that were building the concept for a 2010 launch may not have all the six countries; may not even have four countries, or face other trade or finance related disputes,” said Defterios. “But if you look at the bigger picture those are stepping stones in a very giant process of inter-Arab integration. So these are problems, yes but are these insurmountable problems, no,” said Defterios who has reported on the region for over 20 years. While drawing parallels between Euro and the proposed GCC currency, he said that during the launch process of a European currency and the 10 years leading up to it, similar challenges; the same disputes over opening trade markets, over financial services, and over location of the central bank, arose. “But does it really matter whether the launch of the currency takes place now (in 2010) or in a 3-5year horizon… the fact that they are talking about it, is a big plus,” he added. And with inter-Arab trade at all times high, even a broader Arab currency within 20-22 countries, according to Defterios, was not “too far fetched”. “With the oil surpluses people wanted to keep their capital in the same neighbourhood (thereby)… accumulating a great deal of surplus so the money that’s going into Africa from the GCC is like one giant development,” he explained. “Once you do that process of raising the wealth within the region, developing a free trade zone and eventually a currency for the region could be something that is not that far fetched in the next 20 years horizon,” he added. On Qatar, the prospects for growth particularly looked brighter to the man tracking the regional economies especially with the “phenomenal build out on the LNG side” whose export capacity is expected to increase by 75% by 2010. “Needless to say in a population of 200,000 the development plan is a long running one. But the betting that LNG technology is the fuel of the future by the Emir and his cabinet paid off,” he said. According to him, the greater economic landscape will be owned by a new generation of East-East for the next 25 years and Middle East will be right at the heart of that belt of growth. Citing expected growth rates of Qatar (8.5%), Dubai and Saudi Arabia’s (5-6%) in few years, Defterios said any body in the GC will be happy to have that kind of growth in the current global climate. “For Qatar, one of the things that changed dramatically in the last five years is that they have taken the energy surpluses and diverted into other sectors. The beauty of that model is that domestic re-investment is creating the domestic growth,” he said while adding that the process of diversification is not done yet and will need another 10 years. The expert also projected that oil at $60-70 will be sustained between the next 12-24 months with the escalation of prices taking place to the range of $80-120 on the back of demand coming from the East (China, India and Middle East) again. Defterios also blamed economists in the West for “completely miscalculating” the growth in the East while also lashing out at those who “believe that they can put restrictions on capital flows whether it’s China or Sovereign Wealth Funds (SWFs) from the GCC”. “People live in dreamland if they think they can put restrictions on capital. Those putting restrictions already quickly went from a paranoid partner to a needy one. The biggest lesson of this worst downturn of 60 years is that East-West bond in terms of capital flows is very essential,” he added.