Analysts here believe it is unlikely for the UAE to rejoin the regional monetary union after having decided to pull out of it over the issue of the proposed Gulf central bank being headquartered in Saudi Arabia.
“It’s unlikely the UAE would review its boycott decision because of the nature of the dispute,” financial analyst Bashir Yusuf Al Kahloot said.
The United Arab Emirates held the door open yesterday to rejoining the Gulf Arab monetary union, a day after pulling out of the project, although it said it was not interested in participating for the moment. UAE Foreign Minister Sheikh Abdullah bin Zayed Al Nahyan said: “I would not say the door is closed, there is nothing that is an endgame in politics,” Sheikh Abdallah told reporters on a visit to Latvia, signalling the UAE may reconsider its position. “But I am saying that for the moment we are not interested,” he was quoted by a news agency as saying.
The decision of the UAE to withdraw from the union might be aimed at testing the waters and building pressure on GCC leadership to eventually agree to shift the venue of the central bank, Kahloot said. The withdrawal decision came just when Oman was about to return to the monetary council. “It has already begun attending the meetings of the union,” Al Kahloot told this newspaper yesterday. A common currency is very much a plausible idea even if four GCC states, including Qatar and Saudi Arabia, pressed ahead with it. It would, in fact, be easier to conclude negotiations.
Qatar has already reaffirmed its support for the common currency as the economic adviser to the Emir, Dr Ibrahim Al Ibrahim, reasserted on hearing of the UAE decision that Doha will not change its stance and will press ahead with currency plans.
“The European Union (EU) launched the euro without the sterling pound although the latter is one of the four strongest world currencies,” Al Kahloot argued.
Saudi Arabia’s share in the combined Gulf economies is an estimated 55 to 60 percent, while the UAE, which boasts the largest sovereign wealth fund in the entire Arab world, contributes 21 percent to the combined regional GDP. It is the second largest Gulf economy. And, while Saudi Arabia has the GCC secretariat based there, having the proposed Gulf central bank also headquartered there would, in the opinion of the UAE, mean Riyadh’s near-total dominance in the region.
The UAE, according to Al Kahloot, was the first GCC member-state which had thrown its hat in the ring in 2004 to host the regional central bank, so it was hoping to win the bid.
One reason why the UAE might be feeling hurt is that no GCC body is based in that country. There is only one Arab organisation (Arab Monetary Union) which is in Abu Dhabi, said Al Kahloot.
However, asked if with or without the UAE, the GCC states were in a position to launch a Gulf currency by 2010, he replied in the negative and said it would take at least two to three years beyond the deadline since many issues still remain unresolved. “They haven’t even thought of what they would call the currency, dirham or riyal,” said Kahloot.
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