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Maastricht Spurs Gulf States to Go for a Common Market

by Mohammed Aslam
***Greater regional economic co-operation is a world trend. The six-nation Gulf Cooperation Council plans to create a common market by 1999 to co-ordinate the oil rich economies of the Gulf states. Gemini News Service reports that European Community efforts to achieve a common monetary and economic policy seem to be the model for the Gulf states.
Proposals for the creation of a common market arc moving Guff states. The approach of the single market tn the European Community after 1093 la adding a sense of ur •racy to the debate.
Commerce minis lera from
Mx Oulf Cooperation Council (OCC) countries decided at a meeting in Doha. Qatar, to remove obstacles to a common market and set themselves a four-year deadline to resolve
These include unification of customs tariffs. selling up a regional share market and Jetting Oulf firms open representative offices in any member state.
The United Arab Emirates Minister of Stale for Financial and Industrial Affairs. Ahmed Al Tayer, said : *Wc have chalked out a timetable to Im piement the remaining points tn the (1982) Joint economic agreement between 1992 and 1999 This will lead io the establishment of a common Oulf market by the end of 1999 after monetary and banking rules are unified."
%lhe annual summit of : states tn Kuwait economic issues were high on the agenda. Several rounds of preparatory talks in recent weeks indicated a revival of tn-terest In efforts to give a fresh thrust to their oil-based economies by way of diversification and integration.
Economic cooperation leading to full uniformity of rules, procedures and operations was the prime purpose of the OCC when it was formed tn
But the circumstances tn which It was set up — a few months after the outbreak of the Iraq-Iran war in 1980 —kept the focus largely on political and security aspects of the strategically sensitive region.
The dangers posed and du ruplton caused by the long war compelled the smaller stales to think of pooling their resources to cope with any
spillover of hostilities.
That war ended in August 1988. but Just as the OCC stales were recovering from its effects and confidence was returning to liteir markets Iraq invaded Kuwait in August 1990. The shock was as crip phngasHwas unnerving.
The aftermath of tlx- war io free Kuwait has been compara lively easier to deal with, partly because of the confidence flowing from the United Slates-led viclory and partly because of the rapid economic revival fuelled by the rebuilding of Kuwal. and tlx- opening up of the Iranian, other Arab and South Asian economics.
The result has been quite
encouraging. Tlx- focus is returning to the goal of economic integration. In parallel arc equally energetic cllorts to find a post-war joint security mechanism with the help of friendly Arab and Western stales, such us Egypt, Syria, the US. Britain and France.
The six OCC member stales haw taken many complementary measures, notably allowing each others citizens to set up local trades, licensing fuclll Ues. Joint projects and conces-
sions on customs and transit controls.
Formidable problems remain. preventing quicker title gratlon of the economics. These relate to bunking regulations. import tariffs, dispart ties tn taxes, stock markets, subsidies and pi Icing patterns. Policies and practices on almost all these Issues dlfkr widely among tlx six. Levels of prosperity also vary.
Bahrain and the UAE allow foreign banks to operate and have also become financial centres of the region, whereas Saudi Arabia, the biggest of Ihc six. and Kuwait do not cn courage this trend.
Share prices of regional companies arc robust, but not all GCC members have formal slock exchanges. Equities are traded through authorised banks in the UAE; Kuwait, Bahrain and Oman have clocks famra; Saudi Arabia has a semi official exchange and Qatar plans to act up Its own slock market, as does Ihc UAE
Income Is tax-free, but Import levies and safes lax ve ry from place to place, ranging from a maximum of four per cent tn the UAE to up to 20 per cent tn Saudt Arabia. Unification of customs larifis poses the biggest difficulty.
After the Doha meeting. Abdullah Al Quwaiz. the coun ells Assistant Secretary-General for Economic Affairs, said they had decided io complete all outstanding formal! tka in four years.
And after the Kuwait finance minsters' meeting, the UAE minister. Al flayer, said the programme they had finalised "envisages accomplishment of a common OCC monetary, banking and customs market."
The Maastricht accord reached by the European Community on political. nv>i» laiy and social Integration has created perhaps the right at nioSphcrv for the Gulf states to compromise and agree on common tariffs In order to deal with a united Europe as a single and competitive group.
The Community is the OCC's main economic partner. In 1989 trade amounted to nearly 835 billion In 1989. Varied Gulf tariffs arc one factor preventing n trade poet between the two blocs.
I iowever. GCC economic performance has its critics. Kuwaiti economist Dr Abbas Al Mfjren says the group's efforts to diversify economics from dependence on one source of income — oil. which forms up to 85 per ecnl of revenues of some stales — had had "very poor results after all these decades."
A concerted programme to attract Arab mplUil lo local in vestment schemes Is not lo be encouraged. The Abu Ohnbi-bused Arab Monetary Fund estimates put Arab funds kept abroad, mostly in the West, nt 9670 billion — more than half owned by the Gulf govern mcnls. Economists and stock dealers emphasise that steps should be taken lo absorb these funds tn the region before luring them buck here.
One factor th.il makes such a prospect realistic is that Ihc Gulf economics are market oriented, with free enterprise and Ihc private sector being gtven a greater role tn dcvcl opmenl plans after ihc governments have laid out infras tructures out of their vust oil Incomes.
The pressing necessity now is to unify policies. Maastricht is expected lo spur action.
MOI MAIMED ASI AM Is on lite staff of Tin- Khaleej Times, lie was formerly with the Times oj India.