Notwithstanding the many political and security challenges facing the region, the leaders of the Gulf Cooperation Council (GCC) states made the right decision in not overlooking the matter of closer regional economic integration.Among other things, the latest summit, in Doha, touched upon the customs union and for jointly funded railway projects.
In reality, the implementation of the customs union has proved problematic since its inception in 2003. The scheme involves a unified trade policy with non-members, but something not easy to implement for those economies enjoying competitive advantages in external trade.
Following repeated delays, it was generally understood that full completion of the project would take place in 2015. However, the Doha summit made no specific commitments for comprehensive implementation, clearly signalling the continued presence of some problems.
Lingering challenges entail developing a formula for the fair distribution of customs duties and taking into account issues related to the port-of-entry and final destination of goods. Other issues concern bureaucratic obstacles.
In addition, the Doha summit pressed for a completion of the joint railway project, and if all goes well, it should be completed by 2018. This is a major infrastructure work covering a sizeable area of 2,117 kilometres.
To be sure, at $15.4 billion, the projected cost of this vital initiative and of considerable future significance for the economies, is not exceptionally prohibitive. This is an affordable amount given the group’s combined sovereign wealth funds. According to Sovereign Wealth Institute, the GCC has access to a staggering $2.4 trillion in sovereign funds, in turn comprising around 37 per cent of the world’s total.
The summit adopted other resolutions with economic implications, notably continuing the work of unified guiding principles for the Gulf’s financial markets. Certainly, unified principles are vital given the level of popular interest among GCC nationals to invest in stocks. This has been magnified by the plunge on the stock markets in reaction to the drop of oil prices. Many investors experienced sizeable losses on their exposures to listed firms.
To date, the best unifying regional economic scheme remains the Gulf Common Market (GCM), which was approved during an earlier summit in 2007. Implemented at the start of 2008, the project stresses free movement of the factors of production among member states.
The project covers all economic and investment services, dealings in the stock market and setting up of companies in both public and private sectors besides social insurance among GCC citizens. In fact, the GCM focuses on finding a unified regional market through which nationals could benefit from available opportunities in member states.
Statistics relating to movement of goods point to increasing trade flows within the GCC thanks to customs union and the GCM combined. Recent stats suggest that inter-GCC trade activities amounted to $121.2 billion in 2013, up from $106.5 billion in 2012. The figures also demonstrate opportunities to enhance trade within the grouping. Still, further improvement should emerge following a full functioning of the customs union project.
Plans are underway to set up an integrated grid for water distribution by 2020, ostensibly building on the success of the existing electricity grid. The power scheme has proven useful during the long summer months, with countries having surplus supply willing to share electricity with those in need.
Above all, the 35th GCC summit would be known for cementing ties between member-states, as evidenced by the return of ambassadors from Saudi Arabia, the UAE and Bahrain to Qatar.
The writer is a Member of Parliament in Bahrain.
© Al Nisr Publishing LLC 2021. All rights reserved.