GCC corporate decision to spur common market

A decision by Gulf heads of state to allow national private institutions to operate in any member state will spur investment and expedite plans to create a landmark common market in the region, the private sector said on Monday.

But the six Gulf Cooperation Council (GCC) countries, which control over 40 per cent of the world’s recoverable oil resources, need to take measures to implement the resolutions issued by their heads of state at their annual summit held in Abu Dhabi recently, said Sheikh Saleh Kamel, chairman of the Dammam-based Federation of the GCC Chambers of Commerce and Industry.

In statements sent to Emirates 24l7, Kamel urged the GCC private sector, the wealthiest in the Arab region, to take advantage of the summit decisions mainly those related to the common market and the customs union.

He noted that the December 6-7 GCC summit expressed relief at the performance of regional economies, adding that this indicates there is a “comprehensive economic recovery and development in member states” despite the repercussions of the 2008 global fiscal distress.

“The agreement by the GCC leaders on allowing local companies to open branches in any member states and giving them the same treatment as national firms will create massive investment opportunities for the GCC private establishments so they can expand their operations in the region,” he said.

“This in turn will give a strong push to efforts to fully enforce the GCC common market, which will turn members into a single market and create large business and investment opportunities for all local companies.”

But Kamel stressed that GCC nations—UAE, Saudi Arabia, Kuwait, Qatar, Bahrain and Oman—need to take the necessary measures to implement the summit resolutions in order to push ahead with the common market.

Speaking to Emirates 24l7 just after the summit, analysts said the corporate decision would give greater access to the regional market by local firms seeking to expand operations in the six members as they start to recover from the repercussions of the 2008 global fiscal crisis.

“It should create the right platform for investments and trade to increase cross border flow within the GCC region,” said John Sfakiankis, chief economist at the Banque Saudi Fransi, one of the largest banks in Saudi Arabia.

“It is an important step but we need to see how it translates on the ground and what steps businesses take to overcome barriers.”

The summit’s approval of that plan removes one of many obstacles blocking the full enforcement of the common market and the customs union, which have been launched over the past few years in line with the GCC’s 1983 economic pact which targets economic and monetary integration among members.

Other obstacles include trade agencies, long delay of shipments at border customs points and distribution of revenue from tariffs on foreign imports.

Official data showed cumulative foreign direct investment (FDI) among the GCC countries is estimated at around $74 billion until the end of 2008, more than a quarter of the overall FDI attracted by the six members.

The figures showed the UAE is the largest capital exporter to other GCC members, with a total capital of around $45.7 billion, including nearly $44.4 billion in Saudi Arabia. A large part of those investments are controlled by Emaar Properties and Etisalat, according to the figures by the Kuwaiti-based Inter-Arab Investment Guarantee Corporation (IAIGC), a key Arab League establishment.

Kuwait came second with total FDI in the GCC standing at around $13 billion, most of which are based in the UAE and Saudi Arabia.

Figures by Kamel showed inter-GCC trade has also made big leaps since the six members launched their economic, defence and political alliance in May 1981, soaring from less than $four billion to nearly $67 billion in 2009.

“There is an urgent need now to intensify efforts to remove all the obstacles blocking the implementation of the GCC customs union…this will constitute a major step in stimulating trade and investment among members,” he said.

A full GCC market will give birth to the world’s largest oil bloc, with proven crude resources of more than 480 billion barrels, just over 40 per cent of the global proven oil wealth. Their gas reserves of around 40 trillion cubic metres also account for more than a fifth of the world’s gas deposits.

The combined economy of the six members stood at around $877 billion in 2009 and is projected to surge above $1,000 billion in 2010, accounting for nearly half the total GDP of the Arab League’s 21 nations.

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