Gulf oil producers today entered a landmark stage in their 27-year-old alliance by launching the common market, which will pave the way for a full economic merger and create one of the largest trade blocs.
The six Gulf Co-operation Council (GCC) countries, which control more than 40 per cent of the world’s extractable oil wealth, began the new year by enforcing the decision of their heads of state at their summit in Qatar just before the end of 2007, when they set January 1, 2008, as the start of their common market.
The smooth enforcement of the historic plan paves way for the more important Monetary Union, within a few years, to allow member states to become a single European Union-style economy and create the largest oil alliance in history.
“The Gulf Common Market aims to create one market... raising production efficiency and optimum usage of available resources and improving the GCC’s negotiating position among international economic forums,” the GCC leaders said at the end of their summit in Doha in December.
The launch of the common market, the first in the Middle East, comes amid a surge in the economies of the UAE and its five GCC partners – Saudi Arabia, Kuwait, Bahrain, Qatar and Oman – as a result of high oil prices and a sharp increase in public spending, private investment and foreign capital.
“It is a very important stage in the GCC progress as the common market and the ensuing monetary union will largely expand co-operation among members, increase joint investment ventures and trade, spur economic growth, and consequently create more jobs for nationals,” Saeed Al Shaikh, chief economist at the Saudi National Com-mercial Bank, told Emirates Business. “But the most important thing is this project is enforced without any obstacles or delays.”
GCC states are the top oil producers in the world and their union means the birth of the largest oil bloc in history, giving them control of about 41.7 per cent of the world’s total recoverable oil resources.
The six members pumped around 16.6 million barrels per day of crude in 2007, about a fifth of the global oil supplies. But their production is set to surge in the medium and long term as they are pushing ahead to expand output capacity to make up for a decline in the production of other areas and a surge in demand. They are also home to 22.7 per cent of the world’s gas reserves and are the largest producers of liquefied natural gas.
Their combined gross domestic product is expected to have peaked at about $750 billion (Dh2.7 trillion) in 2007, about 57 per cent of the total Arab GDP.
Figures issued by the International Monetary Fund (IMF) showed the GCC’s exports also soared to a record $507bn (Dh1.8trn) last year as a result of higher oil sales, while their imports peaked at about $376bn (Dh1.3trn). Their total trade accounted for 80 per cent of the combined Arab commercial exchange last year.
Strong oil prices have allied with a surge in investment and expansion in the non-oil sector to boost the GCC’s real GDP by an average six per cent during 2002-2007, but in current prices growth exceeded 15 per cent.
IMF Managing Director Rodrigo de Rato said in a recent statement about the planned GCC market: “Economic performance in the GCC remains strong, underpinned by continued high oil prices and strong policies.
“In a fundamental shift, the non-oil sector is now becoming the main engine of growth, with this sector’s contribution to real GDP growth increasing to more than 80 per cent.”
GCC a step closer to full merger