Single currency to boost GCC banking ties

Plans for GCC monetary union have given little fillip to banking ties among the six Gulf countries. At the end of 2007, the number of GCC bank branches in member states stood at only 16 although more than 2,000 bank branches operate in member states, including hundreds of foreign banks, GCC data showed.

 

The low penetration rate is despite a doubling of intra-GCC trade ties from 2000 to 2006. From about $13.4 billion (Dh49bn) in 2000, trade between Gulf neighbours soared to $19.8bn in 2003, $25.5bn in 2004 and $33.9bn in 2005. It reached highest level of $34.5bn in 2006, GCC Secretriat data showed.

 

Bankers blame what they call restrictions in local banking laws and relatively limited business opportunities in GCC states.

Even the trade between Gulf nations is considered low compared to overall GCC trade figures. Oil accounts for the bulk of exports by the six member states to non-GCC markets.

“Intra-GCC trade has steadily grown over the past years because of plans to merge their economies, but the level remains below expectations,” said Ihsan bu Hulaiga, a Saudi economist.

In 2005, trade among the GCC states accounted for about 5.5 per cent of their total commercial exchange of nearly $616.6bn.

 

This declined to 4.18 per cent in 2006, when total trade hit $824bn.

The trade among the GCC countries is expected to remain unchanged in 2007 even as total trade figures for the Gulf are projected to rise by seven per cent.