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  Economics
Withdrawal of GCC currency not related to Saudi Arabia being HQ of Gulf central bank - report
23/05/2009   |   10:15 PM | Gulf News
تصغير الخطالشكل الأساسيتكبير الخط
ABU DHABI, May 23 (KUNA) -- The goal behind the United Arab Emirates (UAE) not joining the unified GCC currency has nothing to do with choosing Saudi Arabia as headquarters of the Gulf central bank, local politicians and economists said here Saturday.
According to those experts, the UAE is entitled to be the headquarters of the bank due to its "sturdy" economic status in the Gulf area.
Gulf Cooperation Council (GCC) countries of Saudi Arabia, Kuwait, Qatar, Bahrain, the UAE and Oman had previously approved draft project of the joint monetary agreement and its by-laws last year, so as to implement it by end of 2009.
The draft project would pave the way for establishing the monetary union and the issuance of the common currency.
Yet, and in spite of the UAE's withdrawal of the agreement, officials here did not fully closed the door in face of joining the common currency, but temporarily held up the matter for further revision and negotiations that would have a more satisfactory result for all parties.
Most resounding official statement of which came from UAE's Foreign Minister Sheikh Abdullah Bin Zayed, who said "should terms change, we will 'positively' reconsider joining the agreement, but in the meantime, the terms are not acceptable by the UAE." Some experts referred the UAE's decision to recently-updated economic studies and their impacts on local economy, which required alteration of current economic approaches and future priorities.
Choosing Saudi Arabia as headquarters of the bank was a "politically-oriented decision" and a "surprise", some local economic reports said, adding that the headquarters issue was not the only reason that triggered the UAE to withdraw from the agreement.
According to Governor of the UAE's Central Bank Sultan Al-Suweidi "the UAE had some fundamental reservations and other minor ones regarding the union, such as marginalizing the currency agreement cased on the International Monetary Fund, Special Rights, and them being devoid of an appropriate mechanism, which will allow them a sequenced entrance in the GCC's currency accounts for a reasonable time duration required to try out monetary policies." This time span, he noted, would have been essential for evaluating issues and their affect on the economies of GCC countries.
The other UAE reservation entailed the role of the Gulf Monetary Council, which was limited to conducting studies while it should have had a role in the monetary policy and other practical aspects, added Al-Suweidi.
He also said that the UAE had additional remarks concerning the Gulf Monetary Union as a result of the absence of a unified inflation index, and the condition of covering the currency reserve from imports.
He said that this condition was overlooked and did not take into consideration the differences between imports to be exported and imports for local consumption.
Al-Suweidi said that 70 percent of the UAE's imports are directed to re-export, making it the second re-export center in the world.
He also reaffirmed that pulling out of the Gulf Monetary Union does not mean the UAE would change its monetary policies.
Set to launch in 2010, the unified GCC currency saw the withdrawal of Oman in 2007, while Kuwait, still committed to the deal, had de-pegged its currency from the US dollar in May 2007 in a bid to counter inflation. (end) bmj.hb KUNA 232215 May 09NNNN
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