Lower rates won't alleviate supply chain issues, high raw material prices, and labour unrest
The six countries, which form the GCC, have largely been successful, so far, in protecting their economies from the cascading effects of the global crisis. Yet their citizens, and especially businessmen, keenly await some reassurance in the form of a ‘ pre-emptive’ unified economic plan from the summit.
Secretary-general of the council Abdulrahman Al Attiyah earlier this month said the GCC had the means to get over the turmoil, but that, he added, did not mean they should neglect its effects. He said the member states should work together and draw up a course of action to limit any negative impact of the downturn. Meanwhile, most economists predict GCC economies to register sharp falls in their pace of growth next year.
Most developed economies, such as the
Gulf countries that saw a remarkable economic boom in the last six years, when oil prices were on the rise hitting as high as $147 a barrel in July, are now struggling to keep their financial sectors intact and economies chugging. Crude prices recently dropped to $34 per barrel, the lowest in more than four years, raising doubts about the financial stability of some GCC state. The group, with a combined GDP estimated at $1 trillion, draws up to 80 of its revenues from oil. There was little respite after a hefty 2.2-million-barrel cut in daily production announced by Opec. Oman, for instance, had to modify its 2009 budget estimates which are now based on an assumed price of $45 a barrel compared with the originally estimate of $55. Even the newly revised $45 now seems to be on the higher side, some economists say.
Key subjects, likely to be on the agenda of the Gulf rulers, include the GCC monetary union, first proposed in 2001 and whose progress has been notably slow. A GCC Ministerial Council, comprising finance and foreign ministers, met in
One of the major goals of the Gulf central bank and the ensuing single currency with a 2010 deadline is expected to be price stability—countries of the region have been under tremendous inflationary pressure in recent years, although the prices have eased a little of late. Advocates of the monetary union claim that the global economic predicament has underlined its relevance and urgency. The quest for a common currency, however, has been beset with problems.
Last month’s ministerial council meeting also discussed a railway project, estimated to cost over $14 billion, to link the member states and the formation of a joint company to build it.
The 1,940-kilometre railway is being mooted as a cheaper mode of transport between the member countries that will support the customs and monetary union initiatives. It is envisaged to be operational by 2016. However, it is not known whether the project will come up for discussion during the summit.
Issues likely to be discussed:
Economic:
· Establishment of GCC Monetary Authority as a precursor to the launch of single currency
· The slide in crude oil prices
· Preventative measures to minimise the impact of global economic recession
· The progress of Customs Union and Single Market initiatives
· The $14 billion regional railway
· Political and Security:
·
· The Palestinian crisis
· Developments in
· Joint Policy on Food Security
· GCC Nuclear Energy Project
· Proposal to restrict the stay of unskilled foreign labour in the GCC to no more than 5 years
ravindranath@khaleejtimes.com
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