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Saudi Arabia Most Likely 
to Host Gulf Central Bank

DUBAI - While the race will be tight, Gulf Arab leaders meeting this week are most likely to choose Saudi Arabia, the region’s largest economy, as the headquarters of their common central bank, a Reuters poll showed on Sunday.

The world’s top oil exporter will face tough competition from Bahrain and the UAE, which were neck-and-neck in the second and third spot in the poll of 21 economists.

Heads of state of Saudi Arabia, the UAE, Kuwait, Qatar and Bahrain are meeting in Saudi capital, Riyadh, on May 5 in their latest attempt to decide on a location for the central bank — a key remaining hurdle before the Gulf monetary union plan.

Choosing a venue won’t be easy, according to respondents in the April 29 to May 2 poll, who said a number of political and economic considerations complicate the decision.

Of the 21 poll respondents drawn from regional and global banks and research institutes, nine favoured Saudi Arabia as the most-likely choice for the headquarters, while six opted for the UAE, five picked Bahrain and one chose Qatar.

The kingdom also scored the highest points overall among respondents asked to rank the five states from most likely to least likely.

Bahrain’s was just ahead of the UAE, while Qatar and Kuwait trailed far behind in fourth and fifth place.

“Saudi Arabia is most likely because of its economic and political weight among Gulf states and its image of stability in the region,” said one 
poll respondent.

Another added: “Saudi Arabia’s bid is based on the Saudi view of the superior quality of its central banking capabilities and its wish to have a controlling say in Gulf policies.”

The Gulf’s mostly autocratic leaders had failed to reach a compromise on the location at an annual summit in December where they signed a long-awaited monetary union agreement.

Stumbling on a decision this week would deal another blow to the project’s credibility, already shaken by Oman’s decision in 2006 not to join and Kuwait’s move to break ranks with its neighbours and sever its dinar’s peg to the US dollar in 2007.

But Saudi Arabia’s location bid does face objections, with many analysts saying Bahrain or the UAE are 
better choices.

Foreigners face travel restrictions to the largest Arab economy, home to 26 million people, and the conservative nation already hosts the Gulf Co-operation Council secretariat.

Analysts said the island kingdom of Bahrain was a strong candidate because of its small size, its status as the first Gulf financial centre, and its deferential ties to Saudi Arabia.

“Saudi Arabia could be seen as unduly dominating the decision-making process. Bahrain is a compromise candidate. It was the first Gulf financial centre, it has the infrastructure,” said Sergei Voloboev, an analyst at 
Credit Suisse.

Some analysts said the financial crisis in Dubai, a regional trade and commerce hub, could work against the UAE, although others said Abu Dhabi or Dubai were ideal sites for the bank given their political stability and 
global appeal.

“The UAE is a very open, cosmopolitan environment, it has the largest financial sector in the Gulf and a geographic position as a GCC centre,” said Giyas Gokkent, chief economist at National Bank of Abu Dhabi.