Reuters: US Dollar Report: MIDEAST MONEY-With customs union, Gulf edges toward closer economic ties

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MIDEAST MONEY-With customs union, Gulf edges toward closer economic ties Jul 23rd 2012, 11:05 Mon Jul 23, 2012 7:05am EDT * Countries shy away from giving up autonomy * But GCC aims for full customs union in 2015 * Customs revenue-sharing formula the main challenge * Monetary union unlikely in next 5 years - analysts * Oil prices reduce incentive for unified VAT By Martin Dokoupil DUBAI, July 23 (Reuters) - In April this year, a queue of thousands of trucks built up at the Al Ghuwaifat border crossing between the United Arab Emirates and Saudi Arabia. Weary drivers ate and slept in their cabs, some for as long as several days, because of a slow customs clearance process. It took several weeks to reduce the logjam to normal levels. The incident underlined the difficulties faced by the six rich oil exporting countries of the Gulf Cooperation Council (GCC) as they edge toward closer economic integration. Saudi Arabia, the biggest Arab economy, is leading moves toward political and economic cooperation, which it believes would give the mostly Sunni-led monarchies of the Gulf more power to withstand any confrontation with Shi'ite Iran. Closer business ties within the GCC, which consists of Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain and has a combined annual output of about $1.4 trillion, could have big repercussions for companies and consumers. Projects already underway or under study include a customs union, a joint value-added tax and even the introduction of a single currency. But there are large obstacles to closer integration, including bureaucratic and administrative inefficiencies, as in the case of the border crossing, as well as old rivalries and a desire among smaller Gulf states to retain their autonomy. Even the countries' wealth sometimes becomes an obstacle; with economies already growing robustly, there is less incentive to make radical changes to achieve faster growth. "We will not see any picking up the speed on going into the monetary union any time soon," said Abdulkhaleq Abdullah, a political scientist in the UAE. "Having said this, it does not mean that the GCC is not going to pick up other aspects of integration and speed up coordination and cooperation at other levels. I see the customs union speeding up in the future." <-------------------------------------------------------- Link this Share this Digg this Email Reprints

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