Arabian Business Weekly Update April 17, 2005

Plans to introduce a GCC single currency are flawed and must cease. THIS week we highlight the Gulf's quiet movement towards the formation of a single currency. Recent comments by Saudi Arabia's finance minister Ibrahim Bin Abdel Aziz Al Assaf suggest the project is well under way, and that by 2010 the six GCC countries will share one currency. This is not just an ambitious dream, but an unwise one.

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By  Anil Bhoyrul Published  April 17, 2005

GCC must beware one currency|~||~||~| Plans to introduce a GCC single currency are flawed and must cease. THIS week we highlight the Gulf's quiet movement towards the formation of a single currency. Recent comments by Saudi Arabia's finance minister Ibrahim Bin Abdel Aziz Al Assaf suggest the project is well under way, and that by 2010 the six GCC countries will share one currency. This is not just an ambitious dream, but an unwise one. There is no doubting the financial power and sway that the UAE, Kuwait, Oman, Qatar, Bahrain and Saudi Arabia currently hold: an economic force worth US$388 billion that controls 45% of the world's oil reserves. But in attempting to introduce a single currency, each country is putting its own economic stability at risk. All countries that signed up to the project would hand over financial sovereignty to a GCC Central Bank, which would set interest rates, GDP ratios, the level of fiscal deficits and inflationary targets. This simply won't work: Saudi Arabia has public debt issues not experienced by Kuwait, Qatar or the UAE. The UAE faces inflationary pressures that other GCC countries have been immune to. Indeed, the list of independent economic problems and advantages is growing and endless. To date, the GCC's economic force has been unchallenged because of each country's ability to deal, independently, with the financial challenges of the day. A shift in demand for services affects different countries in different ways. There is no way that a GCC single bank could apply a common cure to different problems. Just look at the European example, where Germany's once powerful economy is being derailed by the debt and unemployment issues of its single currency partners. The same must never be allowed to happen in the GCC. ||**||The champ is back|~||~||~|In recent weeks, Emaar chairman Mohammed Alabbar has received a lot of stick: admittedly, much of it from myself. But a sign of a true champion is the ability to pick yourself up from the canvas just as the referee is about to declare a knock out. In Alabbar's case, the count was at nine: his visit to Palestine, his outburst against the media, and his withdrawal from a reality television show had all given big blows to the Alabbar ego. Then, last week, just as the obituaries were being prepared, Emaar's latest set of results came out. For the first quarter of 2005, net profits came in at US$361 million, a rise of 537% on the same period last year. A range of new projects and a move into the aluminium sector has paid huge dividends. Emaar is a world-class operation that is only getting better. In business, all that really matters is the numbers. And you can't argue with these ones. ||**||Lebanon let down|~||~||~|Anyone who seriously thought that Lebanon could go ahead with the planned May elections on schedule should think again. The United Nations has rightly led calls for a May poll, in theory just after Syria has completed the withdrawal of its 14,000 troops. Already, 10,000 have gone. Syria appears to be listening and learning. It is doing the right thing, the right way and at the right time. But what of the Syrian-backed Lebanese officials left in charge? Continued squabbles over key cabinet posts have thwarted the formation of a new government. It has now been six weeks since prime minister Omar Karami resigned, and the political vacuum is growing by the day. It could be several months before an election can take place. Lebanon has been let down again, this time by its own toothless leaders. ||**||

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