Gulf leaders signed an accord on a pan-Gulf Cooperation Council monetary union on December 29 containing the legal and organisational framework for the running of the union. They also hinted at plans to implement a progressive tax system across the Gulf.
The signing of the accord in Muscat on Tuesday marks the start of the final arrangements before the implementation of the monetary union. Despite a number of complications in the process to date, including Oman pulling out of the proposed monetary union, GCC Secretary General Abdulrahman al-Attiyah, when quizzed on its implementation, emphasised that the project would not miss its 2010 deadline.
Before plans can be finalised, Gulf leaders must agree on the contested location of the regional central bank, with the United Arab Emirates, Qatar, Bahrain and Saudi Arabia all voicing a desire to host the bank. The central bank will be independent from the governments of member countries and will be responsible for setting interest rates and distributing the currency. Chief Economist at the Dubai International Finance Centre Nasser Saidi said that some departments of the institution would be located in different countries to neutralize the influence that any one member country may potentially exert on monetary policy. Speaking recently Abdulrahman al-Attiyah said that he expected discussions on the bank issue to reach a conclusion by mid-2009.
Alongside the monetary union plans, Gulf countries, whose governments rely heavily on excise duty on oil products for their revenues, have been forced to discuss implementing a progressive income tax system in the Gulf to offset falling oil prices, which have plummeted by 75% in the last six months. Although no official statements have been made surrounding the proposals, many experts and economists believe that details are likely to be released within months.
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