Can the GCC realise its economic integration dream?

However, the implementation of these treaties or agreements has faced many bureaucratic and legal obstacles and complications that must be overcome and need the adaptation of laws and administrative systems in various Gulf countries to the requirements of economic integration.

Customs union

One of the most important objectives was to remove all tariff barriers to the products of the GCC countries, to exempt those products from customs duties, and to treat them as national goods in any of the GCC countries in a way that promotes intra-trade.

The GCC countries have also sought to establish a customs union since 2003 and apply uniform customs duties on goods imported from outside the GCC countries' borders.

They have worked on developing trade exchange agreements with countries and economic blocs such as EU countries, the United States, China, and other major exporting or importing countries under common standards and conditions.

There is no doubt that the development of trade relations with these countries and international blocs enhances the position of the GCC countries in international trade, especially as the Gulf countries are among the largest exporters of oil and gas, which play an important role in the economics of energy. 

The Gulf countries are also important because they are importers of food, durable goods and other consumer goods; this makes agreements between the GCC and various countries necessary to enhance this economic role.

The Economic Agreement

The Gulf Summit, held in Riyadh at the end of 2001, adopted the Economic Agreement between the GCC countries, which included clauses related to the customs union, and stressed the provision of appropriate conditions for international economic dealings so that the member states draw and plan their economic policies and relations with other countries in a collective form.

The agreement also urged the unification of procedures for regulating import and export and highlighted the need to treat the natural and legal citizens of the GCC countries in any of these countries similar to the way they are treated in their countries.

This includes the rights of movement, residence, and employment in public and private organisations as well as the exercise of professions, trades, and ownership.

In addition to this are the rights to invest in various economic sectors and own property, not to mention the rights to move capital without restrictions. Other provisions relate to taxation, trading and buying shares, incorporation of companies, and enjoyment of the rights to education, health, and social care.

Under the economic agreement, there was hope in the development of the monetary union at the beginning of 2010; the required agencies were established, but this monetary union has not been realised to this day. 

It is known that the national currencies of the GCC countries have varied exchange rates against the dollar, the euro, the yen and the Swiss franc.

Pricing mechanisms in most GCC countries depend on the US dollar, but Kuwait still uses a basket of currencies to determine the dinar's exchange rate, although the dollar represents the primary weight in that basket.

The monetary union process has stalled for several reasons due to the uneven economic and financial policies in various Gulf countries.

It goes without saying that the achievement of monetary unity could have been an important achievement for these countries and would have boosted their economic strength and negotiating capabilities in the fields of trade and investment with various countries of the world.

They are of economic importance in the world as a group and can issue a stable single currency, backed by adequate economic performance and the ability to improve sovereign revenues from oil and gas and other potential activities. 

The prospects for monetary union remain if all obstacles are overcome and the concerns raised by the economic administrations of the Gulf countries are addressed.

The economy and comparative advantages

The GCC Statistical Centre set the GDP of the Gulf countries in 2020 at $1.4tn and the annual per capita at $24,600. It is known that the per capita income varies between one Gulf country and another due to the economic capabilities in all these countries and their population sizes.

The total population of the Gulf states is estimated at 57,6mn, including non-citizens. The proportions of citizens in these countries vary.

It can be argued that there is great potential to boost economic activity and develop non-oil activities, but it is important to develop integrating economic policies based on the use of comparative advantages in all Gulf countries. 

The countries still dependent on oil revenues, perhaps for a long time to come, must develop diversified economic activities and adopt human development programmes that can promote the transition to a knowledge economy, take advantage of technology shifts, and adopt joint strategic projects.

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They should cooperate with international companies in various vital areas to enable the desired economic integration to be achieved over an appropriate period of time. 

Saudi Arabia is one of the countries with large economies, and it is one of the top 20 countries in terms of economic size and output.

Saudi Arabia is important in the energy sector as it exports record oil supplies to various countries in the East and West, has a production capacity of about 12mn barrels per day (bpd), and is one of the three countries in the world in terms of oil production capacity alongside Russia and the United States.

There is no doubt that the country has developed oil-based refining and petrochemical industries over the past seven decades. Saudi Arabia's economy is diversifying properly, especially since Vision 2030 and its development plans were launched.

The Kingdom has worked to build important non-oil manufacturing industries such as food industries, and the economic administration has been launching important businesses in the tourism sector and vital services.

These plans can interact with the objectives of Gulf economic integration and be coordinated with plans in the bloc's other countries to link similar activities.

Read more: Mawani ports authority flexes Saudi Arabia's maritime muscles

Qatar also has significant potential in gas extraction and processing, making it one of the most important gas-exporting countries, with annual production estimated at more than 6tn cubic feet – of which it exports about 4.6tn cubic feet per year.

It is known that gas has become one of the most important sources of clean and environmentally-friendly energy and can be one of the most important sources of electricity production in the other Gulf countries.

This calls for supporting the linking of infrastructure to provide the other countries with their gas needs. Gas can also be used in petrochemical industries that are being developed by various Gulf countries, including Saudi Arabia, Kuwait and the United Arab Emirates.

Qatar's wealth from gas revenues could boost investment potential in various economic sectors in other Gulf countries, including telecommunications, tourism, and manufacturing. 

There is no doubt that the other countries – Bahrain, Kuwait, Oman, and the United Arab Emirates – have economic assets and advantages such as human capabilities and educational and professional achievement, which can be beneficial to all Gulf countries.

Demographic realities

One of the most important economic facts in the Gulf countries is the population growth among citizens and the high percentage of foreign workers in the labour market.

Therefore, upgrading the professional and educational levels of citizens is one of the challenges of the future, and economic integration may remain deficient if Gulf workers in the various GCC countries are not capitalised upon. 

The private sector needs to expand its role and increase its contribution to GDP – including facilities; telecommunications; land, air, and sea transportation; and infrastructure facilities – so that the sector can invest within the Gulf countries, strengthen inter-partnerships, and improve the participation of foreign companies in various vital sectors.

It also includes improving the capacity of the private sector to employ national and Gulf workers in all countries of the region, in line with the relevant provisions of the GCC Common Market Agreement.

Expanding private sector businesses may create a new economic reality that leads to coherent economic integration. 

Private sector activity varies between Gulf countries, where it plays an important role in Saudi Arabia, the United Arab Emirates, Bahrain, Oman, and Qatar to some extent but continues to face obstacles and hindrances in Kuwait where it does not contribute much to the creation of jobs for national labour.

The private sector

The Gulf states are located in an important geographical area and are adjacent to Iran, Iraq, Yemen, and to some extent Jordan, Syria, Lebanon, and Egypt.

Therefore, the development of economic relations between the Gulf countries can lay the foundations for the development of distinct economic relations with neighbouring countries. this can provide beneficial consumer markets for the Gulf economy if it can achieve political stability and appropriate security conditions. 

When a modern road network, distinguished transportation networks, and ports that can accommodate heavy ships are available, linking those countries becomes economically important to promote re-export trade with Iraq and Iran.

What is needed?

To sum up, economic integration among the Gulf countries depends on key elements, the most important of which are:

• To implement the GCC Common Market Agreement with confidence and without hesitation by overcoming all bureaucratic and legal obstacles.
• To enhance the capacity of the private sector and increase its economic contribution in the various Gulf countries through privatisation and structural transformation projects.
• To upgrade vocational and traditional education to provide the capacity to increase the contribution of Gulf national labour to the labour markets in the various countries of the region and enable such labour to move from one country to another to take advantage of employment opportunities available on the same terms as citizens.
• To work on the serious implementation of economic plans and visions aimed at diversifying the economic base in all countries and eliminating dependence on oil and gas revenues within a specified period of time consistent with the potential transformations in the energy sector within the global economy.