Dubai
GCC
single currency
The proposition for a GCC single currency was agreed in 2006 as a means to create a monetary union that would protect and improve the members’ economies. The currency would be run through a central supranational bank that would set interest rates, inflation targets and nominal exchange rates. The GCC Monetary Union (GMU) would facilitate the free movement of labour; capital and goods; and the necessary mergers and acquisitions between the states.
The biggest benefit of a single currency would be attracting business to an area that receives 3.9% of the world’s foreign direct investment (FDI), with the UAE contributing 60% of total flow in 2005. As the leader in FDI and service imports in the UAE, Dubai is at the forefront of creating monetary union.
Dubai has continued to promote the GMU over the past two years despite pressure to remove the plans and float the individual currencies. On August 19 this year, the Dubai International Financial Centre released a report they had compiled on the progress towards monetary union. They revealed that the GCC was on target for 2010 if it invested in institutional framework; curbed inflation; invested in building statistics capacity and invested in their financial infrastructure. These measures would leave the GCC states in a position to adopt the plan on time.
By leading the GCC surge to a single currency, Dubai is hoping to bring greater economic integration to the Gulf, along with the benefits that that integration creates. Cross-border companies can benefit from the FDI already concentrated in the emirate without the problem of exchanging currency. And fluctuating dollar will no longer place inflationary pressure on the GCC, as its own central bank will decide its future. These factors – and many more – would help secure the long-term economic stability of the region.
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