Gulf union should set achievable goals

Since its establishment in 1983, the GCC has been taking incremental steps towards the creation of a single currency. But over the past three years, as the 2010 deadline has loomed, the actions of some member countries have only served to undermine the chances of putting the scheme into practice.

Oman's statement in December 2006 that it would not join the currency at its launch was the first sign of government-level uneasiness about the project. Five months later, Kuwait's decision to drop its peg to the dollar led to further speculation about the remaining members' commitment to the single currency.

The withdrawal of the UAE, the second-largest economy in the zone, is the latest threat to the plan. The UAE is the only country that can seriously challenge the dominance of Saudi Arabia in the GCC. The selection of Riyadh as the location for the new GCC central bank has raised serious concerns in the UAE.

What is unclear is whether the UAE is simply jostling for influence. Could it be tempted back into the single currency by the guarantee that a UAE national would head the central bank, for example? Without the UAE to act as a counterbalance, Saudi Arabia will dominate Bahrain, Kuwait and Qatar if the new currency goes ahead as planned.

The single currency may still limp on, but its credibility has been questioned. Because most states acknowledge that the 2010 deadline will not be met, the project lacks a clear timeline for its introduction.

Progress on more significant initiatives such as joint power, transport and defence schemes, and the creation of a common market for GCC members, is not threatened by the UAE's move. The GCC would be better to concentrate on these tangible initiatives rather than an increasingly unlikely plan to create a single currency.