GCC common market to offer arbitration

04 January 2008
The GCC secretariat launched its common market policy on 1 January, and quickly followed it with plans for a judicial tribunal to arbitrate on disputes between members.

The tribunal comes as the GCC is encouraging cross-border trade within the region. However, no deadline has been set for the implementation of common market rules and difficulties remain over bureaucracy and the pace of implementing the rules.

“The tribunal is on a fast-track and is to go with the common market,” says Abdulaziz Abu Hamad Aluwaisheg, director of economic integration at the GCC secretariat.

The tribunal will be the third route for individuals, government agencies or others to seek redress under the terms of the Economic Agreement Between GCC States, which was signed on 31 December 2001 in Muscat. Other dispute resolution channels are an arbitration centre in Manama and the offices of the secretariat itself.

The rules for the tribunal have been drafted but have yet to be approved by member states. Once established, it will be able to administer penalties to parties that break GCC agreements.

Although the implementation of agreements is monitored by several bodies, including the GCC secretariat, the Council of Foreign Ministers and the Common Market Committee, there are no current sanctions for a state's failure to implement common market agreements.

The official launch of the common market follows agreement on the remaining rules, covering retail and wholesale trade, during the GCC summit held in Doha in early December.

The agreement sets out the framework for the equal treatment of all GCC nationals. It covers a wide range of issues, including the freedom of movement and residency; employment rights; pensions; investment; real estate; capital movement; education and health services; stock ownership, and tax.

The principle of the common market was established in 2001 and states have been working towards a 2007 deadline to agree on the rules.

While member governments have adopted the rules at different speeds, most of the issues have now been addressed, according to Aluwaisheg.

The UAE is taking the lead and has introduced legislation to meet the requirements of the common market in all areas, except retail and wholesale trade. Saudi Arabia has been the slowest in reaching agreements with member states on the free movement of GCC nationals without passports, and their ability to reside in the kingdom without visas.

In November, the secretariat launched an initiative to handle queries over how the common market rules are being implemented in different member states. It is also keen to encourage nationals from around the Gulf to take advantage of the common market.

“The common market was declared at the summit,” says Aluwaisheg. “This means that citizens can start asking for their rights.”

However, despite hopes that the common market will boost trade levels between GCC member states, the secretariat warns the agreement will not eliminate bureaucracy on its own.

“The different tracks are handled by different [national government] departments and it is a maze of bureaucracy,” says Aluwaisheg. “The common market will not eliminate red tape. It means you have to treat all GCC nationals equally. If you have red tape, it applies to all.”

No deadline has been set for states to implement all the common market rules, and some issues remain to be addressed, such as national employment quotas.

“The common market will take a long time,” says Eckart Woertz, economics programme manager at Dubai-based Gulf Research Centre. “Its impact should not be overestimated. For example, most of the labour here is foreign [and not permitted free movement] and there are still considerable restrictions on investment in the stock markets.”

Currently, the bulk of GCC trade is with the US, Europe and Asia, and relatively little is traded between GCC states.

By freeing up the movement of services and capital, the common market is expected to have a greater impact on trade within the GCC than the common currency would. Along with the customs union, they are the pillars of the GCC economic integration project.

The move could also lend fresh momentum to the common currency. Although the GCC originally set a deadline of 2010 for the currency to be implemented, most observers do not expect it to be brought in before 2012 at the earliest.

“There will be a stronger economic logic for a common currency if a common market is in place and is functioning properly,” says Simon Williams, Middle East Gulf economist at HSBC . “But it is not a prerequisite. They are not dependent on each other.”

The member states also have more work to do to agree a customs union. This would cover the movement of goods, which is not covered by the common market agreement.

“The common market is quite promising but we should look at the customs union, which should be more efficient,” says UAE Economy Minister Sheikha Lubna al-Qasimi. “There are domestic issues regarding borders and we should focus on them. We have an economic bloc, which is very important regarding free trade agreements. As an economic bloc we have great value.”

GCC in numbers

  • 33,146 citizens owning real estate in another GCC state (up to 2006)

  • 14,655 licences for economic activities in another GCC state (2005)

  • $33.9bn intra-GCC trade (2005)

  • $822m loans to GCC citizens for industrial projects in other GCC states (up to 2006)

  • 16 GCC bank branches in other member states (2006)

Source: GCC Secretariat General

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