GCC Monetary Union

Plans for a GCC monetary union have been discussed for nearly 30 years, but the deadline has been pushed back repeatedly and is now tentatively set for 2015. Oman withdrew from the common currency in 2006 and in May 2009, the UAE followed suit, when Abu Dhabi was passed over as the headquarters for the monetary council. In March 2010, Muhammed al-Jasser, governor of the Saudi Arabian Monetary Agency was elected as the first chairman of the Riyadh-based GCC Monetary Council, the body set up in 2009 to pave the way for a regional central bank. In 2007, the GCC agreed on the convergence criteria, encompassing inflation and interest rates, foreign cash reserves, fiscal deficit and public debt.

Convergence criteria

  • Inflation rate*1: within 2 per cent of GCC average
  • Interest rate: within 2 per cent of average for lowest 3 states
  • Fiscal deficit: less than 3 per cent of GDP
  • Public debt: maximum of 60 per cent of GDP
  • Official reserves*2: to cover at least four months of imports

All states have met criteria unless noted. *1=Saudi Arabia not met criteria; *2=Bahrain not met criteria; GDP=Gross domestic product. Source: Institute of International Finance

Gulf regional railway

Later this year, the Secretariat-General plans to begin the study to form the GCC Rail Authority, which will implement the integrated rail project. Various national schemes will form the basis of the regional railway, which will run for 2,200 kilometres from Kuwait to Oman. It will be dual use, meaning it will transport both passengers and freight. The estimated budget for the project is $15bn, but this excludes about $4bn needed for land expropriation. A second phase of the scheme could see the railway extended to Yemen. In the original timetable, construction of the GCC railway was set to begin in 2010. The project is now planned to be complete in 2017.

GCC interconnected electricity grid

The first phase of the ambitious $1.6bn project to create a GCC-wide shared electricity network has been a great success since it came on line in July 2009, facilitating power sharing in the summer months and preventing power outages. Kuwait in particular has benefited. The fibre-optic communications network installed to support the grid is hoped to form the basis of a regional telecoms network. Plans for unified water and gas grids have also been discussed, but these were shelved to prioritise the electricity project. A feasibility study for the $3.86bn proposed water grid envisaged the construction of three supranational desalination plants at Sohar in Oman, Sila in the western part of the UAE and Al-Khafji in the Divided Zone between Saudi Arabia and Kuwait. The plan was to set up a GCC water grid in two phases, with phase one due to begin in 2010 and phase two in 2025.

Power grid timeline

1982: Unified electricity network first discussed

1990: Feasibility study launched

2001: GCC Interconnection Authority set up

2003: Second feasibility study launched

2004: Contracts awarded for construction of the GCC network

2005: Construction work begins

2009: Phase 1 complete, linking Kuwait, Saudi Arabia, Bahrain and Qatar

2011: Phase 2 and 3 complete, linking all six GCC countries