Gulf countries agree to single currency by 2010

Agence France-Presse, Riyadh

Oil-rich Gulf Arab states moved closer to economic unity over the weekend as finance ministers set 2010 as a target date for monetary union and a single currency, and approved a five percent common customs duty on imports.

Bahraini Finance Minister Abdullah Hassan Saif told reporters at the end of a two-day meeting here the ministers of the Gulf Cooperation Council (GCC) also decided to bring forward the complete implementation of a customs union to 2003 from 2005.

The meeting, held at GCC headquarters in Riyadh, also approved a "mechanism for collection and distribution of customs duties" and set the end of 2002 as the date to finalize the details for applying it.

The ministers also approved the modified form of the GCC unified economic agreement that calls for economic integration between members of the six-nation alliance.

The GCC, which groups oil powers Saudi Arabia, Kuwait and the United Arab Emirates in addition to Bahrain, Qatar and Oman, also approved the U.S. dollar as a yardstick for a single currency to be effective by 2010.

But the Kuwaiti dinar, pegged against a basket of currencies, mainly the U.S. dollar, was given "a margin of movement" against the dollar until the single currency is achieved, Kuwait's Finance Minister Yussef al-Ibrahim said.

The currencies of the other GCC member states are pegged to the dollar.

The ministers overcame the most controversial difference that blocked an agreement earlier on a customs union by approving the Saudi customs duty of five percent as a common tariff on imports from foreign countries.

"It was agreed to start the implementation of the GCC unified customs law as of January 2002. It was also agreed to adjust the customs duty to five percent. Implementation would begin from 2002 and must be completed by 2003," Saif said.

Ibrahim said the ministers agreed to exempt 35 essential commodities from any customs duty.

Individual GCC states have different customs tariffs and members which have relatively high duty had resisted a drastic cut. But the Saudi decision earlier this year to cut customs duty to five percent from 12 percent appeared to have facilitated the agreement.

The GCC states, which depend heavily on oil revenues, signed in 1981 the unified economic agreement which calls for full economic and financial integration between the member states.