The members of the Gulf Cooperation Council are Kuwait, Saudi Arabia, UAE, Bahrain and Qatar. These countries met on 25th May 1981 in Abu Dhabi where they created a platform that was aimed at uniting the entire Arab world. The proposed name of the currency that member state would use was Khaleeji. The meaning of Khaleeji in this region is “the gulf”. There have been speculations that the member states of GCC would make gold their currency.
According to the top GCC officials, the currency might have a link with the US dollar. It could also tie-up with the other currencies but the US dollar will have a larger share. Most currencies of the countries of the Gulf had an attachment with the US dollar. Saudi Arabia declined a proposal that the International Monetary SDR serve as the reserve currency.
The establishment of a common currency for the member states of GCC is a great plan for the economic unity of the Gulf States. There is a common custom duty for the GCC member states that is already in place and it relate to other states of the world. The member states of GCC are now working on the formation of a common market. Over the recent past, different investment barriers in GCC were dropped to enable the nationals of different member states to work together.
The cost of business operations and transactions would be made affordable by Khaleeji currency. This would imply dealing with a single market where everything would have a single quoted price. This would lead to a more integrated financial market within GCC. A common currency would serve as a reserve for international assets. It implies that it can be used for international trade. The Arab states can also use it in making payments externally. This can create a room for an enlarged territory for the Khaleeji currency. The monetary indolence for Arab states would be bigger and financial stability would also be enhanced. The financial muscle of the member states of GCC would be greater than what it is now.
A common currency implies that firms in the other nations like Namibia or Ireland can issue their securities in the Gulf States. When GCC is freed in financial markets, investors would want to invest in the region. These would list their stocks or bonds as well as other securities in the financial markets of the Gulf nations. Member states will be able to manage financial wealth and also make the Gulf Cooperation Council a financial giant.
A delay in the implementation of this initiative has been caused by sovereignty issues and political differences. Other members of the GCC except Oman and UAE have always pushed for the plan of this currency. These states withdrew due to disagreements over where the Gulf Central Bank would be located as well as the monetary unity. Both states felt that Saudi Arabia dominated the region. Saudi Arabia leaders felt that being the largest economy, their country should be the location of the Gulf Central Bank. The countries decided to establish a common currency in 2000 for the first time. However, its implementation was made more complex by the financial crisis.
In a nutshell, trade practices of GCC member states are common. Their religion, language and political infrastructures are also similar. These act as their stronger pillars in the launch and circulation of Khaleeji currency. Khaleeji will enhance price transparency among consumers and businesses. It will be possible for customers to compare substitute and complement products within different member states of GCC. Businesses will benefit from the launch of this currency due to effective price strategies and price rates that will be in line with those of competitors within the GCC region. This currency is part of a long-term initiative of GCC.