The Gulf Cooperation Council (GCC) was established on 25 May 1981 among Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The GCC was established in view of the special relations among them, their similar political systems, assumed joint destiny and common objectives. The GCC was envisaged as a regional common market with a defence planning council. The geographic proximity of these countries and their adoption of free-trade economic policies facilitated the establishment of the GCC.
GCC members began with the establishment of a free trade area (FTA) in 1983, under which tariffs on goods traded among them are eliminated. From the early 1980s to the 1990s, efforts were channeled towards reaching common external tariffs in order to constitute the GCC Customs Union (CU). In January 2003, the CU started to be implemented and member states agreed on a common customs tariff of 5 percent on all goods imported from outside. All this eventually led to the launch of the GCC Common Market (CM) in January 2008. Many of the operational details, however, are yet to be finalised. The CM is expected to open wider avenues for intra-GCC trade and investment activities. The agreement covers economic and investment services, dealings in the stock market, and the establishment of public and private companies. The CM provides for the free flow of capital and gives GCC nationals freedom of movement, residency and employment — in both the private and public sectors — in all six countries. Regardless of whether the CM is followed by the planned monetary union and single currency in 2010, the ongoing process is likely to bode well for increased intra-regional trade flows and is likely to draw more foreign investment to the region.
In addition to forming a Common Market, the GCC has also benefited from high energy prices, which have dragged considerably in the last four months as a result of the global recession. This is reflected in sound government revenues, current account surpluses, large accumulations of foreign assets, and an investment boom. The near-term economic outlook is quite favourable for this group of countries. According to a recent McKinsey Global Institute (MGI) study, even with an oil price of USD 50 per barrel, the GCC would earn USD 4.7 trillion in oil export revenues up until 2020, equivalent to 2.5 times the earnings over the past 14 years. In addition, the MGI expected the total net foreign assets of the GCC to exceed USD 2 trillion dollars in 2008. It is not surprising that investors, regulators and policy makers are taking an ever greater interest in the region.
Against this backdrop, ASEAN Studies Centre (ASC) of the Institute of Southeast Asian Studies (ISEAS), Singapore, would like to convene a study with the following objectives:
Examine the integration of the GCC economy over the last 27 years.
Draw some lessons for the ASEAN Economic Community, which has been scheduled to be achieved by 2015.
To achieve these objectives, ASC is planning to commission a paper that would discuss the following in detail:
Since its inception in 1981, the GCC has experienced the transformation of oil wealth into a new kind of soft power. Although there are significant differences among the six members of the GCC, all have recently experienced a broad-based economic boom. In the last few years there has been a dramatic change throughout the GCC with respect to development plans, investment strategies and attitudes towards foreign investors. In the light of this, the study should examine how the member-countries are benefiting from the regional integration process, especially in terms of intra-regional trade and investment, GDP increase, poverty reduction, etc. What can ASEAN learn from the GCC experience in terms of trade and investment facilitation and institutional structures? What are the challenges that have emerged while implementing the GCC Common Market and how have they been dealt with? What are the important public policies required at the domestic and regional levels for a smooth transition to a common market and to maximize gains in the process?
The author would be required to submit a paper which would be subsequently compiled and published as a policy report by ISEAS.