Riyadh to host GCC central bank

RIYADH: Gulf Cooperation Council (GCC) leaders yesterday chose the Saudi capital to host the group’s first regional central bank, a key step toward a push for greater economic integration in the region.

GCC Secretary-General Abdul Rahman Al-Attiyah said Riyadh was chosen as the location for the region’s Monetary Council, the precursor to the new central bank.

Speaking to reporters after the conclusion of a consultative summit, Al-Attiyah said details of the agreement would be released later. Custodian of the Two Holy Mosques King Abdullah chaired the meeting at Daraeya Palace.

The announcement marked a major step toward advancing the Gulf’s monetary union plan that also includes a unified currency. “No timetable has yet been established for monetary union� between the member states, Al-Attiyah said.

The effort, in the works for years, has stalled on a number of issues, including Oman’s decision not to participate in the single currency and Kuwait’s move to drop the US dollar as a currency peg.

GCC officials had set a target of 2010 for the new currency, but they have since acknowledged that this deadline would not be met.

Following a meeting in December, the GCC set the end of this year as a deadline for ratifying the charter of the monetary council, which would subsequently work to establish a timetable for the unified currency. Qatari Emir Sheikh Hamad bin Khalifa Al-Thani, Kuwaiti Emir Sheikh Sabah Al-Ahmed Al-Sabah, UAE Vice President and Prime Minister and ruler of Dubai Sheikh Mohammed bin Rashid Al-Maktoum, Bahrain’s Crown Prince Sheikh Salman bin Hamad Al-Khalifa and Oman’s Deputy Prime Minister Fahd bin Mahmoud Al-Saeed attended the summit.

Saudi Arabia is the world’s largest oil producer with an overall domestic product of about $470 billion. A leading member of the Organization of the Petroleum Exporting Countries, the Kingdom is the only Arab member of the Group of 20 nations.

John Sfakianakis, chief economist at SABB (formerly Saudi British Bank), said: “The decision is an obvious proof of Saudi Arabia’s undeniable importance in the whole GCC unification enterprise. Saudi Arabia’s role as a driving force within the GCC is an opportunity and a challenge.� Sfakianakis said Saudi Arabia is not only the biggest economy in the region but given its size the only one that demonstrates a solid financial sector without any excesses as currently witnessed by others in the region.

The challenge now will be for Saudi Arabia to push ahead and maintain the momentum toward unification and further customs harmonization. The next challenge for all would be to build the institutional capacity of the GCC central bank, he added.

Al-Attiyah said the summit discussed major political, economic and security issues including the situation in Palestine and Iraq, GCC-Iran relations and efforts to protect Arab interests.

“The summit discussed projects for strengthening GCC ties, most importantly a railway line linking the member countries, and the second phase of the GCC power grid,� he said, adding that the power grid project would be launched during the upcoming GCC summit in Kuwait, scheduled for December.

Earlier in an arrival statement, Oman’s deputy premier urged GCC states to adopt strategic decisions in order to cope with global developments and challenges.

Bahrain scraps sponsorship system

Meanwhile, Bahrain, a GCC member, said yesterday it would scrap its existing sponsorship system for foreign workers.

“We’re working on identifying a ceiling on expatriate workers in Bahrain,� said Labor Minister Majeed Al-Alawi in a statement published by Bahrain’s official news agency.

He added the country’s Labor Market Regulatory Authority (LMRA) would determine the limit in a study this year. Under the new regulations, foreign workers will be directly sponsored by the LMRA and therefore able to move jobs without the consent of their previous employer.

The changes will be effective from August.

The previous system, which is common in Gulf Arab states and under which employers do the sponsoring, has long been criticized by human rights groups for placing workers at the whim of their employers, who usually take their passports.

“The sponsorship system has been a curse,� said Marietta Dias of the Bahrain-based Migrant Workers Protection Society. She said the new regulations were unlikely to include domestic workers such as housemaids, who she said have the worst employment conditions of all in the region.