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GCC set to endorse tariff union today

posted on 30/12/2001: 689 views


Gulf Arab oil producers are expected to begin tearing down customs barriers and join each other into a single market within a year in an EU-style merger that will give birth to the biggest oil bloc in history.



The GCC countries, which control just under half the world's extractable crude oil wealth, hope a customs union will pave the way for the long-sought free trade pact with European Union and put the six members on track towards a currency union.



GCC heads of states are to endorse the ambitious customs union when they meet in Muscat today. The project will become a reality at the start of 2003, two years ahead of the original schedule.



"There is a clear stand to hasten the implementation of the customs union in the GCC so it will be launched on January 1, 2003 instead of 2005," said Jamil Hujailan, GCC secretary general.



"The agreement stipulates a common tariff of five per cent on all imported items instead of the five and seven per cent agreed on at the Riyadh summit."



The much-delayed customs unification will revive flagging trade and investments among members and trigger foreign capital inflows as it means a much bigger market and investors can benefit from strategically located regional ports. But experts believe the 20-year-old GCC needs to relax investment rules to make them more enticing for foreigners, who are dissuaded by the persistent restrictions on full foreign ownership.



GCC states consider the free trade deal with the EU as vital for their economies on the grounds it will bring in technology and funds and give them greater access to European markets and other countries.



The EU is the GEC's biggest economic partner, with two-way trade touching US$40 billion a year. But the balance has remained largely in favour of the EU in the past decade, with a surplus of more than US$10 billion. The situation contrasts with the oil boom period, when Gulf nations enjoyed a high surplus because of strong oil prices and higher oil exports.



GCC officials hoped the customs union would tempt foreign investors, mainly from the EU, the U.S. and Japan, to set up major industrial projects. Although the GCC has pumped more than US$80 billion into the non-oil manufacturing sector, industrial exports have remained below one-fifth of oil sales and less than 7 per cent of the GDP. This is because industrial investments have been confined to light and medium products as they lack technology for heavy industries.



Officials noted a customs union would expand business opportunities for foreign investors, who will be able to set up projects in any GCC state and import the needed material through other members. (The Gulf News)

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