Saudi warms to unified customs regime

Saudi Arabia is warming to the adoption of a unified GCC customs regime next year that would allow the free flow of goods within the region, a senior UAE Government official said yesterday. The six countries that make up the GCC have worked since 2002 to adopt a single import duty system to allow goods that enter a country to be moved to another without paying an additional customs tax.

Saeed Khalifa Saeed al Marri, the deputy director general of UAE's Federal Customs Authority, said that the country was ready for the unified system, as it already waived taxes on goods from other GCC countries. Saudi Arabia, however still charges duties on 150 items but King Abdullah bin Abdul, the country's ruler, has shown willingness to move toward a customs union. "King Abdullah is pushing for the customs union," said Mr Marri.

Until three months ago, Saudi Arabia charged duties on 200 items but has dropped them on 50 products, including Lipton tea. Mr Marri added that all GCC countries had made progress in adopting uniform regulations on food and medicines to ease transportation of such goods. The customs union stipulates that goods entering a GCC country are charged a five per cent tax and can then move freely to any of the six nations.

Mr Marri will lead the UAE delegation to next week's meeting in Riyadh to discuss the adoption of a unified customs regime. "This is the final year to finalise the customs union," he said. The six GCC set a self-imposed goal of 2009 to form a customs union. A union would be a prerequisite for a GCC common market, particularly with a common currency deadline of 2010 fast approaching. The UAE, a hub of re-export in the region, would be one of the biggest gainers from a unified customs union because of the increase in trade.

Individually, GCC countries are mostly small economies and do not provide a large enough market for domestic companies to grow. Advocates of a common market believe that open trade within the block would help domestic companies. "In terms of development, companies first cater to their domestic market, then to the markets in the neighbouring countries, then they may go global," said Fabio Scacciavillani, an economist at Dubai International Financial Centre. "In the GCC, this process of economic development is hampered because a lot of economies are small and so in order for a firm to have a significant dimension, dimensions that would allow this company to take advantage of the economies of scale, this company has to sell to a market that is at least the size of GCC."

Mr Scacciavillani said that improving procedural processing at the ports and borders was as important as hammering out a customs law because of inefficiencies in the system. Mr Marri added that a common market would make the region more competitive in a global economy. Although the UAE does not charge tax on goods imported from other GCC countries, it has to work on adopting a uniform procedure of processing goods at the country's ports.

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