Abu Dhabi // The GCC has announced the formation of a new agency aimed at increasing economic cooperation within the six-nation bloc, as Gulf countries face a common challenge of low oil prices and shrinking budgets.
The Economic and Development Affairs Authority “will boost coherence, integration and coordination between member states in all economic and development sectors”, the Gulf Cooperation Council said in a statement released shortly after a summit in Jeddah on Tuesday.
Among other things, the authority “will look into matters such as completing the customs union and the common market of the GCC states”, said Saudi foreign minister Adel Al Jubeir.
The body “can solve these issues urgently and effectively”, he added.
Sheikh Mohammed bin Rashid, Vice President of the UAE and ruler of Dubai, headed the UAE delegation to the 16th Consultative Meeting of GCC leaders, which also included Foreign Minister Sheikh Abdullah bin Zayed.
The bloc has long maintained that economic integration is a priority, but political disagreements and sovereignty concerns have undermined these efforts.
Tuesday’s announcement of a new economic coordination body may indicate, however, that members are willing to show compromise on these issues in the current context of shared challenges. The steep fall in oil prices over the past two years has put serious pressure on budgets across the Arabian Gulf and forced unprecedented economic changes including cuts to subsidies, the restructuring of state energy and financial institutions and taxation.
The UAE announced in February that it would introduce value added tax by the end of 2018 at a rate of 5 per cent.
Saudi Arabia, meanwhile, has announced the most ambitious plans for reforming its oil-dependent economy. These include the establishment of the world's largest sovereign wealth fund, which Riyadh says will eventually control more than US$2 trillion (Dh7.35 trillion) and help wean the country off oil.
Further economic coordination and cooperation may help the GCC states to confront the economic challenges facing them. They will also seek greater cooperation from western partners. In April, US president Barack Obama announced the creation of a “high-level economic dialogue” between the United States and GCC to address the fallout – and opportunities – of lower oil prices.
This dialogue would “focus on adjusting to lower oil prices, increasing our economic ties and supporting GCC reforms as they work to provide jobs and opportunities to their young people and all of their citizens”, he said at the time.
Tuesday’s summit was held two days after GCC meetings with UK foreign minister Philip Hammond and the EU high representative for foreign affairs, Federica Mogherini. Those meetings also focused on economic cooperation, as well as regional conflicts, particularly Yemen.