There is an urgent need for the GCC’s position among global economies to be reviewed due to the region’s economic and financial power, says an influential report.

Regional GDP will comfortably exceed the $1 trillion mark in 2008, moving the GCC further up the top 10 in terms global GDP rankings. However, appropriate recognition of this status is needed in order to support the GCC’s aspirations in global finance, said the Chatham House report.

Despite being economies of such high standing, they are typically still treated as ‘developing countries’. Their GDP/capita is well above emerging market levels, even excluding the energy sector, it said.

“None of these countries has joined the OECD and there is notably no representation at the world’s top table, the G8 summits,” pointed out the report. 

This review should acknowledge the importance of Gulf’s financial sector, said the Chatham House report titled: ‘The Gulf as a Global Financial Centre: Growing Opportunities and International Influence’

It says that the Gulf’s global economic status is impressive, underpinning significant growth in the financial sector and potentially the rise of the GCC as a top rank global financial centre. In principle, the GCC could overtake both Australia and a weakened Japan in the IFC rankings over the next decade.

“The GCC is well positioned to act as a key hub in global financial markets, serving the wider Asia-Mena region. To enable the GCC to leverage its position, an important development would be the creation of a larger, deeper debt market, whether based on Western-style bonds or the Sharia model, building on the region’s strength in Islamic finance. This implies a radical departure for the GCC in terms of the role played by government debt and project finance, its potential in promulgating local market activity and broadening the base of the financial sector.

“If successful, this move could open up a much larger role for the GCC in global debt markets, especially across the Middle East and Asia. This would provide a massive ‘hinterland’ within which the GCC’s financial sector could expand and fulfil the target of becoming a GFC. It would also help the global community to meet the task of coping with the surge in “new wealth”, reducing global asset imbalances,” said the report.

GCC cooperation will be essential in achieving these goals and a positive step in this direction is the recently confirmed plan to set up a common Monetary Council by next year, another step towards a common currency, it added. – TradeArabia News Service