UAE OFFICIALS ON GCC COMMON MARKET AND CURRENCY

C O N F I D E N T I A L ABU DHABI 003929

SIPDIS

SIPDIS
NOFORN

STATE FOR NEA/ARP, EB/IFD/OMA
STATE PASS USTR FOR BELL
TREASURY FOR DAS SAEED AND ROSE

E.O. 12958: DECL: 10/10/2016
TAGS: ETRD EFIN ECON PREL GCC AE
SUBJECT: UAE OFFICIALS ON GCC COMMON MARKET AND CURRENCY
UNION

REF: ABU DHABI 3709

Classified By: Martin Quinn Charge D'Affaires a.i for reasons 1.4 (b &
d).



1. (C/NF) Econchief briefly discussed the prospects for the
GCC common market (scheduled to be established by 2007) and
the GCC monetary union (scheduled for 2010) with MinEcon U/S
Abdullah Al-Saleh and Central Bank Governor Sultan Nasser
Al-Suwaidi on October 8 and 9. In response to econchief's
question, Al-Saleh flatly stated that the GCC common market
would not be established by 2007. He explained that the GCC
was still having difficulties effectively implementing the
GCC customs union, and that issues of reciprocal investment,
etc. had not been resolved. Al-Saleh noted that the
"leadership" sometimes made decisions (such as calling for a
common market by 2007) that the "working level" were not
implementing. When asked about the prospects of a currency
union in 2010, Al-Saleh was more positive, saying that he
thought that was more likely.


2. (C) On October 8, Econchief briefly discussed the GCC
currency union with Al-Suwaidi and the Governor's alleged
remarks that the GCC Central Bank would be located in Abu
Dhabi. Al-Suwaidi said that papers in the UAE erroneously
attributed the statement to him that the GCC Central Bank
would be located in the UAE rather than identifying it as a
supposition of the paper interviewing him. Al-Suwaidi said
that the GCC monetary union could slip slightly from its 2010
planned start, but "would be close." He explained that -- in
contrast to the Eurozone -- he thought that GCC laws and
policies were better integrated, which would augur well for
the success of a common currency. (Note: The Central Banks
are to prepare a draft paper regarding the single currency in
advance of the GCC summit in December 2006. End Note.)


3. (C/NF) Comment: UAEG officials have told us on several
occasions of their frustrations with the customs union,
generally complaining about Saudi Arabia slowing down traffic
at the border, excessively. The more reflective have
admitted that all sides (including the UAE) share some of the
blame. Barriers to intra-GCC investment (including
investment in property and in the equity markets) remain, and
will need to be addressed in order for the GCC to develop a
true common market. In his meeting with State A/S for
Economic and Business Affairs Sullivan and Treasury DAS
Saeed, Al-Suwaidi noted that political/sovereignty issues
could delay implementation of the currency union (reftel),so
his current remarks are not unexpected. End Comment.
QUINN