As GCC Summits go, the 28th, held in Doha in early December, was one of the most significant, yielding an “historic declaration,” according to GCC Secretary General Abdel Rahman al-Attiyah. Heads of state agreed to implement the Gulf Common Market (GCM) in January 2008, aiming to provide a more fluid, unified market for citizens and paving the way for greater internal and foreign investment.

The GCM gives GCC citizens the right to work in all regional government and private institutions and is meant to bolster free trade and production between countries. The all-encompassing agreement means Gulf citizens have the same rights regarding real estate, stock, capital movement, taxation, pensions and social security.

In a quantum leap for conservative Saudi Arabia, GCC citizens will be allowed to trade Saudi stocks, giving them a de facto voice in the region’s largest economy, with a real GDP of more than $300 billion. Collectively, the six GCC nations now have a GDP close to $800 billion, on a par with India in dollar terms, although its cash flow and investing power are far greater, as high as $4 trillion.

Gabriel Stein, director at Lombard Street Research in London, which specializes in macro economic forecasts, says that the goals of the GCM are laudable, but the devil could be in the details. The agreement was originally slated to launch last year, but Saudi Arabia asked for more time.

“It’s fine as an idea but there are a number of issues,” he said. “Only 7 percent of Gulf exports are to other Gulf countries, so what are they going to trade? Gulf exports are dominated by energy, and while they import foodstuffs, little is produced. Then if you have free movement of labor, what becomes of each country’s rules regarding expats? You’re going to have to harmonize GCC residency regulations. But I have no problem with the GCM in principle; they have to start somewhere.” He added that the regulations to GCC citizens would have to apply to nationals and expats alike, otherwise “it defeats the purpose.”

Member states may be better off exploring trading commonalities, perhaps pegging currencies to a fixed price of a barrel of oil – and should think twice about adopting an EU-style common market that may not be appropriate, added Stein. “The Nordic countries had free travel for 50 years but no common market. As for the Gulf single currency, strictly speaking, it’s not even necessary.”

The communique issued at the end of the 28th summit said the GCC remained committed to a 2010 date for monetary union and single currency, despite Kuwait’s decision to peg its currency to a currency basket instead of the dollar in 2007, and Oman opting out. It’s unclear just how much will change in January. The chairman of Dubai Financial Market, Eisa Al Kazim, is quoted as saying “nothing changes from January 1,” indicating that the GCM’s launch may be just one more step in the region’s rapid evolution.

Should the GCM spark a migration of young, skilled job-seekers from less attractive GCC countries to “honeypot” commercial hubs such as Dubai and Doha,such an influx could increase in housing, infrastructure, health and education costs, as well as exacerbate congestion and pollution. Office rents in the two cities are already expected to increase 20 percent this year.

The GCM launch culminates a fiveyear program, which started with the the GCC customs union in January 2003. Between 2003 and 2005, trade between GCC countries rose from $20 million to $34 million. Today, free trade and customs union agreements are established, with a common import tariff of 5 percent. Over the past two years, member states have agreed to widen the scope of activities granted to GCC subjects. In 2006, insurance, clearance of official documents in governmental departments and transport were added to the list, complementing recruitment offices, car rentals and most cultural activities in 2005.

Plenty of food for thought leading up to the next GCC meeting in Oman.

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