4 Gulf states sign a monetary pact

CAIRO: Four Gulf Arab nations on Sunday signed an agreement paving the way for a monetary union and pressing ahead with plans for a unified regional currency despite political obstacles that have threatened to undermine plans for greater economic integration.

The signing of the pact in the Saudi Arabian capital Riyadh, reflected a concerted push by Saudi, Kuwait, Bahrain and Qatar to move ahead with the long-delayed monetary union just weeks after the United Arab Emirates withdrew its support for the plan.

Oman had already said it would not participate in the accord, saying it was not yet ready to join in a single currency plan that also includes the establishment of a regional monetary authority and central bank.

The withdrawal of the UAE, the Arab world's second largest economy, from the plan dealt a blow to the GCC, raising doubts about the viability of the project and plans to set up the unified currency by 2010. Many analysts had already questioned that timeframe, even before the UAE pulled out, and the signing Sunday evening in the capital of the Arab world's largest economy appeared aimed at showing the bloc's commitment to the process.

``This is good news,'' said John Sfakianakis, chief economist with SABB, the HSBC Holdings PLC affiliate formerly known as Saudi British Bank. ``This is going to keep momentum going forward. Much remains to be done, but one should not forget that much was done already.''

``This is a good indication that the remaining states will move ahead,'' said Sfakianakis. ``And what needs to be done is for the ... (GCC) states outside the monetary union to realize the benefits of being in the union.''

The UAE's surprise decision earlier last month to pull out of the process was read by many as a political reaction to the decision to select Riyadh as the headquarters for the regional monetary council, the precursor to the new central bank.

Saudi already hosts several GCC bodies whereas the Emirates, home to boomtown Dubai and significant oil wealth in Abu Dhabi, has been looking to secure greater recognition for its rising standing in the region. GCC officials had set a target of 2010 for the new currency, but they have since acknowledged that this deadline would not be met.

Following a meeting in December, the bloc set the end of this year as a deadline for ratifying the charter of the monetary council, which would subsequently work to lay out a timeline for the establishment of a unified currency.