Finance ministers from the Gulf nations discussed on Tuesday a wide range of issues facing a proposed common market, including the final details of a regional customs union, in an effort to revitalize the effort to establish a tighter economic bloc after plans for a monetary union faltered in May. The customs union, while less controversial than the common currency project, has been stuck in a transitional phase since 2003. If approved when the region's rulers meet in Kuwait in December, the customs union would collect a 5 percent tariff on imports at the first port of entry in countries belonging to the Gulf Cooperation Council. It would also establish a common customs law. “There is only one issue and that issue is how to distribute revenue,” Darwish Ismail Al Bulushi, the secretary general of Oman's finance ministry, told reporters after the meeting in Jeddah. The ministers looked at a study that recommended that revenue be distributed based on population and economic output, but the final percentages haven't been agreed upon yet, Al Bulushi said. The GCC Custom Union is expected to reduce trade barriers within member states, and allows the region to act collectively when negotiating foreign trade agreements. The UAE, the second largest economy of the GCC member states, pulled out of the monetary union after Saudi capital Riyadh was chosen to host the central bank, joining Oman which opted out of the union last year. While the customs agreement isn't expected to fundamentally change trade flows given the dominance of oil exports, its implementation could help restart talks for the common currency and regional central bank. “Reaching a deal on the customs union is significant because it's part and parcel of the larger effort to establish an integrated economic bloc,” said John Sfakianakis, the chief economist at the Riyadh-based Banque Saudi Fransi, an affiliate of Credit Agricole Group. A single central bank for the Gulf could make the region a formidable international force. With the Gulf's immense oil wealth backing up the bank, the region could be home to one of the world's largest central banks in terms of assets, analysts said. If the Gulf adopts an independent currency, it will allow the region's central bank to craft its own monetary policy, making it better able to counter economic crises. Most Gulf countries' currencies, except Kuwait's, are pegged to the US dollar, and their monetary policies move in tandem with the US Federal Reserve's. Saudi Central Bank Governor Muhammed Al-Jasser said last week the Kingdom still hoped to lure back the UAE and Oman to the monetary union. “The more they meet, discuss and compromise on issues, the closer they get toward achieving progress,” Sfakianakis said. “Pessimists can discount such meetings as simply chat sessions but there is more than meets the eye,” he added.
