Introduction
The Gulf cooperation council (GCC) is an economic integration pact among six member countries which include: Kuwait, Bahrain, Oman, Qatar, Saud Arabia and the United Arab Emirates (UAE). Member countries not only share a common goal of creating a strong economic block but also cultural and historic ties. Member countries frequently rely on expatriate labor force which poses a common challenge. However, GCC is an ideal example of successful sub regional integration. GCC has ambitious objectives concerning its member countries as it does not dwell so much on free trade as would be expected in the developing countries. It has goals to embrace national mobility on factors of production (labor and capital) and focuses on opening sectors in member countries (Borchert et al).
Member Countries in the GCC have somehow similar circumstances, this being among the reasons the integration has been growing stronger over time. The similar characteristics binding the member states include: similar economic and fiscal policies- countries in the GCC have common economic policies for instance the use of a pegged currency on the dollar, open free trade which tends to vary based on the ratio of exportation and importation to the Gross Domestic Product. Secondly, GCC countries are hydro based economies (mainly oil and gas) thus resulting to high income. However, this has resulted to a common goal which is to diversify into other sectors. Thirdly, member countries emphasize on national governments being primarily involved in the organizational structure as opposed to delegating to multi national bodies. According to its articles of association and establishment, three main bodies are encompassed including; the supreme council, the ministerial council and the GCC secretariat (Al-Abdulrazzaq, and Srinivasan 39).
GCC was founded in May 1981.Its first 20 years focused on enhancing external security and coordinating policies in specified economic sectors. This has been through lifting the custom duties on domestic products of member states and increasing mobility on factors of production (labor and capital). Over the years, the integration has been strengthened and reinforced by various agreements which include; an economic agreement signed in December 2010 aimed at crucial aspects of the economy (trade and investments). In 2003, a customs union agreement was signed focused to remove restrictions on internal trade.5 years later, in 2008 the GCC declared a common market aiming at creating an environment conducive enough where citizens from member countries share equal rights and privileges. However the milestone to achieve a common or single currency was scheduled for 2010 but was postponed.
The GCC success story that eventually saw it on the global economic map was due to endless oil reserves and appropriate trade routes. However, success in the retail industry has attributed their relevance in the global economic front today. GCC has been successful over the years because the integration of the countries is facilitated by same key factors including; trade (both service and product), infrastructure and finance.
Integration through commodity service and trade has steered constant growth among the GCC members. Policies like lowering non tariff barriers have strengthened their integration and also commitment inline with the requirements of the world trade organization. Reduced border controls, in a bid to enhance the regional infrastructure have been of much benefit to the GCC. Trade corridors and linking railway lines are some of the ways used to facilitate trade. With these followed other economic reforms aiming at increased returns. This has resulted to market segment enlargement, broader economic base and promoted the trade sector through attracting new investors both foreign and local. The service sector has also been enhanced through the waiver approved on visas for the expatriates with the valid travel documents of the other Gulf States. The service sector has a lot of potential but its liberalization will pose some political and technical challenges. According to World Bank, the five major service sectors in the GCC integration are highly restricted. However, the reform in policies due to take effect might ease up the situation by promoting competition, harmonizing the standards and facilitating easy license acquisition to foreign firms. The retail industry has been a strong player in the strong GCC economy.
Commonly referred to as shopper paradise, growth is ha s been constant as retail chain outlets continue to emerge. The innovation is impeccable with the likes of the Dubai mall being the largest in the world (Kaia).
Financial and monetary integration in the GCC is dominated by the banking sector thus playing an important role of intermediation. Generally, the GCC market lacks institutional investors thus has a weak or slow bond market. The financial markets of member states vary in regulation and freedom of entry to foreign investors. The regulation towards foreign investors greatly affects the global integration process. The stock Market capitalization in the six states is lower than the banks assets.
The financial sector is a key determinant in the GCC integration and as such measures have been instilled to ensure best practices. For instance, the monetary union has been an objective since 2003. GCC member states have similar economic structures from same source of foreign exchange to a pegged currency on the Us dollar. This is to be reinforced by adopting a common currency which will also lower transaction costs and enhance pricing transparency (Mohsin).
GCC integration through infrastructure will boost trade volumes. Basically infrastructure will facilitate ease of movement for the products as well as individuals. The pipelines (gas, water), fiber optic lines (telecommunication) and power grids (electricity) will reinforce the integration. However, the integration process is encumbered with political challenges for instance the border disputes. There is yet to be a defined travel corridor and a standard on the required weight on freight moving vehicles. Railway lines are not widely connected with each other and as such it is not a major mode of transport. However, the air transport is quite different. Over the years, unprecedented growth has been observed, leading the GCC to impact greatly in the aviation industry. Infrastructure facilitating passing of energy has already been developed. This owes to the fact that, many industries in the GCC are mainly energy intensive (Al-Abdulrazzaq, and Srinivasan 22).
Globally, the GCC tariffs are considered low. This is attributed to the customs union agreement that was signed in 2003. Member states have over the years been trying to enforce collective trade negotiations until recently. GCC countries are members of the world trade organization and are still considering working with European Union although political reforms are hampering the process.
Challenges to further integration although major milestones have been achieved in the finance, trade and infrastructure sectors some impending issues remain thorny. For instance, there lacks standard mechanisms on how tariff funds collected are to be distributed. The organizational structure also does not have an executive body in place to resolve disputes. Accelerated integration would be enhanced by public accountability and also transparency (Alsharif 12).
Conclusion
Since its formation, the GCC has made remarkable progress and reinforced its integration by signing additional agreements. Restrictions in the service sector and trade tariffs have been lowered. Despite the progress, a lot still is desired particularly with the trade agreements among the member states. In a bid to strengthen the integration, GCC needs to strategize on its organizational structure. GCC also needs to come up with stronger economic reforms in potential sectors. However, if the last edition of the InRetail magazine and the constant retail growth in the GCC is anything to go by, then the future seems brighter than before (Humayon and Presley 1165).
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