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The UAE on Wednesday officially pulled out of the proposed Gulf monetary union, jeopardizing the future of the region's single currency aspirations.

Sources in the UAE Central Bank told Gulf News that the move follows reservations about the recent decision to locate the Gulf central bank in Saudi Arabia.

"The UAE's monetary policy will not change and will maintain its method of openness," Al Suwaidi said, adding that the dirham will remain pegged to the dollar.

The UAE was the first country to submit an application to host the GCC Central Bank in 2004, as part of the arrangements to join the monetary union.

The UAE had expressed reservations over the monetary union after an informal GCC meeting in Saudi Arabia on May 5 decided that Riyadh, which is home to the GCC headquarters, would host the future Gulf central bank.

A UAE Central Bank source said the UAE had been told initially that it would host the bank.

"The work on the headquarters [in Abu Dhabi] was done and the place was ready to start operations," he said, adding that the UAE was "taken off guard" by the summit's decision to base the bank in Saudi Arabia

http://www.gulfnews.com/business/Economy/10315602.html

well maybe its because they dont get to host the central bank

This translates into some kind of rebellion against KSA. That is pretty controversial.

I mean would'nt it be so much simpler to just opt out of the Khalleeji
citing change in perceptions regarding the viability of the currency?
This is some kinda of a political statement I would think!
Although it does seem as though UAE could adopt Kuwait's strategy and opt for a basket of currencies, dollar, euro, SF, pound ,yen, might even start buying Chinese currency etc

UAE pulls out of GCC single currency

The UAE has announced that it will no longer be part of a region-wide monetary union, according to the official WAM news agency. 'The UAE has decided not to take part in the proposed monetary union agreement between the states of the Gulf Cooperation Council,' the agency reported, citing a foreign ministry source.

United Arab Emirates: Wednesday, May 20 - 2009 at 19:55
'The UAE extends its best wishes for success to those GCC member states who will join the monetary union agreement.'

The UAE would have been the second largest economy in the agreement, after Saudi Arabia.

Abu Dhabi had been proposed as host city for the new regional Central Bank, but earlier this month members voted for it to be located in Riyadh.

With Oman and now the UAE both deciding against joining the monetary union, and Kuwait de-pegging its currency from the dollar in 2007, it now throws the future of the GCC common currency in doubt.

Giyas Gokkent, Chief Economist at National Bank of Abu Dhabi, said the decision was 'a major spanner in the works', while Standard Chartered bank said it was 'a serious setback to plans for a single currency'.

The UAE Dirham will remain pegged to the US dollar.

http://www.ameinfo.com/197386.html

Today the UAE is saying they may rejoin....!! (See the article below by GN, today’s edition)

But basically they’re still saying if we don't get the GCC Central Bank, we won't join...

The proposed location of the Central Bank was voted upon by all the GCC member counties. The UAE didn't like the outcome of the vote and decided to walk out....

Childish pouting or jealousy ....or something else!!!???


UAE could rethink Gulf monetary union if terms change

Reuters & WAM
Published: May 22, 2009, 23:39


Vilnus/Abu Dhabi: mUAE's Foreign Minister said on Friday the UAE would consider rejoining a Gulf monetary union if terms change and its neighbours agree to allow a joint central bank to be based in the country.

Shaikh Abdullah Bin Zayed Al Nahyan left the door open for the UAE to rejoin the euro zone-style single currency, two days after pulling out, but did not elaborate on what conditions would have to be met. Speaking to Reuters during a visit to Lithuania on Friday, Shaikh Abdullah said: "If the terms are different, we will look positively to that. At the moment the terms are unacceptable for the UAE, and that's why we decided not to join."

The UAE's Central Bank Governor Sultan Bin Nasser Al Suwaidi said yesterday that the decision of choosing Riyadh as the location for the Gulf Central Bank was political and disregarded the UAE's competitive advantages. In an interview aired by Dubai TV, Al Suwaidi said the decision disregarded the fact that major global banks have branches in the UAE and that 50 per cent of international money transfers in the Gulf region take place in the UAE.

The UAE broke ranks with Saudi Arabia and three other Gulf states last week by withdrawing from the plan in protest of the May 5 decision to base the joint central bank in the Saudi capital. Asked what terms would have to change, Shaikh Abdullah said that until last year, only the UAE had been a contender to host the joint body.

"When I say the terms, the UAE was the first country supposed to host the central bank, and we believe we had the right to do so. [It] did not happen," Shaikh Abdullah said. "All the other countries did not mention anything about hosting the central bank till last year. For the first four years it was only the UAE which was a candidate to host the bank - so this is where we are today."

Al Suwaidi added that the location of the proposed bank was not the only issue that led to the UAE pulling out of the Gulf Currency Union, since there were some other reservations raised by the UAE on the common currency project, but these were overlooked.

They were saying on the Business Breakfast on Dubai Eye the other morning that this whole thing was just a negotiation tactic by the UAE. They are obviously p!ssed off about the central back being in KSA.

Captain Australia wrote:They were saying on the Business Breakfast on Dubai Eye the other morning that this whole thing was just a negotiation tactic by the UAE. They are obviously p!ssed off about the central back being in KSA.

Thats exactly what I think.

The public struggle is a bit weak I think, since it shows how the parties involved are on the wrong foot with eachother.

Bit childish to do it in public

RobbyG wrote:

Captain Australia wrote:They were saying on the Business Breakfast on Dubai Eye the other morning that this whole thing was just a negotiation tactic by the UAE. They are obviously p!ssed off about the central back being in KSA.

Thats exactly what I think.

The public struggle is a bit weak I think, since it shows how the parties involved are on the wrong foot with eachother.

Bit childish to do it in public

It was political posturing.

Arab unity has never been achievable to a large enought extent. The GCC itself while being a commendable effort to grow political and economic muscle has little real world value.

What I found interesting about the Business Breakfast interview (forgot who it was with) was that the guy said the UAE being involved in the single currency was nothing to do with financial reasons, it was all about strengthening the GCC ties.

Interesting in light of what has happened.