GCC Jordan, Morocco move to spur investment

A decision by Gulf hydrocarbon exporters to admit Jordan and Morocco to their 30-year-old alliance will spur investment, create jobs in those two Arab nations and boost home remittances from Jordanians and Moroccans working in the Gulf, according to a semi official study in the UAE.

The move, encompassing nearly 70 million people in those two Arab kingdoms and the six-nation Gulf Cooperation Council (GCC) will also allow the Gulf group to boost exports to those two kingdoms and their Western economic partners, including the US and Europe, the government-controlled Emirates Industrial Bank (EIB) said in its latest monthly economic bulletin.

The study said the GCC and the two Arab kingdoms already have strong commercial relations, with their two-way trade surging to nearly $7.8 billion in 2010 from around $4.6 billion in 2009.

But it stressed that the two sides need to modify some economic laws to accommodate each other, mainly those concerning the GCC customs union. It noted that GCC members—UAE, Saudi Arabia, Kuwait, Bahrain, Qatar and Oman—enforce a unified five per cent tariff on foreign imports as part of their customs union while tariffs in Jordan and Morocco range between 20 and 80 per cent. Some food imports in the GCC  are also exempted from tariffs, it said.

“There is a need to amend some laws and legislations to facilitate the joining of those two Arab countries of the GCC,” the study said.

“As for the benefits, both parties will gain from this move….Jordan and Morocco will witness an increase in GCC investment and this will contribute to expanding growth in the two countries, create more jobs and cut unemployment rates…the move will also boost GCC exports and remittances from Jordanians and Moroccans to their countries and this will help improve their living standards.”

EIB said the expanded group would also allow GCC states to increase their exports to the US and the European Union through Jordan and Morocco given the two countries’ special economic relationship with the West and this will enable the GCC to expand their industrial sector.

The study expected the surge in GCC investment in Jordan and Morocco to boost the GDP of those two countries, adding that they currently account for only  11 per cent of the GCC’s combined GDP. The GDP per capita in the GCC, which was created in 1981, is also almost seven times that in Jordan and Morocco.

“For example, a five per cent rise in GCC investment in Jordan and Morocco will contribute to a four per cent rise in the GDP of the two countries…in time, this will help bridge the economic gap between the GCC and the two countries…the GCC can also help cut fiscal deficits in those two countries…all these measures will be vital for the success of the formation of a strong group capable of facing the challenges of the time and achieving more gains for all members.”

In a recent study, a key French bank said the inclusion of Jordan and Morocco into the GCC would add more than 12 per cent to the bloc’s economy which could soar above $one trillion in current prices.“Full integration of Jordan and Morocco into the GCC economic area would add 12.2 per cent to the bloc’s nominal GDP, based on 2010 data, bringing it solidly above the $one trillion mark,” Credit Agricole said.

The study said it would be much easier for the GCC to absorb Jordan since  its economy, worth $27.5 billion in 2010, is smaller than that of Oman and about a fifteenth of the size of Saudi Arabia’s.Jordan, which shares a border with Saudi Arabia’s northwest, is also a better geographic fit than Morocco, a Mediterranean coast state in North Africa.

Morocco’s economy was valued at $103.5bn in 2010, not far below Qatar andKuwait, and its inclusion in the GCC would lead to a sizeable adjustment in the GCC’s economic structure, the study added.

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