Expanding the GCC: Economics meshes with politics

Posted on September 21, 2011

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The inclusion of Jordan and Morocco will add USD 118 billion to the bloc.

Flag of the Cooperation Council for the Arab States of the Gulf

The potential inclusion of Morocco and Jordan into the Gulf Cooperation Council‘s fold is a move designed to expand the political and economic influence of the oil-rich bloc and mirrors the North American Free Trade Agreement, the European Union, and the Association of Southeast Asian Nations. Even the loose market grouping that was BRIC now includes South Africa to become BRICS.

No one can fault the Gulf states’ efforts to ring-fence their economies and social structures from the ravages of the Arab Spring. The Saudi-led grouping has launched a proactive diplomatic, economic and military effort to remain a force within the region as it tries to turn down the flames of revolution and keep at bay an increasing Iranian influence. Morocco and Jordan, whose leaders have remained strong American allies for decades, appear to be a natural political fit for the GCC.

Jordan and Morocco might even jump the membership queue over Yemen, whose application for a full membership has been languishing in the GCC’s in-tray for years. The political benefits are clear. The new members will help the GCC wield influence deep in North Africa and also in the Levant. It will give them a vantage point in Tunisia and Algeria and also offer them front-row seats for events in Lebanon and Syria.

In exchange for a wider base of influence in the region, the oil exporters are willing to use their petrodollars to the benefit of the new members. Both countries have and will continue to benefit from foreign direct investment flowing from the Gulf region. According to the IMF, the GCC economies account for the largest share of Jordanian trade, remittances, grants, FDI, and tourism receipts. Morocco too has received Gulf investments, but the North African state’s biggest partner is the European Union. Given the parlous state of the European bloc, more interaction with the capital-exporting Gulf states seems like a positive for the Moroccan economy.

The inclusion of Jordan and Morocco will add USD 118 billion to the bloc, giving the expanded entity a formidable USD 1,140 billion. In other words, the two new recruits will make up 10% of “GCC Plus”. About USD 28 billion will come from Jordan’s GDP and a formidable USD 90 billion from Morocco.

The planets appear to be in conjunction for this initiative to be taken to its logical conclusion. However, the current global economic circumstances also call for a re-examination of the structures that are in the process of falling apart under the Eurozone, and the GCC Secretariat has indicated, rightly so, that it is doing just that.

More intelligence on “GCC Plus” (Zawya.com):

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Posted in: Economy