Founded in 1981 as a Saudi initiative, the GCC includes Saudi Arabia, Qatar, Bahrain, Oman, Kuwait, and the United Arab Emirates. It has been a loose security and economic grouping, but the new agreement will make it a far more important and cohesive body. GCC Secretary-General Abdel Rahman al-Attiyah rightly called the decision to create the common market "a historic declaration."
It means the right of all GCC citizens to live and work anywhere in the GCC, to buy and sell real estate and make other investments, to move freely between the countries, and receive education and health benefits. (It took the European Union 40 years to agree such sweeping rights for its citizens.)
The total economic output (or gross domestic product) of the GCC states this year will be around $800 billion, which makes them an economy close to the size of India in dollar terms. But in terms of cash flow and investing power, the GCC states are a superpower. Abu Dhabi alone runs an investment fund worth $850 billion, and a survey this year by the A.T. Kearney consultancy reckoned that the total investment capability of the GCC was over $4,000 billion. That is roughly the equivalent to the combined GDP of Britain and France. It is also more than double the available investment funds of China.
The importance of this was overshadowed in most media by the presence of a summit guest, Iran's firebrand President Mahmoud Ahmedinejad. He made no concessions on the territorial disputes over islands in the Gulf, nor on his nuclear plans, but proposed a regional security pact and a 12-point cooperation plan, including free trade and joint investments in oil and gas. Tehran at least seems to understand the economic importance of the Gulf states.
Media attention also focused on the decline of the U.S. dollar, which is putting inflationary strain on currencies of GCC members which are closely linked to the dollar. The GCC leaders agreed to take no action that might hurt the dollar further and refused even to discuss the prospect that they might drop the peg linking their currencies to the dollar and move to a basket of currencies that would include the euro. This might be costly, but it was a responsible decision given the worrying instability of the markets.
The challenge now will be to coordinate the laws of the GCC states to make the common market a reality in one month's time, and to prepare the way for their planned single currency in 2010. By then, who knows, the dreams of some Arab theorists of the GCC expanding into a regional security system that could include Jordan and possibly one day even Egypt, Iraq, and other Arab states, might start to look more real.