UAE Central Bank Governor defends dollar policy

"Gulf states need a collective political decision to end a long-standing Link between their currencies and the US dollar, UAE Central Bank Governor Sultan bin Nasser AI Suwaidi told the Oxford Business Group in an interview.

Al Suwaidi added that the UAE could be a right place to host the proposed Gulf Cooperation Council (GCC) central bank as part of plans to set up a monetary union.

In an interview with the Oxford Business Group he defended the slow moves by the UAE and its five partners in the GCC to create the long-awaited monetary union, noting that the six nations have never talked about a full union.

"I do not think the dollar peg affects our economic performance. The peg remains a GCC issue at this point. The peg has been beneficial to the UAE look at what we have achieved", Al Suwaidi said, indicating that "Of course, the sceptics will question this. At the end of the day, there is a relationship between how much you can sell and at what price. You cannot look at it in absolute terms".
He added that one could not necessarily sell the same amount of goods at a better price by being pegged to another currency.

Al Suwaidi said "on individual level we cannot do anything about the peg at this time. If we want to appreciate or depreciate our currencies or change the peg to a basket of currencies, we need to consult the other GCC countries as such matters constitute both economic and political decisions".

The governor said that the UAE is a strong candidate to house the proposed GCC central bank for the simple reason that it was the first of the six countries to offer to be its headquarters.
Al Suwaidi cited that the UAE is a strong candidate for three main reasons: first, it does not host many GCC institutions; second, the UAE was the first country to take the initiative to offer a place for the proposed GCC central bank; and third, the UAE adopts a free economy, one that is capable of attracting top industry talents.

He indicated that the entire UAE offers a pleasant environment that attracts human resources. More than anything Else, having the central bank would allow the UAE to help other GCC countries and serves as a leader in financial supervision and monetary policy.
"It is not a material benefit that we are seeking. It is rather leadership and being able to prove to the GCC states that we can drive forward and share our economic experience with them," Al Suwaidi said.

He defended the slow progress on the GCC monetary union, which has been set for 2010, adding that the plan now is not for a full union. The six members do not want to copy the monetary experience of European Union or any other bloc.
"We have never talked about a full monetary union. We have never aimed to have the monetary union as envisaged by the European Central Bank:' AI Suwaidi concluded. (WAM)