The Gulf Cooperation Council (GCC) is one type of trade bloc which called multilateral trade agreement where there is an agreement of multiple nations for coordination in specific fields. Also, GCC is known as the Cooperation Council for the Arab States of the Gulf (CCASG), and it was found in Abu Dhabi, United Arab Emirates on 25th of May, 1981 by joining 6 states allowing coordination and integration between the member states in all fields. The countries who served as member states are United Arab Emirates (UAE), The Kingdom of Bahrain, The Kingdom of Saudi Arabia, The Sultanate of Oman, Qatar and Kuwait.
GCC mainly acts as a regional cooperation system among the Gulf Arab States in order to response to challenges derived from the surrounding circumstances. For the background, the GCC was established mainly in order to act as a defensive measure because they perceived the threat of Iran-Iraq war (1980-1988). In additional, the variables those helped in facilitating the establishment of GCC were firstly the geographical proximity among the GCC member states. Secondly, the GCC states have very similarity in term of their social conditions, regulations and economic structures.
Moreover, in economic, they mostly depend on the oil exporting, and they are known as the organization that controls almost half of the world’s oil reserves. The GCC has the total amount of oil reserves about 480 billion barrels and Natural gas of 1,030 tcf (trillion cubic feet). Therefore, they are the world’s most important energy source. The Headquarter of GCC located in Riyadh, Saudi Arabia, and its official language is Arabic. The leader state of Supreme Council Presidency is United Arab Emirates and the Secretary General is Bahraini, Dr. Abdullatif Bin Rashid Al-Zayani.
The total populations of member states are about 43. 5 million peoples. In additional, the total GDP of GCC was about US$ 940 billion in 2009, and the GDP per capita was about US$ 21,612. There are several basic objectives of the Gulf Cooperation Council. First of all, they aim to achieve unity among the member states by effecting in coordination, integration and inter-connection between them in all fields. Second, the GCC aims in both deepening and strengthening relationship between people of the GCC in order to create the links and areas of cooperation.
The third objective is to formulate more similar regulations. The last objective is stimulating scientific and technological development in the fields of industry, mining, agriculture, water and animal resources. Moreover, they aim to conduct scientific research, also establishing joint ventures and encouraging the cooperation by the private sector. Moreover, they aimed to achieve cooperation with several countries and even other economic integrations such as EU and EFTA. Next is the discussion about the overall picture of the GCC’s strengths, weaknesses, opportunities and threats.
For their strengths, they are the world’s largest oil exporter and having ample oil reserves, so they achieve high international bargaining powers, also they are in a strong position within the cartel because they are the main OPEC producer. Their second important strength is the boosted growth and improvement of the non-oil sector and infrastructure resulted from recent oil price boom. Moreover, their increasing number of population made a solid domestic demand for goods/services and infrastructure. And geographically, the member states are the well places for FDI in the region.
For the weaknesses, the GCC is home to several violent Islamist groups and as they mostly depend on oil, so it means that their growth, exports and government revenue remain highly risk to the shifts in world oil prices. Moreover, their education system is not met the needs of the private sector and there are likely ongoing political obstacles. For the opportunities, the first one is there are more opening up to a wider range of political views of media. Second, there is slower growth and lower liquidity will bring inflation down domestically, cushioning the impact of the consumer slowdown.
Third, the joining the WTO and pursuing a free trade agreement (FTA) with the US, China-GCC FTA, GCC – Singapore FTA and GCC – EFTA FTA mean liberalization will continue. For the threats, the GCC will be risk if there are any attacks on oil facilities which could lead to a disruption of output, which would be extremely harm to the overall economy because they given the reliance on this sector a lot. The second threat is some investors could be interrupted by perceptions about high security risk and high political risk which could result in increasing costs of insurance.
There were several successes and failures of GCC. For their successes, it has been credited with successes that surprised even its members in a variety of issue-areas. Economically, the GCC is known as one of the most powerful organization among trade groups. For example politically, with the performance of the politically homogeneous GCC, is regularly mentioned as the most accomplished among the sub-regional institutions attempted in the Middle East. For example, the boundary demarcation crisis between Bahrain vs.
Qatar (1982-1995), the GCC intervention at that time act as a primary cause of success in stop the crisis. For the failure, the GCC still failed to meet the pre-requirements to establish a monetary union in 2010 due to the GCC economies are oil dependent, have little intra-trade between members, lack convergence in macroeconomic fundamentals, and lack synchronization in business cycles. Arab Spring is a sequence of anti-government uprisings in various countries in North Africa and the Middle East, beginning in Tunisia in Dec. 2010.
The main reason is to put an end to government oppression, corruption and incompetence. For the impact of the Arab Spring, there are the political changes, and then everywhere facing Arab Spring is in uncertain condition. The second impact is the need of finance support for reconstruction oil-importing countries, however the economies of the MENA oil-exporting countries, (including some GCC members-Bahrain, Kuwait, Oman, Qatar, Saudi Arabia,), are forecast to expand by 4. 9% in 2011, but those of the region’s oil importers are expected to grow by less than 2%.
For the international response, the killing of civilians by Arab Spring governments drew strong protests by the United Nations and adverse reports by its agencies for example, Libyan civil war between the forces loyal to Muammar Gaddafi’s government and the anti-Gaddafi forces. Therefore, the biggest threat to business conditions in the GCC is the Political unrest in MENA, but the impact of “Arab Spring” is seen more positively than last May, both in the short term and the long term.
In conclusion, the Gulf Cooperation Council even is in the competitive position in controlling the most important energy source in the world and has several international agreements which could create huge opportunities, but they are still facing several problems such as political problem, protesting, and impact from global economic crisis. Therefore, the carefully effective strategic plans and movements are still highly required.
Courtney from Study Moose
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