GCC countries to use oil wealth for development issues

Oct 25, 2004 02:00 AM

Gulf oil producing countries under pressure to raise oil output to cool world oil prices will use current extra energy revenues on development issues, a GCC official told.
They welcomed the UAE initiative on a value added tax (VAT), initially on cigarettes, and discussed unifying laws, among other issues.

The issue of how to manage the surplus funds resulting from record oil prices and higher production came up during a meeting in Riyadh between GCC ministers of finance and Rodrigo de Rato, the visiting International Monetary Fund (IMF) managing director.
"The IMF considers this as extra revenue that we have to invest in the region's production facilities. The GCC ministers told him (Rato) that this is an opportunity to invest in the region's general development requirement. Our priority is to serve the future generations," Mohammad Al Mazroui, the UAE representative to the GCC secretariat-general, told.

Rato urged the GCC oil producing countries to boost production in a bid to ease bubbling prices, saying such a move will help world growth. GCC officials said a country like Saudi Arabia, the world's biggest oil producer and exporter, would utilise the extra billions of dollars from oil revenues to eliminate a running deficit and pay back huge internal and external debts estimated at more than 600 bn riyals (Dh 600 bn).
The GCC officials welcomed Rato's visit and asked for observer status at the IMF meetings, but appeared sceptical about the IMF request for unilateral action by the GCC to lower oil prices.
"Why do they ask us for producer-consumer cooperation now, why didn't they offer to cooperate when oil prices were low?" asked Mazroui.

Mazroui dismissed as untrue fears that additional oil revenues will trigger inflation, saying the cost of living had been under control in the region for several years. Other topics the ministers of finance discussed included the UAE initiative to introduce value added tax across the region on a gradual basis that would first target tobacco and other "harmful" products.
Mazroui said that Saudi Arabia had welcomed the initiative while ministers sought more extensive studies on how to apply VAT, along with other options, including tax on consumption. The ministers also welcomed the UAE offer to host an entity that would manage the Gulf unified currencies that would be issued in 2010.

The GCC officials are still debating whether such an entity will be in the form of a Gulf Central bank or a financial committee.
The ministers approved during their meeting in Riyadh a unified industrial law and a unified trademarks law, Al Mazroui said. The GCC officials also discussed the problems in implementing the Customs Union, such as ensuring a smoother collection of unified duty and other obstacles.

Source: Gulf News
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