NEWS FROM THE UAE
SOURCE: THE NATIONAL
UAE quits currency union on ‘principle’
ABU DHABI - MAY 21: The UAE yesterday withdrew from the GCC’s planned monetary union, dealing a serious blow to the bid for a single regional currency.
The decision was announced 15 days after the country was passed over as a venue for the union’s central bank in favour of Saudi Arabia.
A UAE government source indicated yesterday that the UAE could have vetoed the vote to award Riyadh the GCC central bank but chose not to, so that the other four nations could carry on with plans for monetary union.
“This was a matter of principle for the UAE,” the source said. “The UAE made a compromise by the decision not to block the monetary union. We expressed reservation instead of using our right to block the entire agreement.”
Government sources stressed the decision to withdraw from the monetary union process was taken after a period of careful reflection, and was in no way born from the need to simply score a point against the decision.
During a summit in Riyadh on May 5, the majority of GCC nations agreed the Saudi capital would be home to the new monetary council, a precursor to a GCC central bank.
But the UAE expressed its reservations to basing the central bank there. Sources said the status of the summit as a consultative meeting precluded any definitive decision being reached on such a central issue and that a UAE formal notice reminding the attendees of this had been “ignored”.
It is strongly felt by the UAE authorities that the country enjoys an open banking sector in an open and tolerant society that operates as a key nexus of commercial activity in the region.
Sources further stressed that the UAE was naturally inclined towards political and commercial consensus within the GCC, but that on this occasion bylaws governing the definitive location of the proposed central bank had been skirted.
The UAE believes the decision to pull out will affect the efficacy of proposed monetary union, in the same way that the absence of proper participation by Germany or France might affect monetary union in the European Union.
“It will definitely harm it,” a source said. “The UAE is a third of the GCC economy, and along with Oman it is staying out of the union.”
The UAE was concerned that Saudi banking policies would affect the rest of the region, according to a source familiar with official thinking.
The Saudi Arabian Monetary Agency has traditionally shied away from structured-investment banking products and services, sometimes putting Riyadh at odds with other Gulf economies.
Furthermore, while other Gulf countries have floated the idea of abandoning their currency pegs to the dollar in favour of a basket of currencies, including the dollar, Saudi Arabia has steadfastly defended the peg and would be expected to resist any attempt to delink.
“With the absence of the UAE there is no doubt that conservative monetary policy of Saudi Arabia would prevail in the new union and will dominate its monetary policy,” he said. “Having the UAE part of such a union would have definitely offered a moderate voice to balance the Saudi conservative monetary policy.”
Officials believe the UAE is best suited to host the central bank because most regional and international banks, insurance companies and industrial firms operate on its territory. They also argue that the UAE’s free-market economy is a winning card.
Despite its withdrawal, the UAE wishes the project well and will continue to demonstrate its past commitment to common enterprises, political, financial and social, in future GCC enterprises, government sources stressed.
In announcing the decision, the state news agency, WAM, reported that the GCC’s general secretariat in Riyadh was informed before it was made public.
The UAE Central Bank governor, Sultan bin Nasser al Suwaidi, dismissed speculation the UAE would sever the dirham’s link to the US dollar.
“The UAE will continue to maintain its expansionary monetary policy, without change,” Mr al Suwaidi said, according to WAM. “Therefore, it will maintain the exchange rate of the UAE dirham pegged to the US dollar.”
A Federal National Council economic committee advised the Government on Tuesday to “deeply evaluate” the dollar peg. The committee report said that if the Government had not planned to join the Gulf’s single currency, scheduled for 2010, it would have recommended pegging the dirham to a basket of currencies.
Kuwait dropped the dollar peg in 2007 and linked its dinar to a basket of currencies, further complicating any process of establishing a unified Gulf currency. In 2006 Oman decided to withdraw from monetary union after concluding that a more independent monetary policy would be better for its economy.
Officials here are convinced that Abu Dhabi should house the union because the country is a trading hub for exports and imports. Much of the region’s imports are offloaded in UAE seaports and then trucked across the desert to the rest of the GCC.
The officials fear that the absence of a unified currency will complicate the calculations involved in this trade.
Check-ups for labourers in summer
Abu Dhabi - May 21: Health and labour officials will carry out spot checks on industrial sites during the summer to ensure that companies are taking proper care of their employees.
It is the first such collaboration in the UAE and will tighten up regulations and rules surrounding working in heat, officials say.
The Health Authority-Abu Dhabi (HAAD) yesterday launched its Safety in the Heat programme with the Ministry of Labour. Although initially the inspections will be limited to companies that volunteer for the scheme, HAAD said it hoped a long-term collaboration with the ministry would lead to spot checks across the board.
“We are increasingly aware of problems that need to be addressed and fixed,” said Dr Jens Thomsen, section head of occupational and environmental health at HAAD. “Heat-related illnesses are one of the most important public-health-related problems during the summer months. It impacts on safety because it causes a higher incidence of accidents and injuries among those affected by the heat.”
Promotional materials and educational workshops – another aspect of the multimillion-dirham campaign – will be available to companies across the country, which officials say means there is no excuse for neglect.
Ministry of Labour inspectors and HAAD officials plan to visit all types of industry in Abu Dhabi.
“This is enforceable but not by us directly,” said Darren Joubert, senior adviser on occupational health at HAAD. “This is why we are working with the Ministry of Labour.
“In labour laws it says employees must protect their labourers; this is administered and enforced by the Ministry of Labour. This helps them to improve their capacity.”
The educational material includes information on meal breaks, clothing and hydration. If a company signs up, inspectors will use those guidelines to establish whether the company is taking precautions to protect its workforce.
The programme is a result of two years of study by local and international experts. They examined more than 200 labourers in sites in Abu Dhabi during two summers, monitoring their hydration, heart rates and temperature three times a day for 12 days.
Dr Graham Bates of Curtin University of Technology, Australia, was one of the key figures behind the study.
He said that after studying the lives of some of the workers in the emirate, he considered the climate in Abu Dhabi to be “one of the most extreme working conditions in the world”.
“This is not just for the heat, but for the general health of the workers,” he said. “If the heat is not dealt with properly, it can result in death. There are many factors to consider and lots of things to be done.”
If the pilot is successful it will be rolled out across more government facilities in the emirate.
Companies can find out more at www.haad.ae.<;br>