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Gulf states on track for single currency despite recent concerns

DUBAI, United Arab Emirates -- Gulf Arab states are on course to create a single currency in the world's top oil exporting region by 2010, despite concerns raised last week by at least one participant.

While political leaders may drag their feet on ceding sovereignty, the stakes are too high to allow significant delays or to opt for a watered-down version of the European Union-style integration they have publicly committed to.

So Oman's protest last week that too little had been done to meet the 2010 deadline looks more like an attempt to inject momentum than a sign the project is about to run off the rails.

"Probably what Oman was trying to do was to say: 'Look, we need to move forward with some of these decisions to make the timeline realistic,' " said Steve Brice, regional head of research at Standard Chartered Bank in Dubai. "The small countries could benefit more from a monetary union, where they would be part of a $600 billion economy."

Oman is the second-smallest economy in the Gulf Cooperation Council, which includes Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, and Bahrain.

Oman became the first country to publicly raise concerns about the 2010 deadline when the executive president of the Omani central bank said last week it had written to the Gulf Cooperation Council Secretariat questioning the timetable.

He said other countries shared his concerns, but central banks and finance ministries across the Gulf have declined to comment. It was a surprise statement in a region that a week earlier was debating the location of its central bank.

The UAE scrambled to limit the damage, setting up a committee to tackle problems with a customs union running two years behind the original schedule, one of Oman's concerns.

A Saudi newspaper said the Gulf Cooperation Council planned to urge Gulf leaders at a December summit to stick to the 2010 deadline.

The six countries have compelling reasons to press on with integration and are more closely linked in many ways than the states of the euro zone, said Richard Fox, a senior director, sovereign group at Fitch Ratings.

"At the end of the day they are all pretty close to a common currency because they are all linked to the dollar. It makes more sense for the GCC to do this than the EU," he said.

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