GCC Economics and OPEC Research Paper Example | Topics and Well Written Essays - 2000 words

GCC Economics and OPEC - Research Paper Example The common market agreement among the GCC countries took effect from 1 January 2008. The members of Organization of Petroleum Exporting Countries (OPEC) is an association of developing countries, which include Venezuela, United Arab Emirates, Saudi Arabia, Qatar, Nigeria, Libya, Kuwait, Iraq, Iran, Ecuador, Angola and Algeria. OPEC was formed to help market oil and stabilize oil prices in the world. United Arab Emirates United Arab Emirates whose capital city is Abu Dhabi, Dubai covers an area of 82,880 Km2 and the land is predominantly desert with few pockets of agricultural areas. It is a member of OPEC. The country has an opened and highly developed economy, which is among the fastest growing in the world. The rate of inflation in United Arab Emirates is low and was 0.9 percent and 1.6 percent in 2010 and 2009 respectively. To boost trade, a free trade zone for manufacturing and distribution purposes. Presence of a deep-water port has also promoted international trade. The rate of interest charged by commercial banks was also lower at 6.2 percent and 5.9 percent in 2010 and 2009 respectively. Figure 1: GDP growth rate There was a sharp decline in the real GDP growth from 3.2 percent in 2008 to -3.2 in 2009. Sharp decline is attributed to the global financial turmoil. However, there was a strong growth in real GDP growth rate to 5.3 percent in 2010 due to recovering economy and increasing oil prices. OPEC Quotas in United Arab Emirates is 2.3 million barrels daily but its capacity is 2.8 million barrels daily. According to CIA (2011), United Arab Emirates’ reserves are estimated to be 97.8 billion barrels. Non- oil sectors include agriculture that produce dried fish, dates, watermelons, vegetables, eggs, poultry and dairy products (Department of State 2011). Non-oil sector covers tourism and international finance. United Arab Emirates produces cement, aluminum, fertilizers, boat building, commercial ship repair, textiles and handicrafts. Major trade pa rtners include Japan, India, China, United States, Germany, Iran, South Korea and Thailand Saudi Arabia Kingdom of Saudi Arabia whose capital is Riyadh also referred to as Saudi Arabia covers an area of 2,149,690 km2 with arid climate. It is a member of OPEC. It has a command economy, where government controls major economic activities and depends heavily on oil exports. The GDP of Saudi Arabia was $623 billion in 2010. Inflation rate is slightly lower at 5.4 percent and 5.1 percent in 2010 and 2009 respectively. The unemployment rate in Saudi Arabia was 10.8 percent, 10.5 percent and 9.8 percent in 2010, 2009 and 2008 respectively. High unemployment rates are among the highest rates in the gulf region. Commercial bank interest rates were 7.3 percent and 7.2 percent in 2010 and 2009 respectively. The country’s proven oil reserves are 262.6 billion barrels (Sfakianakis 2011). Saudi Arabia has the largest oil reserves with and is the world top oil exporter. Oil generates 75 per cent of the total budget revenues and comprises about 90 percent of total exports. Increase in oil prices caused by increasing demand has improved the economy of Saudi Arabia. The current quota for Saudi Arabia as set by OPEC is 9.4 million barrels daily. However, the country can produce up to 10.52 millions barrels daily. The non-oil sector real GDP growth r