RIYADH, March 14: The Gulf Cooperation Council (GCC) finance ministers in their recent meeting have cleared the last snag towards the creation of a GCC customs union, within the next 10 months, by agreeing on a mechanism for the collective distribution of import duties and a possible compensation fund, newspapers reported here.

The varying level of import tariffs within the six-member GCC has been a major stumbling block towards a GCC economic union on the lines of the European Union. In order to overcome this problem, the GCC states have been bringing their custom tariffs at par over the last years.

Consequently, the UAE announced increasing the import duties to four from the earlier one per cent and Saudi Arabia announced decreasing its import tariff to five per cent from a minimum of 12 per cent on most of the items earlier. Once this was resolved, the issue of distribution of import duties was the last problem the GCC finance ministers were required to overcome before moving ahead with the task. Now the newly announced deal indicates that the time frame on a GCC economic union could be followed.

“We have reached agreement on the distribution of customs revenues among the member states after the customs union is set up,” the Omani Minister of National Economy Ahmad ibn Abdulnabo Macki said after chairing the 56th meeting of the GCC economic and financial committee.

No details of the distribution mechanism was provided at the end of the meeting earlier this week. However, it was mentioned that the revenues would be shared proportionately on the basis of the size of imports, GDP and population of each member state. The draft agreement would now be presented to the cabinets of each GCC member country for approval.

The GCC states plan to form a customs union by January 2003, two years ahead of the schedule. In their negotiations with the GCC for preferential tariff to their exports into the European Union, the EU has been stressing upon the GCC member states to form a unified GCC economic union before any such move.

The GCC decision paves way for the ultimate economic union within the GCC, analysts here now strongly believe.