Who would benefit from an enlarged GCC union? (page 1 of 2)

The political motive behind the GCC's surprise move to invite new members, in the form of Jordan and Morocco, is clear: in the wake of the Arab uprisings, the six Gulf nations - Saudi Arabia, Kuwait, Bahrain, UAE, Oman and Qatar - known as the "Kings' Club" are keen to recruit countries run by similarly autocratic monarchies, to strengthen their alliance.

Enlargement would bring GCC nominal GDP above $1 trillion

The economic consequences of such an upheaval are less immediately apparent, although a recent report from Banque Saudi Fransi said that the integration of two oil-importing countries into the energy-rich bloc would trigger considerable economic implications for the GCC. "Full integration of Jordan and Morocco into the GCC economic area would add 12.2% to the bloc's nominal GDP, based on 2010 data, bringing it solidly above the $1trillion mark," said John Sfakianakis, the bank's chief economist and author of the report.

"It's not necessarily a bad thing for the existing GCC members," says Said Hirsh, Middle East Economist with Capital Economics. "Jordan and Morocco won't necessarily cost a lot of money, and their needs financially, especially Jordan, are very small by GCC standards.

"On the other side of the fence, for Jordan and Morocco it might be good from an immediate budget perspective, but in the medium and long-term it could be bad from an economic reform perspective," he adds.

The Jordanian government was quick to welcome the prospect of joining the GCC, and King Abdullah II said it would help to boost historic ties with Arab monarchies. "This step would further enhance historical ties and cooperation between Jordan and the Gulf Arab states," he said. "The GCC advocates economic cooperation, which can be good for Jordan," added Information Minister Taher Adwan. "Jordan is facing an unemployment problem, a heavy bill for oil and gas and this membership brings hope."

Jordan to see short-term boost from GCC membership

"It wouldn't surprise me if Jordan joins, because the government there is completely focused on short-term political problems at the moment," says Hirsh at Capital Economics. "Joining the GCC might help solve those problems, although of course there would be opposition both inside Jordan and inside the GCC, to them joining."

The Jordanian economy was worth $27.5bn in 2010, is smaller than that of Oman and about a fifteenth of the size of Saudi Arabia's. As a consequence, and as long as any opposition to the move is quelled, Jordan would be much easier for the GCC to absorb. It is also a better geographic fit than Morocco, as it shares a border with Saudi Arabia's northwest edge.

"Jordan is likely to be enthusiastic given its proximity and cultural ties," notes Mark McFarland, emerging markets economist at Emirates NBD. Nevertheless, analysts fear a union with the GCC could have negative implications for the country's economic reforms, which have seen it take notable strides since the First Gulf War.

"After 1990, as Saudi and other countries stopped giving aid, a lot of workers came home and Jordan was forced to introduce economic reforms, especially from a budgetary perspective and a fiscal perspective," says Hirsh.