ABSTRACT
The similarity in economic, social and political structure of the members of the Gulf Co-operation Council (GCC) is too well-known to need any further elaboration. Culturally, historically, geographically and politically the members of the GCC present a rare example of homogeneity with a continuous landscape. Oil-exporting countries, and particularly the Gulf oil producing countries, were the major beneficiaries of the new redistribution of world income. Political risks apart, inflation is the number one enemy facing Gulf states’ foreign investments. Gulf states’ foreign investments stand to lose from inflation regardless of its origin, internal or external. A device to link the price of oil with foreign investment could be the introduction of a new Gulf Dinar to be used as an accounting unit for both oil pricing and foreign lending. Domestic and foreign investment are thus vital to their economic survival. Absorptive capacity limits the extent of domestic investment, and world inflation threatens to erode foreign investment.
