Sovereign Funds Investment in Qatar and Dubai Term Paper

Sovereign Funds Investment in Qatar and Dubai - Term Paper Example Due to SWFs importance gained in the recent times many researches are being conducted in order to deal with the concerns and problems identified in its current position and in the expected growth that is to occur in future. Sovereign Wealth Funds (SWFs) and Investment: Sovereign funds investment is a government owned and controlled investment fund. Such an investment fund is called Sovereign Wealth fund (SWFs). There is no one accepted definition of SWFs; however these funds are usually funded by fiscal (government) surpluses or foreign exchange reserves. The sources of foreign exchange reserves could be profit and surpluses from exports of commodities and other means like investment in international markets. Government is involved in various revenues generation activities, the revenue obtained can be invested within the country or sometimes it is invested in foreign countries. The investment of these funds is put up in foreign financial assets like stocks and bonds of different inte rnational companies. (Truman, Edwin.M. 2010) Establishment of Sovereign Wealth Funds in Qatar and Dubai: About 60% of the SWFs were formed after 2004 when the oil and gas sector faced a sudden boom and the countries involved in exports of these commodities piled up large reserves of foreign exchange. ... Qatar’s SWF is known as ‘Qatar Investment Authority’, established in 2005; while Dubai’s SWF is called â€Å"Investment Corporation of Dubai†, established in 2006. The total funds of Qatar Investment Authority and Investment Corporation of Dubai are 70 and 82 billion dollars respectively in 2009-2010. (Truman, Edwin.M. 2010) Structure of Sovereign Wealth Funds in Qatar and Dubai: The Persian Gulf countries dominate global SWFs. UAE, Saudi Arabia, Kuwait, and Qatar combined accounts for more than half of the world’s assets. Researches show that regardless of countries have a current account deficit or surplus, SWFs are generally associated with countries involved in exports of oil, gas and natural resources and have piled up large foreign exchanges due to these exports. Qatar and Dubai invest most of its foreign exchange reserves directly in SWFs international assets and therefore do not have large reported foreign exchange reserves. These coun tries buy dollars and invest in SWFs internationally rather letting their exchange rate appreciates. Oil sales being dollar- denominated has made it easier for the gulf countries. This leads to drop in the value of dollar due to excessive dollars in the market which results in preserving the value of SWFs when expressed in local currency terms. In 2008 UAE reported US$ 751 billion in its SWF international assets and only US$ 32 billion as foreign exchange reserve while Qatar showed US$ 70 billion in its SWF international assets and only US$ 10 billion as foreign exchange reserve which showed their positions relatively low on foreign exchange to GDP ratio in comparison with countries which reports large amount of

The Impact of Rising Food and Fuel Prices Essay

The Impact of Rising Food and Fuel Prices - Essay Example The rising trend in international food prices persisted and accelerated in 2008. U.S. wheat export prices skyrocketed from $375/ton in January to $440/ton in March. Thai rice export prices chalked up from $365/ton to $562/ton. The governments of the developed and developing countries adopted various mitigation measures. Specific policy interventions were applied in three broad categories: (i) interventions to assure household food security by establishing food safety nets; (ii) interventions to lessen domestic food prices by way of penalty or administrative action, and (iii) interventions to develop supplies and production of longer-term food supply. Given the three categories of policies there are preferred options that are more reliable and equitable. The best options to address food insecurity is the targeted cash transfers to vulnerable groups. Cash transfers increase the purchasing power of the poor without changing the chain of incentives that are available to produce more food and without reducing the incomes of poor food sellers. The depth, targeting efficiency and value of the transfer programs depends on the country's level of development. Another set of best options to decrease domestic prices cover the lowering of tariffs and other government taxes on key staples. Many countries impose tariffs on food imports so as to foster domestic production and produce reliable revenues. During a period of increasing prices, the consequent reductions in tariffs and taxes presents a measure of relief to existing consumers at a limited fiscal cost. The subsequent revenue loss arising from the reduction of the tariffs is very important and the fiscal result of implementing this with extra social protection expenditures can require cutbacks in less priority areas. Approximately twenty-four out of fifty-eight countries under study have recently reduced import duties and Value Added Taxes in the phenomenon of rising food prices. Others developing countries, such as the Philippines, implemented a regime of high tariffs to protect domestic food producers and manufacturers.Other countries utilize a policy of implementing a bread or grain subsidies specifically targeted to the poor to handle household food insecurity. In some cases, the introduction of consumer subsidies for staples after the recent rise in food prices. The Government of Yemen provided wheat in public markets at subsidized rates following a rise in food prices. In 2008, the Government of Pakistan implemented a ration card system to distribute subsidized wheat. These measures can be made permanent given the persistent food increase which results in high fiscal costs. Moreover, if the application of all the consumer subsidies are countered by specific measures to keep producer prices low, this can be counterproductive in the end. The one exception to this situation is when price controls are introduced as a temporary measure and are deemed important in terms of a higher social goal. In these exceptional cases, the risks of entrenchment will be minimized. For countries that are grain exporters, there exist political exigencies to ban or tax grain exports in high price years. Some of these countries have fullly applied these methods. These policies tend to have a limited impact on domestic price levels and a relatively negative effect on