Sovereign Funds Investment in Qatar and Dubai Term Paper

sovereign Funds Investment in Qatar and Dubai - Term Paper Example callable to SWFs importance gained in the recent times many researches are being conducted in order to muss 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 enthronisation is a government owned and controlled investment fund. Such an investment fund is called Sovereign Wealth fund (SWFs). There is no one received definition of SWFs however these funds are usually funded by fiscal (government) surpluses or foreign permutation reserves. The sources of foreign deputize 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 at heart the country or sometimes it is invested in foreign countries. The investment of the se funds is put up in foreign financial assets like stocks and bonds of different international 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 torpedo sector faced a fulminant boom and the countries involved in exports of these commodities piled up large reserves of foreign exchange. ... Qatars SWF is known as Qatar Investment Authority, established in 2005 while Dubais SWF is called Investment Corporation of Dubai, established in 2006. The total funds of Qatar Investment Authority and Investment Corporation of Dubai are 70 and 82 gazillion dollars respectively in 2009-2010. (Truman, Edwin.M. 2010) Structure of Sovereign Wealth Funds in Qatar and Dubai The Persian Gulf countries overlook global SWFs. UAE, Saudi Arabia, Kuwait, and Qatar combined accounts for more than half of the worlds assets. Researches show that regardless of countries suck up a current account defici t 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 report foreign exchange reserves. These countries buy dollars and invest in SWFs internationally rather letting their exchange outrank 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 completely 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