NEW YORK, July 18: With the Arab nations', excluding Iran, earnings from oil exports grossing well over $400 billion in 2007 it was no surprise that they played and would be playing a very crucial role in revamping a sluggish global economy. The credit crisis is sweeping through the world.
In this rather gloomy scenario enters Dubai International Financial Centre (DIFC) awash with petro-dollar and ever willing to come to the rescue of the ailing global economy. But as the deepening bite of credit crisis spreads from Wall Street and takes a global toll, torpedoing once buoyant markets from Shanghai to Stockholm, the Gate, nick name of DIFC, has recently become an even more powerful beacon for a swarm of deal makers looking to stake their claim in one of the world's last remaining bull markets, reports the New York Times.
Dubai once quite shabby never a tourist spot has now attracted worldwide attention with its skyscrapers, luxurious hotels and other modern amenities. Even whisky is not unknown here. It has become Middle East's Capital for financial, trade and tourism. Dubai has recorded an economic growth at roughly 11 per cent a year matching China's sterling growth rate. It has become centre of gravity, the glory once enjoyed by Beirut in 70s and Hong Kong in '80s.
With world's miseries far from over, Dubai and 'the oil fired economies in the region' have become a solace. Investors who once made beeline for China are now looking toward Dubai and the region. Morgan Stanley, Goldman Sachs, Lehman Brothers, Citigroup, Deutsche Bank and UBS all are doing flourishing business. England's Barclay's bank will soon join the crowd.
The boom may be on, but it is by no means clear that the volume of deals and opportunities in shallow and heavily regulated capital markets will be enough to sustain these aggressive expansions, an analyst said. It is not that bankers alone who are rushing into the region and to Dubai in particular. There are others who are also being lured to world of plenty.
Dubai receives at an average 20,000 people a month, most of them from South Asia, Bangladesh included, who do all kinds of jobs from making beds at the hotels to driving the wealthy guests in their Mercedes.
Dubai has a population of about 1.4 million and 90 per cent of them are immigrants.
The region will continue to buzz. The oil price will never come down below $100 a barrel. The current oil price gives the region a staggering $2.0 billion a day from the pockets of the consumers around the world.
The United States in the meanwhile is planning a new legislation seeking to rewrite the rules for nation's energy market. The traders have expressed fear that any measure to tighten the energy market would further unsettle the market. The new law will provide authority to the federal regulators over the vast privately negotiated deals. The regulators will distinguish between legitimate and non-legitimate hedging transactions.
Right now the Wall Street traders can raise oil and gas prices simply by logging onto their computers and execute a few trade, a supporter of the new legislation observed. He said speculation is not bad but without proper market oversight it could go out of control.
The US government is tightening its grip in all matters that tend to harm the nation's economy. The Swiss banking giant UBS which is under investigation for helping US citizens dodging tax and keeping it in off-shore banking agreed to stop offering offshore banking services to American clients.
The UBS's offshore practice helped over 19,000 Americans to stash $18 billion, American investigators found.
Meanwhile, there were some consolations amidst the continued slide in the US economy. The price of oil dropped by $10.50 a barrel. No one can say whether the price will sustain. The drop in oil price inspired a significant rebound in the price of shares of many battered companies.
The Bank of America recorded Thursday a jump of 22.4 per cent, the price of the shares of the beleaguered JP Morgan Chase rose by 15.9 per cent. The shares of troubled mortgage banks Fannie Mae and Freddie Mac bounced back by 33 per cent and Lehman Brothers which was victim of adverse speculation saw a 26 per cent rise in the price of its shares.
The Securities and Exchange Commission (SEC) in the meantime will come down heavily on those traders who the Commission thinks are behind spreading rumours and wild speculations that drove the prices to nosedive.
The concern over rising cost was clearly evident in the senate testimony by Fed Reserve Chairman Ben Bernanke. He gave a bleak picture of the US economy and warned that inflation posed a significant risk to the nation's economic outlook. The rising price of energy and many essentials have contributed to 'sharp pick-up in inflation'.
No matter how one slices and dices the Consumer Price Index data, the bottom line is that US workers are falling farther and farther behind, an analyst said. The Fed chairman allayed anxieties by saying economy would soon recover. 'We will work our way through these financial storms', he said.
The oil demand is shrinking in the US and Europe but the consumption is growing by leaps and bounds in energy-hungry China, the Middle East and India as well. The drop in the price of oil in the US and Europe was seen as a result of Washington's reconciliatory approach to Iran, OPEC's second largest oil producer. The consumption of oil dropped by 5.2 per cent in US. The production has become normal in Nigeria after it faced disruptions due to widespread disruptive activities. The oil price recorded a seven fold rise since 2002.
Meanwhile, the enforcement division of the US SEC is ' seeking records and all communications including instant messages and e-mail messages related to the sorting of the stocks. The agency goal is to prevent any market manipulation, New York Times reported Thursday. The people are looking of villains, top official of a trading company in Washington was quoted as saying.
