Asian Financial Hubs Haven For World Business

Singapore's financial district

Will top Asian cities emerge from the effects of economic crisis and position as the new global financial centers?  Does Asian economy better than its European and American counterparts?

The Global Financial Centers Index (GFCI) has recently assessed the rising competitiveness of top Asian financial centers that includes Singapore, Hongkong and Shanghai.  The GFCI is an annual competitiveness ranking of the world’s primary financial hubs based on the global financial environments.  According to the index, these cities are raising prominence in the world’s financial centers after New York and London.  These two cities still remain the leading global financial centers.

Hongkong, Singapore and Tokyo hold the third to the fifth spots according to the report. Shanghai gain ground by settling at sixth place.  The report affirmed the influence of these Asian cities in the world’s financial environment.   The cities of Chicago, Zurich, Geneva and Sydney completed the top 10 financial centers in the world.  Major Chinese cities of Beijing, Shenzen and Shanghai are regarded as most reputable financial centers in the list.

The index report was conducted online based on 7,270 assessments by the Centre for the Study of Financial Innovation from January and June this year.  The study dwelled on the following factors: business environment, people, quality and availability of IT and transportation, and market access.

The GFCI also reported that offshore centers, known as tax havens, have declined in the rankings as it drives for greater transparency.   The Isle of Man declined by eight notches to rank 32; the Cayman Island dropped to 34^th spot and the Bahamas to number 64.   According to one financial analyst in New York, the Caymans and the Bahamas which are doing good business at present still have their bad reputation as financial hubs in the world.

With this current trend in the financial environment and the strong economy shown by most Asian countries, New York and London might be dislodged in the future surveys as top financial hubs in world.

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Dubai Economic Crisis Looms

DUBAI (AP) – Dubai's leader tried to calm panicky investors yesterday as regional markets tumbled for a second day on news that the city-state's chief conglomerate needs to delay payments on its $60 billion debt for six months.

Government-owned investment company Dubai World — the United Arab Emirates' main engine of growth — gave anxious investors the first bit of clarity they were hoping for on how it might meet its debt obligations. It said it had begun discussions with creditors on $26 billion of its debt that would include restructuring about $6 billion.

The conglomerate is involved in international projects from Gulf banks and ports in 50 countries to luxury retailer Barney's New York and a grandiose six-tower hotel-entertainment complex in Las Vegas. Its potential for a debt default sent jitters through world markets on concerns of new setbacks for Dubai World's large international bank creditors just as they are recovering from the global financial crisis.

Dubai is one of seven highly autonomous statelets that make up the United Arab Emirates and the crisis has sent the UAE's two biggest markets into a tailspin. The Dubai Financial Market sank another 5.61 percent on yesterday after plunging 7.3 percent on Monday and Abu Dhabi's bourse closed down 3.57 percent following an 8 percent slide a day earlier.

Dubai's ruler, Sheik Mohammed bin Rashid Al Maktoum, tried to reassure investors in his first public statement about Dubai World's debt crisis.

"Our economy is strong and solid and consistent," he told Al-Arabiya satellite television, adding markets were overreacting because of "a lack of understanding about what is happening in Dubai." He did not elaborate.

UAE President Sheik Khalifa bin Zayed Al Nahyan also maintained his country's economy was healthy.

However, analysts say Dubai World's debt crisis is a symptom of a broader malaise in the city-state. Dubai has no oil resources. But for the past decade, it has been the freewheeling boomtown, racking up debt as it built extravagant artificial residential islands, malls complete with indoor ski slopes and the world's tallest tower.

The troubles raised concerns in international markets that the large international banks that extended credit to the conglomerate could now face a new setback if it defaults just as those big banks are starting to emerge from the global financial crisis. The big fear is that Dubai's problems could be indicative that the global recovery is not on as solid a footing as many had hoped and there could be other toxic debt problems still to come in developing countries.

World stock markets rose sharply yesterday on the announcement that Dubai World was in talks to restructure a large chunk of its business. Investors were eagerly awaiting clarity on how it would deal with its debts, specifically reassurances that the company was sitting down with creditors to refinance its debt.

Saurabh Dhall, an independent broker in Dubai, said there is a lot of uncertainty about how the debt crisis will play out. He said it was raising credibility concerns both about Dubai's ability to stand behind its debt obligations and the possibility, however, remote, that the crisis could impact broader government debt in the UAE.

"The major concern is not so much the dollar amount ... of the payments, it's the concern about how this will affect credibility," he said.

Investors were not reassured on Monday when Dubai officials indicated they had washed their hands of Dubai World's debts, arguing that it was an independent company that happened to be owned by the emirate.

The news rattled investors and raised more questions about whether neighboring Abu Dhabi, the oil-rich seat of the UAE's federal government, would step in with a bailout of sort and what such a step would mean for Dubai.

Dubai World said yesterday in a statement the restructuring would include about $6 billion in Islamic bonds issued by its real estate arm, Nakheel PJSC, the company behind Dubai's iconic, palm-shaped artificial islands. About $3.5 billion of the bonds come due on Dec. 14, and Nakheel was viewed as the litmus test for how Dubai World will deal with its debt woes.

It did not deal with the broader issue of how it would meet its entire crushing debt burden.

Dubai World's statement yesterday said the restructuring would include Dubai World and certain subsidiaries, including Nakheel World and Limitless World. Excluded from the talks are debts from Infinity World Holding, Istithmar World and Ports & Free Zone World, which includes ports and terminal operator DP World, Economic Zones World, P&O Ferries and Jebel Ali Free Zone.

The conglomerate said all those subsidiaries are on "stable financial footing," and in a statement posted on the Nasdaq Dubai Web site, Jebel Ali Free Zone said it paid a roughly $2 billion Islamic bond, or sukuk, on time yesterday.

Other UAE markets also felt the weight of Dubai's problems. Qatar's bourse fell 8.27 percent while Kuwait's was off 2.71 percent on yesterday.

Markets in the Emirates will be closed Wednesday and Thursday for a national holiday and will reopen Sunday after the weekend.