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Sun 6 May 2007 12:00 AM

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Dubai's diamond drive

Dubai could soon become the global focal point of the diamond industry.

As anyone knows who has ever strolled through one of Dubai's plush malls, with numerous jewellers frequented by the city's many millionaires, the diamond trade is flourishing in the emirate.

To date however, Dubai's significance in the international diamond industry when compared to the old trading centres like Antwerp, Mumbai and New York, has been somewhat limited.

Until now that is. As the emirate gears up for the development of its very own diamond trading facility, it is on target to become the global epicentre for the premium rock trade. "In a very short amount of time, Dubai has become a very significant force in the diamond industry," says Ernest Blom, president of the World Federation of Diamond Bourses. In fact, so fast has been Dubai's emergence as a diamond centre, the world's trading hubs such as Antwerp and Mumbai are becoming increasingly concerned. "Dubai has caught the attention of the governments from a number of competing centres like Belgium, India and China. [They have been] returning formulated proposals and rewriting legislation to keep both the trade and capital at home," adds Blom.

Last year, the total trade in rough diamonds in Dubai reached US$3.93bn compared to US$3.73bn in 2005 while Dubai exported US$2.73bn worth of diamonds in 2006. And experts predict that diamond trade in the emirate will grow 10 to 15% annually in the next few years. If the Dubai government's diamond drive runs to plan however, it is this year that we will see the emirate truly become a global player to be reckoned with. This December, the 64-storey Almas Tower will open in Dubai. Home to the Dubai Diamond Exchange, the facility will be tailor-made to the needs of the diamond sector and, according to Blom, will be a major step towards the emirate becoming a global diamond centre. "Almas Towers will be tremendous for the future of Dubai as a trading hub for the Middle East and Asia," he says. "It's difficult to ascertain how long that will take but I think once Almas Towers is completed, we will see everything fall into place," he adds. Meanwhile, in March, the Dubai Multi Commodities Centre (DMCC) launched International Diamond Laboratories (IDL), a diamond certification service headquartered in Dubai.

Peter Meeus, executive director of diamonds and coloured stones at the DMCC, told delegates at the recent Dubai City of Gold (DCG) conference, that IDL would revolutionise the diamond certification process. "It's clear that Dubai has a character like no other," he said. "It's unique selling proposition is simple: How do you create out of nothing?" He added that IDL would take this approach to diamond certification. "We will do business as if reinventing, we will rethink from scratch," he continued.

With additional offices in Antwerp and Mumbai, there's no doubt that IDL will aid Dubai's efforts to work in partnership with the world's leading diamond centres. According to Blom, this cooperation is essential to the ongoing prosperity of the industry, and to Dubai's efforts to become a major player in the lucrative sector. While he admits that there is certainly concern from governments in competing diamond centres that "some of the diamond traders will be shifting to other areas," he sees Dubai as integral to the future of the global industry. "Dubai is a natural springboard into a very large area. The Middle East and Central Asia could be worth billions of dollars in diamond sales," he explains. "Competition that is initiated with the primary intention of taking existing market share does not make a real contribution to our business; all that does is shift the balance of power. Dubai should be seen as a trading centre that is key to the development of the entire diamond industry."

As well as acting as a bridge to other global diamond centres, IDL could also play a major role in increasing customer confidence in the Middle East. As Meeus pointed out at the DCG conference, international diamond certification has been turbulent in recent years, mainly as a result of the increasing trade of synthetic diamonds, and partly because of general concerns over certification standards and procedures.

Currently, around 80% of diamonds on the market, worth US$3bn a year in the Middle East alone, are sold without certification. "Uncertainty has no place in the diamond market," Meeus said. "We'll offer consistency through technology as the market needs a reputable player."

Perhaps the most serious issue that has dogged the diamond trade in recent years, is that of conflict diamonds. According to Blom however, since the end of the war in Sierra Leone, the problem has almost been eradicated.

"I think it is so minimal now that it is almost negligible. Having said that, even one conflict diamond is one too many," emphasises Blom.

"Wherever it raises its head, we are trying to put a stop to it and we won't rest until everything is eradicated. I'm not saying it can't happen again and we will keep our vigilance," he adds. Meanwhile, Gaetano Cavalieri, president of the World Jewellery Confederation tells


that he believes there are no conflict diamonds circulating in the Middle East.

"Our industry has been taken as a wonderful example of how to solve a problem - we have stopped a war without weapons," he insists.

With retail diamond sales in the Gulf currently worth in excess of US$1.9bn, it is little wonder that an increasing number of global diamond businesses are heading to the region, using Dubai as their foothold. Since its inception five years ago, the DMCC has welcomed over 300 companies from the diamond trade.

As the emirate continues to develop the infrastructure to cater for retailers and traders in the precious stones industry, it looks set to become an increasingly important player on a global scale.

Moreover, as Cavalieri explains, the world's diamond trading centres must seek to forge partnerships throughout the Gulf if they are to "prepare for the tomorrow market".

The commodities chief

AB: A recent report suggested that gold imports into the GCC were decreasing. Is this the case in Dubai?

CG: Certainly not. It's difficult for us to get accurate data in some parts of the UAE but Dubai is clearly the biggest in terms of gold. In terms of tonnage and value it is continually growing. What's happening in Dubai is that it is one of the most well-marketed centres and is holding its market share. I'm not sure how that report got its figures or how accurate it was because we were not asked to take part and were not privy to it.

AB: Why do you think Dubai has become successful as a gold centre?

CG: One reason is that a lot of banks will not leave enormous amounts of gold in say India, because they don't like the credit risk so they will move a lot of gold here and then drip feed India. Gold obviously comes here to be sold to tourists or to be refined and it is a centralised point. Also, gold transport is quite expensive so the least transportation you can do as a buyer or seller is in your favour.

AB: What measures have been taken to improve corporate governance in Dubai's commodities sector?

CG: I think we have done a lot to date but that doesn't mean we will be resting on our laurels. In terms of diamonds, we introduced the Kimberley process for the Middle East and we are now the official body that runs its accreditation. On the gold side, we're aware of our responsibilities to higher standards of corporate governance. While there has been a slow start, I think we've done well but there's still a lot to do. Like everywhere in the world this is an area where standards are being called to be higher and I think that's absolutely right.

AB: So there's still a long way to go then?

CG: DMCC is five years old now but the Dubai Gold and Commodities Exchange (DGCX) is relatively young and is therefore still in its early days. It's not like switching a light on, you can't just turn it on and it works. I think we are through the settling in period, but I don't think I would call it a mature exchange for another year or so.

AB: What have you done to conquer the problem of counterfeit jewellery in Dubai?

CG: The municipality is extremely active in randomly testing jewellery and retailers never know when they are going to be tested. The testing is rigorous and random. If there is a marginal difference they will be given a warning and on repeated occasions they will get charged.

AB: Why did DMCC CEO Framroze Pochara resign recently?

CG: He is returning home to India and will be working back there. He did a great job in getting us off the ground but we are now looking for another chief executive.

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