24 Jul 2019
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Dubai, the New Silk Route
New Star Rises in the East
By: Diamond World News Service
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Oct 21 2013 4:52PM
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Reference: 8404  

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Out of seemingly nowhere, Dubai has created a powerful role for itself in the global diamond industry in just one decade. Stressing its position between African diamond producing states and Asian manufacturing countries, Dubai believes it is making Antwerp increasingly irrelevant. A strong financial backup, strategic geographical location and fast-evolving infrastructure are just some of the reasons behind Dubai’s lead. With the plans to leave behind Botswana and Belgium, the Dubai Diamond Exchange and Dubai’s Multi Commodities Centre have laid out the blueprint for Dubai’s transformation into world’s most important diamond trading hub. To shun its adverse image as smuggle easy country, UAE has already launched a Kimberley Process Certification Scheme (KPCS) in 2003. Diamond World brings you the inside story of Dubai’s speedy ascend as the New Silk Route.

If a new diamond centre were to emerge, it would be reasonable to assume that it would be established in a country with a strong connection to the diamond industry – such as Botswana currently due to it being the largest diamond-producing state by value in the world. Belgium has a more than 500-year history as a diamond trading and manufacturing hub, while New York is the largest gateway to the world’s largest diamond jewellery-consuming state. Meanwhile, Israel is one of the largest trading centers due to its Jewish connections, India is the world’s largest manufacturer due to low labour costs, and China has swiftly become the world’s second-largest diamond consumer as well as an important polishing base. All of these connections to the diamond industry are logical.

How then has Dubai emerged from nowhere to become a significant diamond- trading hub? Its aim has largely been to become an Antwerp in the Persian Gulf, and that has rattled the forces that are in the Belgian diamond centre. How has it gone about that? Largely through the use of financial advantages that are not available to other countries, and particularly not to cash-strapped Antwerp since the global financial crash of 2008 and the global slowdown that followed.

And the results are all too clear: $39 billion of diamonds were traded through Dubai in 2011 compared with $35 billion in 2010. That compares with around $3 billion just 10 years ago. That is still far from Antwerp's $56.5 billion diamond trading turnover in 2011 and even the $52 billion figure for 2012; the figures are nonetheless impressive given the fact that Dubai only started out as a diamond centre a decade ago. In its undeclared battle with Antwerp as the somewhat poor management and mood in the Belgian diamond centre have aided Dubai.

“Frankly, in Antwerp they tend to shoot themselves in the foot a bit," said an Indian diamantaire. "There are so many regulations, and the tax authorities are incredibly strict and insensitive. It's still the leading diamond trading centre because you get goods from all over the world here, but I wouldn't want to gamble that it will always stay like that.”

However, it is not just in diamonds that the DMCC has taken the lead in the jewellery business. Around $70 billion worth of gold was traded through Dubai last year, according to DMCC executive chairman Ahmed Bin Sulayem. He also said that more than 20 per cent of the world’s physical gold was imported and exported through the Emirate. “By building financial and physical infrastructure and developing the right regulation in line with international standards, DMCC has established Dubai as a major bullion centre and a global gateway for commodities trade,” he added.

Benefits of Doing Business in Dubai
Diamond firms enjoy many benefits in Dubai. These include a 50-year tax amnesty with a zero personal and corporate tax rate, to persuade firms to set-up business. And Dubai plays heavily on its geographical location, constantly pointing out that since most of the world’s rough goods come from Africa, and most of those diamonds are polished in India, Dubai's location between the two regions makes it an obvious alternative to further away Antwerp. Although Belgium could not hope to match Dubai’s financial incentives, the tax authorities are seen as being too heavy-handed in raising diamond firms and leaving behind an extremely bitter after-taste. In addition, Belgium’s high tax rates and hostile media coverage are also seen as adding to the poor mood in the city.

Antwerp has also been hit by the decision of the Diamond Trading Company to move its operations to Botswana since the transfer further emphasizes the declining importance of Europe as a whole, and underlines the growing role of Africa in the global industry. “I must say there is a feeling that this is the start of the end of Belgian and European influence,” said a senior manager of a large Belgian company. “I have been involved in the diamond business for just over 30 years and I have never experienced the feeling that we have an Antwerp now. Somehow we gave away our place. We have many advantages here but that is just not what people feel. There is a sort of feeling of decline in the air,” he added.

The Antwerp World Diamond Council last year announced the strategic master plan 2020 aimed at extending Antwerp's role in the global diamond sector. AWDC, which represents some 1,850 trading companies based in the north Belgium port city, said it aimed to create new 4,000 jobs in the sector in Antwerp by 2020. “The position of Antwerp as the world's largest diamond trading centre is going to remain strong for years to come. I do not want to comment on the number of companies that shifted from Antwerp to Dubai, but it is difficult for traders to shift overnight as they have their social and family set up there,” said Meeus, who is also implementing a master plan for Dubai's diamond sector. “Dubai has become the destination of choice for diamond traders in India and Belgium due to its strategic location and tax-free business regime.”

Rohit Mehta, president of Southern Gujarat Chamber of Commerce and Industry, said, “Dubai is a promising destination for diamond trading companies as it offers tax-free environment and is strategically located. It is a gateway to African countries including Botswana and thus many Indian companies are vying for space in Dubai.” And Gipesh Babavia of Super Jewels in Dubai said that doing business in the emirate was safe and secure. “It's a good place for business to be located.”

First Dubai Diamond Conference Stresses Silk Route History
The Dubai Diamond Conference 2013 in March further underlined the changing environment of the world’s diamond industry. It also played on the idea of Dubai as the new Silk Route, the legendary path travelled by traders from China to Europe centuries ago.

The opening speeches at the conference showed that that Dubai's aim is to replace Antwerp as the leading rough diamond center. As DMCC Executive Chairman Ahmed Bin Sulayem said, “The global diamond industry is no longer dominated by Western countries.” Dubai Diamond Exchange Chairman Peter Meeus rubbed that in in a review of Dubai's growth over the past few years, by showing the audience an article from a leading Belgian newspaper that described the decline of Antwerp as a trading center. “Dubai is ideally positioned, geographically and operationally to serve a pivotal role in this ever-changing landscape. We are truly at the centre of the 'New Silk Road' and will bring it to its full potential,” said Meeus.

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