The United Arab Emirates, the world's fourth-largest oil exporter and home to gold trading hub Dubai, is rapidly becoming a force in trade of another highly valuable commodity: diamonds. Dubai, the UAE's center for gem trade, handled $35 billion worth of rough and polished diamonds in 2010, a leap from an annual figure of just $3 million a decade ago, according to Malcolm Wall Morris, chief executive of the Dubai Multi Commodities Center (DMCC). In the first half of this year Dubai traded $25.3 billion, a 55-percent increase from the same period a year earlier. Much or most of the rise was due to surging diamond prices rather than growing volumes — but the increase nevertheless underlined Dubai's success in competing with other trading centers. “Part of the UAE's policy is to diversify its income and gradually move away from one or a few sources of income,” UAE Economy Minister Sultan bin Saeed Al-Mansouri told Reuters on the sidelines of a diamond exhibition in Dubai. “So there must be manufacturing and other sources of income we can depend on and that are also sustainable.” The DMCC, which provides the infrastructure for commodities trade in Dubai, now ranks the emirate as the world's fourth largest diamond trading hub, behind Antwerp, New York and Mumbai. Antwerp, through which more than half of the world's diamond production passes, saw $48 billion of trade in the first ten months of 2010, according to data from the Antwerp World Diamond Center. The UAE has competed with traditional diamond centers by keeping customs duties for diamond jewelry as low as 1 percent, a tiny fee compared to major diamond producer Russia's 23 percent duty and 18 percent value added tax, according to Maximilian Artsinovich, founder of London-based retailer Maximilian Jewelry. “Because of these duties, jewelry and imported watches in the Ukraine, Russia and Khazakhistan cost double their price in Dubai, or are at least 50 percent more expensive,” Artsinovich said after opening a boutique in Dubai. The UAE also tightly regulates the quality of diamonds coming in and out of the country to increase investor confidence, says the DMCC. But some traders still question Dubai's ability to rival more established centers. A major obstacle keeping Dubai from becoming one of the world's top three hubs, according to Mitesh Surti of Antwerp-based diamond seller Beyroha, is local banks' lack of expertise in the diamond industry. Diamond traders have had difficulty setting up accounts with services catering to the industry, such as overdraft facilities, he said. Demand for diamonds in the Gulf is rising, however, and today stands at $15 billion annually compared to around $2 billion a decade ago, Shah said. By 2015, China, India and the Gulf could overtake the United States as top diamond consumers, analysts believe, creating more opportunities for Dubai, which is located between diamond producers in Africa and processors and buyers in Asia.
