A large number of international diamond dealers, led by Indian businessmen, have begun a mass migration of their organisations from Antwerp to Dubai.
The tax-free and friendly business environment of Dubai is credited with luring the diamond traders. Some of them complained that in Belgium they were heavily taxed and allegedly subjected to police raids that shut down their operations for days.
One diamond wholesaler, who asked not to be named, said one reason he moved his business from Antwerp to Dubai was the “unfriendly” environment for the diamond industry in the European city.
“There is no co-operation from the government to protect this sector. And the police, especially, are treating the businessman badly. The police take away our diamonds and jewellery and keep them for days to check for tax payments and that affects our business. Day by day, regulations are becoming stricter in Belgium. We don’t have that kind of headache in Dubai,” he said.
Dubai’s rough diamond trade totalled $4.8 billion (Dh17.6bn) in 2007. About 350 firms specialised in diamond trade are now part of Dubai Diamond Exchange (DDE), compared to about 300 in 2006.
Yori Steverlynck, chief executive of DDE, said: “The majority of companies specialised in raw diamond trade have offices in the main centres of this trade such as Antwerp, which is the international centre of raw diamond trade, and New York and Mumbai, which are considered as main centres for the manufacture of diamonds and mixing them with gold products. However, a presence in Dubai is essential to communicate with clients in the region and benefit from big opportunities in this market, as it is the market with the quickest growth and most consumption. Dubai is also the gate to the Middle East’s markets that are important in terms of diamond trade and consumption.”
The right ingredients
Steverlynck said pressure in the international market is causing diamond traders to re-examine the location of their headquarters to ensure they are maximising benefits. The move to Dubai, he added, makes sense in today’s market. “In my opinion, this is something normal due to the fall of profit margins in the diamond trade. Dealers are pushed to look for international centres and cheaper properties, where they can reduce costs and raise their profit margin,” Steverlynck said.
Ahmed bin Sulayem, executive chairman of the Dubai Multi Commodities Centre, said another reason traders are beginning to prefer Dubai has to do with the emirate’s close proximity to growing world markets, including Asia and India. These regions are also the centres for diamond polishing and manufacturing. Dubai’s shipping and air transport infrastructure are an added benefit convincing some traders to move to the emirate, he said.
Steverlynck said Indian dealers control two-thirds of the world’s diamond trade. “Most big diamond firms belong to Indian families and investors and 75 per cent of the diamond trade in Antwerp is done by Indian dealers,” he said.
However, the Indian community in Belgium has been under increasing pressure. Insiders have said many are looking to escape the increasingly hostile relationship with authorities in Antwerp. In addition to new taxes on the diamond trader, Indian dealers have claimed they are being singled out for harassment by police.
In one case that drew public and media attention, Indian diamond dealer Nikhil Manial, managing director of Beltaj NV, died of a heart attack during a raid by the Belgian police on his home in December 2006. Police were allegedly searching for evidence that Manial had been dodging tax payments.
Following the high-profile incident, Indian diamond dealers in Antwerp closed their businesses for a day of protest, claiming police tactics were too harsh and had caused Manial’s death.
Since the incident, Dubai has seen a jump in the number of traders moving their headquarters to the emirate.
JH Hammer Group, which has 10 offices around the world and totals about $250 million in profits annually from the diamond trade, is one of the businesses that recently moved its headquarters from Europe to Dubai. The major group has opened its main office in the Dubai Airport Duty Free Zone.
Majid Al Ghouneh, managing director of JH Hammer Group, said: “Infrastructure, facilities, geographical location and safety are the essential factors that contributed to our decision to move to Dubai. The decision was taken after a major study and comparing the emirate with many international cities, especially London.”
In addition to its tax-free business environment and strategic global location, Al Ghouneh praised the emirate’s money transfer facilities and said they contributed to make business run smoothly. He said operation costs have gone down by 55 per cent since the company moved to Dubai compared to the group’s operations in Europe.
“We had the option of moving to Dubai or London, but in the end we opted for Dubai. It is more appropriate for residence and families, safe and close to our countries, whether India or Iran. In Dubai, you can drive your luxury car with no fear. But you cannot do this in Europe or Belgium,” he said.
More to come
Al Ghouneh said he knew of at least 20 diamond companies that have moved recently to Dubai from Antwerp. He said a similar number are considering the move and are likely to make the jump once the new home of the Dubai Multi Commodities Centre, Almas Tower, is complete.
“You cannot say Dubai will push Antwerp to retire because Antwerp’s diamond trade goes back 100 years. But over the past four years, Dubai has managed to attract the world’s big names of diamond trade,” he said.
The gold and jewellery trade in the Gulf stands at $2bn annually, according to Al Ghouneh’s estimates, and it ranks third in the world behind the United States and Japan for diamond jewellery sales.
For his part, Steverlynck said the emirate has already succeeded in attracting the biggest names in the diamond industry.
“We can be proud because Dubai has attracted the top five international diamond companies that control most of the diamond trade in the world. These companies include Rosy Blue, which is one of the biggest and most important diamond companies in the world in the area of raw or polished diamonds and gold products with diamonds. Euro Star Diamond Trader has offices in New York and Antwerp and the company is considered a leader in raw and rough diamonds.”
The migration of the diamond trade has also been helped along by actions by the local authorities, DDE and the Dubai Multi Commodities Centre, to make Dubai an attractive base for operations.
Steverlynck said these moves have ranged from assistance with financing to offering local quality assurance certificates.
“Recently, we signed an agreement with HSBC Bank to provide financing services to diamond dealers in the UAE to activate the sector. There also are efforts to persuade local banks in the UAE to enter into the area of diamond trade finance.
“Due to our keenness to raise the quality of products that are provided via Dubai, we also recently began issuing quality assessment certificates. This internationally approved certificate ensures that the diamond a buyer purchases is credible and guaranteed. Through our Diamond Academy, we have organised a large number of courses in the diamond trade for a number of staffers of companies that work in the UAE and the region.”
As diamond and jewellery dealers look to the booming markets in India and Asia, Dubai is increasingly positioning itself as a good place to do business. And it seems that for some of Antwerp’s Indian businessmen, the sell is working.
Moaz Barakat, managing director for the Middle East, Turkey and Pakistan of the World Gold Council, summed up the new migration of diamond traders to Dubai: “It is the back to the East season.”
Dubai set to become world diamond hub