RAPAPORT... Peter Meeus, newly appointed executive director, diamonds and colored stones, of the Dubai Multi Commodities Centre (DMCC), was a guest speaker at the Association Française de Gemmologie meeting held in the French Senate in Paris on March 12. Meeus took time out of his schedule to talk with Rapaport Diamond Report and answer questions about the DMCC and Dubai’s future.
Rapaport Diamond Report: Could you explain the high-speed development of Dubai?
Peter Meeus: Who would believe today that barely half a century ago, Dubai was merely a broad desert where the population used to live, thanks to fishing as well as a restricted pearl culture. The Dubai Creek was considered as a useful port, which helped develop commercial trade within the Persian Gulf region. Having said that — which is only the backstory — the real change took place in the early 1960s. Indeed, the traditional economic model would soon be replaced by a fast-growing development after oil was discovered in the 1950s. In 1962, the first barrel of Brent — a classification of crude oil whose price is used as a benchmark for other oils — would leave the Emirates to be negotiated on the international markets. This would open the path to three decades of unprecedented growth and prosperity, floating on its so-coveted natural resource.
RDR: So it’s the presence and discovery of oil that triggered everything?
PM: Actually, no. Oil was, in fact, a powerful tool to gather over the years a sufficiently strong critical financial mass, to initiate what has become today an economic growth that’s able to compete with that of China. The period that followed 1962 was remarkable but not sufficient to cause the astronomical wave of changes we know today.
RDR: What did accomplish this?
PM: The question should be: How is it that today 20 percent of the world’s cranes have been brought to Dubai and people keep building at top speed under unbearable heat? How is it possible? And why have those people built there, in the middle of the desert, the longest indoor ski slope? Why are the inhabitants of this average city attempting — and succeeding — to gain on the sea, expanding land artificially? What drives those people?
It can be summed up in one word: anticipation. By the middle of the 1980s, their leaders were clever and wise enough to assess the full extent of the consequences of the fact that oil reserves were not eternal. It’s no secret that the last barrel of Brent should leave the Emirates around 2020. What then? What would become of the city?
Visionary leaders started to build up an alternative economy that would help the country to become independent from oil revenues, something unheard of in the region. There would be two main focuses for the trade: becoming a major distribution center for the Gulf area, and improving and reinforcing the tourist economy.
The goal was to double the number of tourists — 8 million today — by 2010, and to double it again within the five following years. Ten years from now, our expectations are that 30 million tourists will come to buy and spend money in Dubai.
RDR: Has the primary goal been achieved?
PM: That seems to be the case. Whereas, about 20 years ago, oil represented half of the national revenue, that dependency has plummeted to barely 5 percent.
Don’t forget, either, that the countries of the Gulf Cooperation Council (GCC) — Saudi Arabia, Kuwait, Bahrain, Qatar, Oman and the United Arab Emirates — will be integrated according to a European model, with a common currency, in 2010.
RDR: Some say that in order to invest in Dubai they need to have a local partner, regardless of his skills. Is that true?
PM: It was, but it’s definitely not the case anymore. Our economic model is a liberal one, sustained by features such as free zones, a 50-year moratorium on tax both for people and companies, liberty for international financial transfers and, of course, the right for 100 percent shareholders.
RDR: It’s been reported from several historical diamond centers that Dubai was actually representing an element of unfair competition in the global diamond trade.
PM: I don’t see it that way. The fiscal environment is not specifically limited to diamonds. The DMCC involves diamonds, as well as precious metals, gold, precious stones, energy and other raw materials, such as tea. The strategy consists of supplying each economic sector with the appropriate structure where players could meet in ideal circumstances to develop trade. The Gulf area means $15 billion of yearly jewelry sales, including $3 billion of diamond jewelry. With an average jewelry sale of $2,500 per inhabitant, this area accounts for the most important jewelry consumption, featuring a 10 percent growth.
Instead of competition, I see, rather, Dubai as the open door to a fast-expanding market and one not easily reachable —such as the Middle East — from Europe or the U.S. The historical diamond centers can’t afford to bypass such an opportunity. Dubai is, first of all, a partner for all the other diamond centers.
RDR: What about the discrepancies between other diamond centers and Dubai regarding fiscal or ethical issues such as, for instance, the greater tolerance as far as the origin of monies or of the stones themselves?
PM: Dubai is no exception when it comes to a growing scrutiny towards AML/CTF [antimoney-laundering and counterterrorism-financing] issues. DMCC set up a dedicated department and has developed a policy in line with international standards. As for the monitoring of trade, Dubai is a member of the Kimberley Process [KP] and volunteered in 2004 for a KP review mission, whose conclusions were more than satisfactory. Any suggestion of lax controls is simply incorrect!
RDR: Rumor has it that DMCC might have opened a discrete office in Antwerp in order to invite and assist Antwerp-based companies to join Dubai. Is this true?
PM: This is just a rumor. However, it’s not impossible that, at some point, we’d increase our visibility in the major diamond centers.
RDR: What future do you see for Dubai?
PM: Bright and shiny. Especially since the approval of the three-pronged Master Plan — market development, services development and the establishment of stabilization bodies, such as arbitraging committees or legal framework improvement — thanks to which, we’ll be able to offer a series of specialized services aimed at efficiently sustaining the diamond trade.
Article from the Rapaport Magazine - April 2007. To subscribe click here.