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Jewelry Trade Challenges and Impact of Gold Tax on Agenda at Dubai Precious Metals Conference

07 may 2018

The 7th edition of the Dubai Multi Commodities Centre's (DMCC) annual Dubai Precious Metals Conference (DPMC) looked at the challenges facing the jewelry business globally in one of its panel sessions. More than 300 participants from across the globe listened as speakers and panelists from the precious metals sector discussed issues and opportunities critical to the future of the worldwide trade.

Lord Dr. Hastings of Scarisbrick, Global Head of Citizenship, at KPMG delivered the conference keynote speech, focusing on the challenges posed by sustainability. "If you want to build a sustainable future, then having values and operating ethically and transparently is critical," he said. "You can sign declarations on sustainability, but actually creating sustainable development is another step. It is about building a decent and dignified future for the people you serve. The challenge is not about what the metals are worth, but what we give back to the communities, and the freedom and dignity we provide for them.”

"Sustainability is a long-term game, but sacrifices will need to be made to help workers. In a sustainable world, we need a mindset change regarding the way we work and operate for a fair world with education for those that don’t have it and in order to create equity for them.”

"Do you believe in equity for the people in the developing world? Are they benefiting from fair trade? African states have continued to export raw materials for processing out of Africa, which means they have continued to be impoverished because the added value is being created outside of the continent. Do you believe in fair trade and fair pay for workers? Are we committed to sustainability and responsible sourcing? Not just reporting according to laws, but sourcing that uses metals that are recycled.

The next panel debate was another one with very high relevance for the jewelry industry. It was entitled “Responsible Sourcing – Expectations and Reality.” Tyler Gillard, Manager of Sector Projects, Responsible Business Conduct Unit, Investment Division at the OECD, said in a message to the conference: “We have worked closely with the DMCC and the gold industry since 2011 on implementation of responsible sourcing. Investors as well as banks are increasingly expecting to see evidence of responsible sourcing before doing any business with clients. Consumers are demanding it. So essentially, now responsible sourcing is no longer an option – it is a commercial requirement.”

Of particular interest to the jewelry industry was the panel debate on the subject of “Challenges in The Jewellery Sector,” moderated by Chandu Siroya. He said: "There are many challenges facing the jewelry industry. These include the responsible and ethical sourcing of gold. There is the problem of lower availability of skilled craftsmen because younger people are looking to work in other industries, so it's difficult to attract them. Attracting finance and the costs of doing business, including marketing costs which are relatively higher for small and medium-sized firms, is also one of the challenges. There is the issue of the threat to physical stores of online sales, the problem of counterfeit jewelry and, finally, finding a way for the use of lab-grown diamonds in jewelry that can be embraced by all – from manufacturers to consumers."

Meanwhile, during the panel debate on “The Evolution and Impact of Taxation on Gold,” Chandu Siroya, Vice Chairman of the Dubai Gold and Jewellery Group, (DGJG), said: "We are seeing many effects from the impact of 5% VAT in Dubai after the first three months. A lot of companies didn't sell much, if anything, for the first 20 days after the VAT came in on January 1, and only later got back to selling. The unique structure of Dubai, where 85% of gold jewelry is for export, means it is creating uncertainty. We also saw that around 20 offices became available for rent in the gold souk. Unfortunately, the market is down significantly, both at the wholesale and retail levels."

He explained that today's Dubai gold souk started in the late 1970s with about 15 stalls, but has grown due to proactive help by the government, minimal taxation and controls that were also strict but fair. "This allowed us to grow, and wholesalers and retailers quickly arrived. We have low margins but high turnovers and that is what allows traders at the market to grow. Dubai is a city of gold and many people come here to buy because of the high-quality designs and prices. There are few other places that could have provided such a price structure.”

"It must be remembered that the Dubai gold industry is mostly for exports. Dubai is a unique market that needs protecting. Visitors and traders come here from all over the world because of our prices. The DMCC helped us in focusing on gold and diamond jewelry, so many firms moved their offices here," he concluded.

A panel on “Bullion Banking: The Road Ahead” was moderated by Jeffrey Rhodes, Principal Consultant, RAKGOLD, who introduced the topic by telling conference delegates: "I am very optimistic about the future of bullion banking in Dubai, and I expect the market to grow substantially. Dubai is the epicenter of the world physical gold trade, but one of the challenges facing the UAE market is the lack of Western bullion banking activity. This is a constraint on the business and why the evolution of a local bullion banking sector will help remove any barriers to trade."

Insights into the “Role & Future of Global Exchanges” was the next leading topic on the agenda, with moderator Somasundram PR, Managing Director-India, World Gold Council, giving his views before inviting panelists to answer questions and give their views.

Les Male, Chief Executive Officer of the Dubai Gold and Commodities Exchange said: "Our main aim is to extend the work of exchanges to work together throughout Asia. Traders are looking for efficiency so that they can work across many exchanges and a have unified clearing house. We want greater cooperation and alliances to give traders added value. More can be done to achieve this, and we would like to spearhead it."

Ahmed Bin Sulayem, Executive Chairman of the DMCC, bringing the conference to a close, said: "Dubai is the world’s leading physical gold market and one of the world’s top three hubs for the diamond trade. This position is not achieved in isolation; it is by working alongside the industry, listening to business and engaging with stakeholders across the globe. The convening power of the internationally recognized Dubai Precious Metals Conference is hugely valuable in this regard as we gear up for future growth.”

By our Israel correspondent Abraham Dayan