For the uninitiated, XAU stands for gold. And D33 is the Dubai Economic Agenda, which envisions doubling the size of the economy and consolidate the emirate’s position among the Top 3 global cities by 2033.
A quick look at the numbers underscores the significance of gold in Dubai’s economy – the gold, jewellery and diamond sector contributes approximately 27 per cent to Dubai’s non-oil trade.
This substantial contribution is the result of sector-specific initiatives over the past 25 years:
Historic development
The Dubai Gold Souk has had a significant revamp in the 1990s and then an ultra-modern extension in 2022.
Special economic zones
The creation of Dubai Multi Commodities Centre (DMCC) in 2002 provided a dedicated free zone for commodities.
Regulatory frameworks
Adoption of the Kimberley Process in 2003 for diamonds and establishment of the Dubai Good Delivery standard for gold refineries in 2005, latter enhanced to UAE Good Delivery in 2022.
Market expansion
Creation of the Dubai Diamond Exchange in 2004, with its auction floor opening in 2019; the Dubai Gold & Commodities Exchange (DGCX) in 2005, and the signing of UAE-India Comprehensive Economic Partnership Agreement (CEPA) in 2022.
Responsible sourcing
Implementation of OECD’s Responsible Sourcing guidelines in 2012.
Quality assurance
Ongoing quality checks and controls in the retail jewellery sector over the past 20 years.
Public-private partnerships
Formation of the Dubai Gold & Jewellery Group in 1996, exemplifying effective public-private collaboration.
Industry conferences
Hosting precious metals and stones conferences annually since 2000 and 2013, respectively.
These initiatives, along with broader economic measures, have firmly established Dubai as the ‘City of Gold’.
While these historical efforts and favorable conditions will naturally drive growth, we must explore how this sector could contribute even more to the Dubai Economic Agenda (D33).
Compliance is a pivotal issue in the global financial system. Regulators demand stringent adherence, while businesses often see it as a burden. Dubai must strike a balance by developing its own rules, regulations, guidelines, and policies that cater to its unique challenges while aligning broadly with international standards. The mantra should be ‘follow, but do not succumb’. This careful balance is crucial for the sector's future in Dubai.
Role of banks
Compliance directly influences the role banks play in this sector. If Dubai manages compliance effectively, it can attract international bullion banks back to Dubai, which exited the market after 2011.
Some of these banks are global experts in the sector and present in this country and region for over a hundred years each, but what is the point in having sector-specific expertise and the so-called deep understanding of local markets and culture if they cannot support a sector that is so vital and contributes so much to the local economy?
UAE based banks also need to overcome their hesitation – they have stayed away far too long from this sector due to the perceived risks without making any concerted efforts to understand the industry and support their own economy.
Banks are in the business of managing risks, not avoiding them. Developing a robust bullion banking infrastructure in the UAE is essential – cost of compliance should not deter participation, which incidentally offers a highly remunerative business and can easily absorb all such costs, and more. It is all in the mind.
Role of industry
Market participants must adhere to all rules and guidelines in letter and spirit, ensuring fair trade practices. Key actions include:
- Full disclosure of beneficial owners, group entities, source of wealth and funds.
- Transparency in imports and their payments, with complete legal documentation and enhanced due diligence (including that for hand-carried items) as per laid down rules and global best practices.
- Clear data handling policies explaining data ownership, usage, storage, and sharing.
- Transparent pricing structures and fair competitive practices.
- Employee welfare measures in addition to minimum stipulated under the UAE labor laws.
While Dubai has developed impressive physical infrastructure for this sector, it lacks a robust digital infrastructure that links to physical metals and stones.
Dubai needs a regulated digital platform for metals and stones trading and investment, backed by physical commodities, with B2B, B2C, and C2C applicability.
Such a platform requires significant investment, trust for market acceptance, proper governance, and regulatory oversight. It needs to be scalable too. This digital initiative could create a legacy for Dubai, enhancing its standing in the global metals and stones industry, offering high returns on investment, and aligning with D33’s goals.
For these reasons, it needs to be initiated by the government and not left to private market participants.
