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On May 22 2013, an important message came from the office of Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai.
“The deadline for the e-government project is two years. We will never tolerate any failure in achieving this goal,” the ruler tweeted.
He wanted the whole of the business of Dubai government departments and authorities to be conducted electronically, with an end to the bureaucratic paperwork that he believed slowed government down and put obstacles in the way of business efficiency.
For Ahmed bin Sulayem, head of the Dubai Multi-Commodities Centre free zone, it became a matter of professional and personal pride to hit that deadline, and, with a couple of days to go, he believes he has. “We’re there. You can now go from start to finish at DMCC – from first inquiry to registering to actually doing business – entirely online,” he says.
To prove it, he’s happy to take me on a tour of the DMCC facilities. In the past, the Client Service Centre in Al Mas Tower, the free zone’s headquarters, would be packed with people filling in forms or waiting in line with bundles of documents to be reviewed – potential customers, public relations officers, messengers.
“The queue would begin here and go round the entire building,” says Mr bin Sulayem, indicating a now-empty waiting space in the centre. There are still a few people in the service area, clutching documents, but he explains that some original documents have to be submitted and items like passports, visa and salary certificates will remain in paper form “until there is buy-in from all the relevant government departments”.
Nonetheless, he is satisfied that DMCC has gone further down the paperless route than most government departments, and also believes the move to e-administration has been a catalyst in the growth of DMCC.
Recently, the centre – which is Dubai’s hub for the trade in and finance of commodities ranging from gold and diamonds to tea and spices – announced the registration of its 10,000th client.
That represents a rapid rate of growth since the DMCC was set up in 2002, faster than any other free zone entity in the emirate.
It is also at the heart of the Jumeirah Lakes Towers development, which in the same period has grown out of empty desert to become a stand-alone community in Dubai, with 66 high-rise buildings providing jobs and facilities – hotels, restaurants, shops – for a population of 85,000 people.
“The paperless move has been very good for us. We wouldn’t have been able to get to the 10,000 figure with the old system,” he says, pointing out that the DMCC’s administrative workforce is the same as it was when there were only 3,000 customers in the free zone.
Back to the tour of Al Mas, Mr bin Sulayem leads us to the diamond trading area. Diamonds will be an important element in the next phase of expansion.
The DMCC’s ambitions in the trade in the precious stones have been growing for several years, to the point where Dubai is now in the top three diamond centres in the world, along with Antwerp and Mumbai.
The most recent initiative has been in the financing of the multibillion dollar trade in diamonds, aiming to fill the gap left by the withdrawal of the Antwerp Diamond Bank, which closed its Dubai office as part of a run-down of its global operations.
National Bank of Fujairah has jumped into that gap, taking over the offices (and several of the staff) of the Antwerp bank, and two other local banks – Emirates NBD and Mashreq – have pledged to back the DMCC’s diamond plans with hard cash.
As if by magic, in the lift we bump into a banker who has called into the DMCC to discuss financing trade in the stones, while on the floor itself we bump into a Belgian trader who is sorting little bags of gems ahead of an online diamond auction. “I promise you, this is all coincidence,” says Mr bin Sulayem. But it is proof that the diamond initiative is advancing rapidly.
Other commodities will follow. “Cashews from Africa, and other perishable goods, maybe flowers and coffee. If trade with Iran opens up, Dubai will be the prime option for many companies. Iran has the biggest business in pistachios in the world, bigger than the US,” he says.
His other big project is the Burj 2020 tower, a skyscraper planned on the edge of the DMCC free zone which is billed to be the tallest commercial building in the world. Mr bin Sulayem says it will beat the record-holding Shanghai Tower, which should soon top out at 632 metres.
With all this breakneck growth, is there a risk the DMCC’s regulatory structure will not be able to keep pace? And is the regulatory process moving completely online too? These questions are especially timely in light of the DMCC’s decision in April to remove the Kaloti gold group from the list of companies that meet its sourcing standards.
“We have the mechanisms in place. The compliance department has the full range of know-your-customer and due diligence capabilities, and they do it personally, not just online. Anybody thought to be high risk is checked and double-checked.
“Compliance has always been a very important part of DMCC. We adhere to international standards in the Kimberly Process [for diamond provenance] and according to OECD guidelines. We have arrangements with the UAE Central Bank on anti-money laundering regulations.
“We don’t want to attract the wrong type of business to DMCC. That would deter other clients like the big multinationals.”

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CAPE TOWN // Diamonds it turns out, are not forever — at least not when it comes to supply.
Declining deposits present a looming shortage but also an opportunity for investors.
Although the wealthy have traditionally collected precious stones, diamonds have not been part of a formal portfolio of value, such as gold, cash and equities. However this may change as natural stones become harder to find, something on which a UK company with Emirati backing is hoping to capitalise.
AIM-listed Paragon Diamonds is developing the sizeable Lemphane Mine and has recently agreed to acquire another sizeable mine, the Mothae Mine, both in the tiny mountain kingdom of Lesotho, in southern Africa. In January, Paragon announced it had teamed up with International Triangle General Trading, a Dubai-based firm, for a debt and equity package of up to US$28 million.
“These investors are connected to the royal families of the UAE and Saudi Arabia,” says Hugo Philion, a member of the management team at Paragon, although he declines to name them. “Through them, we will be talking to some very interesting people who are interested in acquiring our sizeable supply of large investment grade diamonds direct from the mine, and intent on making Dubai the number one Diamond centre in the world.”
Strong demand and a decline in world production will kindle interest in gems as a long-term asset that grows in value over time.
“We see a shift into diamonds both as an asset class and a store of value as a currency surrogate, especially for the ultra-wealthy, as both geopolitics and the global monetary system becomes more unstable with persistent quantitative easing,” Mr Philion says.
Most of the world’s diamonds were formed deep in the earth millions of years ago — up to 300 kilometres down, in some instances. They are usually brought to the surface by volcanic activity — in pipes of larva. These pipes harden and become the diamond-bearing kimberlites that miners seek.
However, the pipes are exceedingly rare. “There’s been no major kimberlite discovery in 25 years,” says Mr Philion.
According to the financial management firm Bain & Co, natural diamond production is set to decline from 2019 as existing mining assets begin to deplete.
“Demand, however, is projected to maintain a robust growth rate, thanks to strong fundamentals such as expanding wealth and a growing middle class in developed and developing countries alike,” reads the Bain & Co’s report, prepared for the Antwerp World Diamond Centre last year.
A growing middle class in Latin America, Africa, and Russia and Asian countries, where consumers show increased interest in diamond engagement and wedding jewellery, will add to demand for gems, Bain says.
Artificial diamonds can be manufactured, and some are extremely good. However, with the right equipment, fakes can easily be identified and just as with high-quality copies of a treasured artwork, to collectors and investors they are worthless.
Even when talking solely of real gem stones, there are diamonds and there are diamonds. It is only the best-quality sparklers that will make the investment grade — and therefore they are the most expensive, says Paul Zimnisky, a New York-based independent diamond analyst and consultant.
“On a real basis adjusted for inflation, the performance of most diamonds has really not been that impressive compared to other asset classes,” Mr Zimnisky notes. “Only the highest quality, rarest, most desired diamonds have outperformed: the blues; the pinks; the reds; and larger flawless whites.
“With the price point of these diamonds starting in the high-tens and hundreds-of-thousands of dollars, the investor base is limited.”
Currently all it takes is a mouse-click for a retail investor to access gold through an exchange traded fund. Diamonds, though, are more difficult to acquire as currently there are no similar investment instruments for them. Instead, purchases of physical stones must be made from dealers or specialised retailers.
This is where the Emirati-backed Lesotho project aims to benefit. “Paragon will publicise their production in Dubai to investors wishing to acquire diamonds at prices more related to the cost of production and thus more transparent than in places like Antwerp, 49th St New York and Hatton Garden in London,” says Mr Philion.
There’s also a growing market for diamond bullions — sealed cards that contain investment grade stones. These can be bought for as little as US$100 — but others will go for hundreds of thousands of dollars, depending on total carat starting at 0.5 and upwards, and quality, says the online dealer
“The diamonds are sealed inside a NDX Diamond Certicard, which protects the stones and guarantees their authenticity and all-important 4 C’s [colour, cut, clarity, carat],” it says on its website.
“It’s the easiest way to get in the diamond business. Total carat weight [TCW] is rounded to the nearest digit and the exact number of stones in each card may be slightly more or less than indicated, based on the precise weight of each stone.
“TCW listed on each card is honoured when selling back.”
However, until diamonds can be bought with the ease of other investment commodities, they are unlikely to become part of the average portfolio. There is talk that the Singapore Diamond Investment Exchange is considering launching a regulated electronic exchange but until it does, it will be left to the ultra-rich to pursue high-value gems themselves.
“For the foreseeable future, I see the appeal of diamonds as an investment limited to high-net-worth individuals, those looking to store value, using diamonds as an additional portfolio diversification tool, with the added benefit being the very high value-to-weight ratio diamonds provide,” Mr Zimnisky adds.
Still, the mere fact that interest has been sparked in investment-grade stones is good news for emerging gem markets such as Dubai.
The emirate has indicated it wants to take on Antwerp as a diamond market, pushing to be the hub of choice for Middle East and Asian buyers. Singapore is another contender for regional diamond dealing.
As things stand now, Dubai has an edge over rivals. It has money and is home to many high-net-worth individuals. Antwerp is making heavy weather of competing at the moment, as credit to the industry has dried up following years of volatility in the diamond market.
The UAE’s Emirates NBD, Mashreqbank, and National Bank of Fujairah stepped in last year to begin financing diamond cutters, polishers and traders operating on the Dubai Diamond Exchange, according to Bloomberg. They began the funding after the Antwerp Diamond Bank, the go-to funder for almost a century, closed its global operations last year. In 2014 Dubai traded $25 billion in diamonds, up from a negligible $5 million in 2001, according Dubai Diamond Exchange figures.
With care Dubai can assume the role that the Belgian city has played in the industry, while at the same time developing a new asset class for ultra-wealthy investors. What remains is to avoid obvious missteps, such as allowing conflict diamonds — those illegally mined, or sold to finance violence — to slip in, although there are no major conflicts occurring in big diamond areas in Africa at the moment.
“Having strict guidelines in place to only allow the trade and manufacturing of ethically sourced stones is imperative for the region to succeed longer term,” Mr Zimnisky concludes.

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LONDON (CNN) - The price of just-mined diamonds is falling. But the outlook for the prices consumers pay is less clear.
This week, two British companies that mine for diamonds said prices for rough stones had fallen and will keep sliding.
One of them, Petra Diamonds, noted that prices of rough diamonds dropped by around 9 percent in the last half of 2014. 
The company cut its full-year price forecast for its South African diamonds from $152 per carat to $130.
Miners like Petra sell rough stones to companies that cut and polish them, but cutters and polishers are starved for cash. And their struggle to access the money they need to pay for diamonds is driving prices down.
A big part of the funding shortage is due to the closure of the Antwerp Diamond Bank in late 2014.
Belgium is one of the world's biggest diamond trading hubs and the bank was a major lender to the industry.
By the way, falling rough diamond prices won't automatically translate to cheaper engagement rings. #diamonds

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The British press is reporting that another huge diamond has just been mined at Cullinane. Though only 232 carets, the British media is estimating that it “could” be worth up to ten million pounds sterling, or U.S. $16,205,000. Other estimates go as high as fifteen million pounds sterling.
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