Dubai in the Diamond Business

I have to say that I'm happy to hear that Dubai is finding some modicum of success in the diamond business. I mean, that oil supply won't last forever. It might take them a bit long, though, to catch up to the Diamond Planet.

The UAE are reporting that Dubai's diamond trade topped $25 billion in the first half of 2011, a 55-percent increase over the 2010 first-six-months total haul. It's important to note, however, that the dollars increase was mostly due to a price increase. But still, the country did see an increase in production nonetheless.

It's a tough business, diamonds. Other countries already do it really, really well. But what Dubai lacks in experience it's willing to make up for in price attractiveness. See, the Russian dealers slap a 23-percent duty on their shipments, along with an 18-percent value added tax. Yes, you know the diamonds and good and ready to be worn or, more probably, kept under glass and lock and key and armed guards. But that's a lot of money to pay for something that Dubai merchants would happily offer you at just a 1-percent duty. Surely what you miss out on in terms of confidence in quality is more than made up for by the drop in overall number of dollars you spend, right? After all, how much of that Russian tack-on is really going back into the diamond production business?

Dubai is also trying to muscle in on Mumbai's territory, building its own diamond boiling center in an attempt to bypass the traditional pathway through India that most diamonds have to follow. And why not keep the precious stones at home until they're ready to be shipped? Which brings to mind the fact that most of those little (or perhaps large) stones are leaving the borders of the country for their final destination, rather than remaining at home. The same can be said of India, of course, but I would think Dubai would want to supplement its rich oil barons' families' wealth with a few more stones and few fewer luxury hotels. Then there's the fight against tradition, which holds that many rich Middle Eastern types are in love with their gold (to the extent that there are gold vending machines). 

So much uphill battle to fight, yet the UAE — and Dubai in particular — certainly have the will and the wherewithal to keep at it until they get it, whatever it in the end may be.

Shine on indeed.