Diamonds are forever
The phenomenal growth of Dubai's precious stones market over the past year has created an immediate need for efficient transportation and specialised supply chain operations, explains Youri Steverlynck, chief executive officer of Dubai Diamond Exchange. Robeel Haq reports.
Dubai's historical relationship with the jewellery trade has been carefully nurtured by generations of businessmen in the Gulf, many of whom have earned their fortunes by trading in high-value commodities such as precious metals and stones.
Such levels of market uncertainty have resulted in consumer spending being diverted into alternative commodities, with diamonds emerging as the unexpected beneficiary from the golden era's temporary decline.
Demand for the precious stones is currently skyrocketing throughout the emirate and the local government has taken active measures to ensure this situation continues unabated in the future.
At the centre of this ambitious strategy is Dubai Diamond Exchange (DDE), which has been established to regulate the market, facilitate its growth, establish logistical efficiencies and provide a secure trading environment.
"Dubai Diamond Exchange is the first diamond bourse within the Arab region, in addition to the first Arab member of the World Federation of Diamond Bourses (WFDB)," explains Youri Steverlynck, chief executive officer of Dubai Diamond Exchange.
"Given the right support, this market will continue to flourish in the future too, and that's exactly why Dubai Diamond Exchange was created."
"We were established to regulate the market and provide an opportunity for traders and customers to interact and conduct business in a secure environment."
Steverlynck's enthusiasm is backed by several years of experience in the international diamond industry.
The 34-year old started his career as a lawyer with expertise in commercial and public law.
However, he left the profession in 2000 and became a spokesperson for Belgium diamond powerhouse HRD, enjoying a rapid ascent up the corporate ladder and working through the marketing and public affairs department.
Since arriving in Dubai two years ago, Steverlynck has played an influential role in establishing Dubai Diamond Exchange and championing the emirate as a future hotspot for the global industry.
"Dubai accounts for between 15% to 20% of the Gulf's diamond retail business, although I predict this market share will experience a considerable boost in the next five years," he says with confidence.
"From a global perspective, a number of success diamond centres have already been established in different parts of the world. For example, New York serves as a gateway into the United States, whilst Antwerp serves Europe, Hong Kong serves China and Mumbai overlooks the Indian subcontinent. However, in the Middle East, nothing has existed until now."
According to Steverlynck, the international diamond industry has already reacted favourably to Dubai's internal marketing campaign.
The emirate is, therefore, on course to establish itself as a suitable adversary to the other leading diamond centres in the United States, Belgium, Hong Kong and India.
"One of the biggest advantages, of course, is that Dubai has a well-deserved reputation for being a secure trading platform. If you look at diamond heists and robberies over the years, it's surprising how creative these criminals have become."
"When I worked in Antwerp, I noticed how some of these major robberies were almost artistic in their nature," he says.
"Thankfully, the crime rate is much lower in Dubai, which means the environment is more secure than the other trading centres. This element alone will help Dubai increase its value and importance amongst diamond traders in the future."
Diamonds are transported into the Middle East from a number of different international markets.
For example, rough and uncut diamonds are typically sent from producing countries such as Russia, South Africa, Australia, Botswana, Namibia and Venezuela.
On the other hand, polished diamonds arrive from trading countries, such as the United States, India, Belgium and Hong Kong.
"The logistics process involved with diamonds is quite specific and unique. The industry agrees that airfreight is the ideal mode of transport, because the capital cost of each diamond is very high, but the actual volumes are very low," explains Steverlynck.
"In practice, only a limited number of airline operators are currently providing services to diamond traders. Only the likes of KLM, British Airways, Lufthansa and Emirates are servicing the industry, because these companies are comfortable in handling high-value items and have dedicated divisions to overlook the process."
The speed and agility of airfreight transportation is another important factor in the logistics process.
Sending a consignment of diamonds from one part of the world to another must be done without any delays, otherwise the traders could potentially lose a large percentage of their profit margins.
"Of course, time constraints do exist in this industry, because it's a fast business and companies must operate quickly to secure their sales. Speed is therefore of the essence and the most successful handling agents are true innovators in terms of overcoming these time constraints," explains Steverlynck.
"The challenge is ensuring your stones arrive within 24 hours to their destination. It's not an option to delay the transportation any further than one day."
A specific range of packaging is used during the airfreight journey to prevent the stones from being damaged in transportation. The solutions are simple and inexpensive, yet incredibly efficient in preventing costly scratches or chips.
"Diamonds are very strong, but the transportation packaging is still very important and should never be neglected. The polished diamonds are typically packed in special parcel paper, almost like an envelope, in which the stones are individually wrapped," says Steverlynck.
Following the airfreighting of the diamonds, the stones arrive at Dubai International Airport, where Transguard is the only security agent that has been officially authorised to escort high-value cargo from the airplane.
The company established its own high security facility in Dubai Airport Free Zone last year, which handles the clearing and processing of valuable cargo, whether its being imported, exported or simply in transit.
The state-of-the-art terminal is supported by Dnata operations, Dubai Customs and the Kimberley Process.
"We have signed a memorandum of understanding with Transguard to strengthen our relationship with the company. As partners, we can better serve the industry with even faster and highly secured clearing of diamond shipments," says Steverlynck.
"Transguard's facility has actually helped Dubai to establish a competitive advantage in the market. The building is very unique and impressive, almost like a high security fortress, with everything under one roof, including customs and physical inspections."
"Once these processes are completed, the cargo can be collected by the client, which could include other handling agents or the individual trading companies."
"In fact, the majority of shipments are handling through the three leading agents in this field, which are Transguard, G-Force and Brinks. Each of these companies has its dispatch centre in or around the airport."
Dubai Diamond Exchange is hoping to build on the success of Transguard's warehouse by opening its own facility, called Almas Tower, in the near future.
The 64-floor headquarters is being located near Jumairah Lake Towers and will be exclusively dedicated to the international diamond trade.
"The biggest challenge for Dubai's diamond industry at the moment is that businesses are scattered throughout the emirate. Companies are based in the gold souk, in Jebel Ali Free Zone, in Dubai Airport Free Zone, in Business Avenue. With the traffic congestion, its not effective, especially in terms of time," concludes Steverlynck.
"We have to bring all these companies together in one physical infrastructure to increase the market efficiencies and improve the logistics process. This is exactly what we'll achieve with Almas Tower, which will boast its own specialised customs office, Kimberley Certification processing department, physical inspection centre for the Ministry of Economy, and operational areas for Transguard."
"We have already started the handover of offices to our diamond sector members. Once this building is operational, Dubai Diamond Exchange will truly be reaching its full potential. Its truly a landmark in our development."
"Dubai's share of the diamond market continues to grow, with the total trade in rough diamonds within the emirate reaching US$1.08 billion in the third quarter of 2007," states Youri Steverlynck, CEO of Dubai Diamond Exchange.
"The creation of the exchange is set to provide a major impetus to the diamond trade, with Dubai establishing itself as leading international diamond centre."
DDE is a member of the World Federation of Diamond Bourses (WFDB), making it the first affiliated bourse in the Arab world.
"Founded in 1947, the WFDB provides a legal framework and regulations for its members," says Steverlynck. "As part of the international bourses body, DDE members will follow the same practices as other bourses."
DDE was created by the Dubai Metals & Commodities Centre (DMCC), a Dubai government initiative, as part of its ongoing strategy to create an industry-specific market infrastructure.