Dubai’s position as an entrepôt for the Middle East jewellery market reflects three broad themes. First, and perhaps most important has been its reputation for the jewellery it manufactures. This means there has been less concern with the purity of the gold, compared with (historically) India. Before compulsory hallmarking was introduced in India, under caratage was quite prevalent and this sharp contrast with the UAE was an important catalyst in helping tourism between South Asia and the Emirates to develop.

The second issue was the duty-free nature of the UAE gold market, which only changed in 2017. Without this tax-free regime, it is questionable how much the India-UAE trade would have developed, which is now so integral to the Emirates. In terms of the new tax structure, a 5% import duty on jewellery brought into the UAE, was introduced, effective from 1st January 2017, followed by a value added tax (VAT) of 5% from 1st January 2018.

This initially caused a stir, resulting in falling retail sales and a decline in jewellery inflows, with some of the wholesaling activity moving to other hubs, such as Istanbul. However, the authorities subsequently looked to address these issues by allowing tourists to reclaim some of the 5% (after processing fees are netted off) when they left the country, exempting B2B trades from VAT, streamlining the import duty mechanism (to avoid imposing 5% import duty for jewellery to be re-exported) and, more recently, removing the 5% import duty for Indian jewellery imports with the above-mentioned India-UAE trade agreement.

The third reason for Dubai’s success as a global jewellery hub is inextricably linked to the above two themes, and reflects the depth of its wholesale jewellery sector, which has been established over the past 15-20 years. Despite the lack of comprehensive UAE trade data for 2021 statistics are available for India, the Emirates’ largest trading partner for gold jewellery. This shows that last year around $2.7bn of product was delivered to the UAE, up some 18% on a COVID-affected 2020.

Overall though, the past 5-6 years have been challenging for the sector, which has had to contend with a new fiscal apparatus, at times record high gold prices, and the COVID pandemic. However, there now appears to be some momentum and a sense of renewed optimism, in part as the UAE (and the wider region) recovers from the pandemic, with a fresh injection now emerging from the CEPAs and with high energy prices benefiting oil and gas exporting countries in the Gulf.

UAE Gold Jewellery Trade

Source: Metals Focus, Bloomberg