“We have been the biggest partner with them. We need them to be part of us—also, other international organsiations from miners, (a) few banks, few traders, few international organisations... (to) come and set up a promotion board. The industry needs that worldwide, really.”
He pointed to efforts made by the diamond industry via major industry players such as De Beers to market diamonds as an example which the gold industry could follow, thereby giving a voice to a sector he had described in an earlier panel debate as “fragmented”.
He said that although big, global brands may promote their own gold jewellery ranges, it is the smaller, independent businesses that are responsible for the biggest volumes in jewellery sales.
“These international brands, the top brands, are not going to consume (the 2,200 tonnes of gold jewellery sold globally last year). We are the people who are going to consume this quantity. We need them the miners and the banks, the international institutes to come and build a body and take two (people) from the region of the Gulf, three from Europe, South East Asia two-to-three (from the) Subcontinent two-to-three... a body of 15 people from around the world.”
Abdulla also said that the Dubai government could help to market the city’s gold trade more effectively. He said the government had provided “very big support” to the industry.
“But we need something that says ‘Dubai, the City of Gold’,” he said, suggesting that either a square or a street in the area leading to the city’s gold souk could be renamed to provide a cost-effective boost to the industry.
“This is a marketing tool, but it's the best can ever happen,” Abdulla said.
During the panel debate, Abdulla had said that younger customers were more interested in buying technology devices and in enjoying experiences than in buying gold jewellery, and that in other parts of the world gold jewellery is now considered more as a fashion accessory than as a precious item.
“I want to advise Middle East markets that if we don't take care of the culture of gold, supporting the gold, the gold jewellery can be out of fashion. It's a threat to all our industry,” he said.
Demand for gold jewellery in the United Arab Emirates dropped by 23 percent last year to 36.2 tonnes, and has fallen virtually every year for the last six years from its recent peak of 64.4 tonnes in 2013. Demand also fell by 14 percent in Saudi Arabia last year to 39.4 tonnes. In a Gold Demand Trends paper published in January, the World Gold Council said that “both markets were affected by the introduction of 5 percent VAT in Q1 2018”.
“Purchasing activity ahead of the tax change boosted Q4 2017 demand, making Q4 2018 demand all the weaker in comparison,” it added.
The introduction of VAT hit the industry hard in the early part of last year because many jewellery makers operate on very low margins and much of the gold bought in the UAE is purchased by tourists bringing it back to their home countries.
Chandu Siroya, vice-chairman of the Dubai Gold and Jewellery Group, said that “ours is an industry where between 80-90 percent of our product is for export”.
The UAE government subsequently sought to limit the impact by exempting the commercial sale of precious metals and diamonds from VAT, although jewellery retailers still need to impose a 5 percent charge on items sold to the public. (Read more here).
“Dubai is one of the largest trading centres for jewellery. It is not a consuming centre. They (the government) understood this,” Siroya said.
Abdulla said he was grateful to the UAE government “because the jewellery industry is uniquely being considered to be a special industry” in terms of VAT treatment, but said customers’ purchasing power had been impacted by its introduction.
He said that although some high-end brands charged anywhere between six and 30 times the actual value of the gold used in a jewellery product, many independent jewellers were operating on margins of just 10 percent above the commodity price.
“When you add 5 percent on top of that, it's a reasonable burden. I think, with all respect, a reduction on that percentage will definitely add more possibility of enhancing our business.”
K P Abdul Salam, group executive director of the Malabar Group of Companies, a Dubai-based group that includes a gold and diamond retail business, also welcomed the VAT rebate service made available to tourists from November last year. (Read more here).
“I appreciate that the government is doing a lot to ease the business here,” he said. However, he also suggested that VAT could be removed entirely from the cost of gold and diamonds used in jewellery products, and instead “be considered only for the value addition part of the jewellery”.
“We are selling an investment product,” he argued. “We are selling jewellery which, for an Indian consumer, it is a consumable investment.”
In an earlier keynote address, Juma Mohamed Al Kait, assistant under-secretary at the UAE Ministry of Economy, outlined the importance of the precious metals and diamonds trade to the UAE’s economy. He said that gold trading at $40 billion, jewellery at $29 billion and diamonds at $26 billion, were among the top four products traded last year.
“The UAE accounts for about 14 percent of the world's gold trade, and Dubai, in particular, is rising through the ranks as a purchase and investment destination, as it accounts for 20 percent of the world's sales of precious metals,” Al Kait said.
He acknowledged that 2018 was “a difficult year for the sector” but said he was optimistic that the removal of VAT on wholesale gold and jewellery sales would make the both the retail and wholesale sectors more competitive.
(Reporting by Michael Fahy; Editing by Brinda Darasha)
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