The year 2019 has relatively started well for the gold and diamond jewellery industry. Looking back at the first quarter of 2018, the volumes of jewellery sales in the UAE have been impacted by the implementation of VAT effective from January 1, 2018. As with other cases of tax implementation, this was a period of readjustment for the economy and the industry, more specifically.
A similar impact was seen when the Goods and Services Tax (GST) was intro-duced in India in 2017. Other factors such as geo-political challenges, global trade war and sanctions, and depreciation of currencies also contributed to the adverse impact on de-mand for jewellery in the UAE during 2018.
However, the volumes gradually improved due to various measures taken to accelerate the recovery process such as the government repealing B2B VAT on jewelleries and diamond effec-tive July 1, 2018 and the VAT refund for tourists coming into effect in Novem-ber 2018. These proactive initiatives coupled with the launch of the Dubai Shopping Festival from December 26 played a positive role in enhancing jew-ellery trade volumes.
To drive the growth forward, it is important for the jewellery industry to seek the opportunities that lie ahead, one of which includes tapping into the millen-nial market by recognising the shift in their buying patterns and appealing to their unique requirements. According to a Forbes article in 2018, the majority of the MENA region's consumer base are young millennial - over 100 million of its 400 million people - which reinforces the importance of redirecting the fo-cus to the region's largest and ever-growing consumer base.
Another growth-oriented opportunity lies within the Islamic gold market which emerged on the back of the Shariah standard on gold. In 2016, the global Shariah standard-setting body AAOIFI along with the World Gold Council (WGC) launched the Shariah Standard on Gold thus giving much-needed guidance on the Shariah rules and basis for the permissibility or impermissibility of gold in Islamic finance. Since then, NBF has already spearheaded this space in the UAE by structuring the first-ever Shariah-compliant bullion financing for one of its key customers, a global jewellery retail chain, thus paving the way for others in the industry.
The bank's commitment to the sector has also been reinforced through its re-cently-announced partnership with the Dubai Gold and Jewellery Group (DGJG), making it the official banking partner for the DSF promotion cam-paign. In an effort to bolster the retail sector within the industry, NBF incentiv-ised customers to invest in gold and diamond jewellery by offering them the opportunity to win grand prizes.
Further looking at the supply chain in the sector, the lack of bullion banks that are required to drive growth within the industry remains a key challenge. Against this backdrop, National Bank of Fujairah continues to extend its un-paralleled market expertise to stakeholders in the sector as one of the leading bullion banks. NBF takes a partnership approach with clients and supports them in overcoming these market fluctuations in an effort to strengthen Du-bai's position as the leading hub in gold and precious metals.
There are expectations for positive developments in the Precious Metals & Di-amonds industry given the interest in jewellery and gold as vehicles for store of value and investment diversifier. It is expected that the overall sentiment of the trade will improve further with key government initiatives coming into ef-fect within this year as well as the impact of the upcoming Expo 2020 which will be more visible from the fourth quarter of 2019.
In the face of global market uncertainty, expansion of protectionism, and the Fed taking signaling a more neutral stance as well as structural economic re-forms in key markets such as India and China, we expect gold products to shine brighter and become more attractive for investment and risk management purposes.
The writer is head of Precious Metals and Diamond at National Bank of Fujairah. Views expressed are his own and do not reflect the newspaper's policy.
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