UAE seeks best valuation practices for diamonds under Kimberley Process
A UAE-sponsored initiative aimed at introducing best valuation practices for the rough diamond trade is due to be launched later this year under the country’s chairmanship of the Kimberley Process, an industry certification programme intended to halt the trade in conflict diamonds.
It comes as a response to criticism of transfer mispricing practices within the diamond trade, which NGOs claim has deprived diamond producer states of crucial tax revenue.
Criticism has centred on Dubai’s role as a major diamond export hub, with NGOs accusing the UAE authorities of turning a blind eye to such practices, and thus being complicit in the illegal flow of wealth out of African diamond producers.
“We feel that should address all the questions that have been raised and start a dialogue on valuation, and we’re planning to hold workshops to start the process,” the Kimberley Process chairman Ahmed bin Sulayem said. “We need to see whether it’s a UAE issue, or whether it’s an issue with producing countries or if it’s an industry-wide problem, and then come with ideas on how we can tackle the problems.”
Mr bin Sulayem said it was too early to say what form such measures would take.
Unlike other commodities, there is no global standardised pricing mechanism for rough diamonds, opening the door for numerous abuses in the supply chain between producers and exporters.
An Amnesty International report on the global diamond supply chain, published in September, highlighted how opaque valuation practices enable international diamond traders to make a large profit at the expense of diamond producing countries.
“Experts have estimated that African countries lose billions of dollars every year to activities such as smuggling and tax abuse,” the report said, accusing diamond trading centres such as Dubai and Antwerp of turning a blind eye to such practices.
“Minimising export taxes by undervaluing diamonds means that diamond-producing countries receive far less revenue from taxing diamond exports than they would if the diamonds were exported at their market value.”
Mr bin Sulayem – who is also the executive chairman of the Dubai Multi Commodities Centre – said that the studies on valuation would look at Dubai’s role within the trade.
“No country’s diamond market is perfect, and everyone major diamond centre has its own challenges,” he said.
“I’m not going to point fingers at anyone else, though. Through these studies and workshops we’ll look at where the main issues are and how we can resolve them.”
Mr bin Sulayem did not say when the initiative would be formally launched, but he did not expect clear consensus to be reached on best valuation practices before the expiry of the UAE’s KP chairmanship at the end of the year.
The initiative on valuations comes as Mr bin Sulayem is seeking mediation with a number of NGOs over their boycotting of the Kimberley Process during the UAE’s chairmanship.
The Civil Society Coalition (CSC), a group of nine NGOs, announced in September that it would boycott the Kimberley Process during 2016 because of a breakdown of trust with the UAE, specifically raising the issue of undervaluation of diamonds entering the country.
Global Witness, one of the founding members of the Kimberley Process in 2003, resigned as an official observer of the process in 2011, over what it described as loopholes in the process and a perceived failure to address a broader range of human rights concerns.
“It’s important for industry, government and NGOs all to be part of the Kimberley Process, as it plays a big role in giving the process credibility for all parties to be represented,” said Mr bin Sulayem.
“I think it would be a huge mistake for them not to participate in the Kimberley Process, and I don’t believe they would risk all the hard work they’ve done up to this point.”
Mr bin Sulayem said that while the CSC has said that it would boycott the main Kimberley Process gatherings, its members have continued to participate in subcommittees this year.
The UAE is pursuing mediation with the Civil Society Coalition, and has also approached other members of the NGO community about rejoining the process.
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Updated: March 26, 2016 04:00 AM