Global Perspectives

Laurence Graff, one of the world’s leading jewelers, once remarked that money never goes away, it just moves around.

Indeed, the “movement of money”—specifically that which is spent on jewelry—was the focus of a session titled “Business Perspectives: Charting the Globe,” held during the GIA Symposium, Aug. 27–29. A panel discussion moderated by Anna Martin, senior vice president and the New York regional manager of ABN AMRO Bank’s International Diamond & Jewelry Group, featured industry leaders from Europe, Japan, India, and Dubai. The session highlighted issues faced by emerging markets versus declining markets.

Yasukazu Suwa, G.G., president of Suwa & Son Inc., a 98-year-old gem and jewelry business based in Tokyo, presented the view from Japan, one of the markets that’s seen its position in global jewelry consumption decline.

Suwa, also a noted gemological author, opened with a historical perspective. Prior to World War II, he said, most Japanese women wore kimonos, and their major forms of adornment were either for the obi sash or their hair ornaments, typically made from tortoiseshell or jadeite. They didn’t need diamonds; hence, Japan wasn’t a major force in the diamond market. After the war, however, tastes changed and the market for diamonds in Japan posted major growth. By 1960, it was a significant player in the world diamond consumer market, and by 1991 it seemed the Japanese were poised to take over global leadership in terms of luxury goods consumption, including diamonds. Indeed, this relatively small country accounted for 34 percent of global diamond consumption.

But when the Japanese economy plummeted in the 1990s, so did diamond and jewelry demand. People who would have formerly identified themselves as middle or upper-middle class were now identifying themselves as lower-middle class, said Suwa. Today, Japan’s share of the global diamond market stands at 12 percent (according to 2004 figures, the latest available). By 2020, predicts Suwa, that share will actually drop to 10 percent—not because of hard times in Japan but because of increased demand in other markets. He predicts the Japanese market will become more polarized: divided sharply between high-quality, fine stones set in classic design and low-end and/or synthetic stones used in fashion jewelry. Branding and traceability will remain the chief consumer issues in Japan, and he also predicts significant recirculation of fine-quality stones.

The Persian Gulf region, by contrast, boasts a booming market, with Dubai, United Arab Emirates, rapidly becoming a major diamond trading center. Amit Dhamani, managing director of Dhamani Jewels, a leading retailer in Dubai, gave a compelling view of the Gulf region’s growth.

“The Gulf economy is the fastest growing in the world,” he said. The economies in the Gulf Cooperation Council, including Bahrain, Oman, Qatar, Saudi Arabia, Kuwait, and the United Arab Emirates, are enjoying a compound annual growth rate of 20 percent, a collective GDP that’s expected to hit $600 billion in 2006, and very high purchasing power among the 37 million citizens living in those nations. GCC member states enjoy free trade and free movement of goods between them, and the region is a hot business destination, he said.

Nearly half of the GDP is being driven by construction, explained Dhamani. The remainder is driven by oil and gas, energy, retail, and tourism/hotel spending. Among the many contributors to the region’s strong economy are buoyant crude oil prices, a tax-free economy, a moderate cost of borrowing, and the construction boom, benefiting from laws allowing expatriate ownership. Additionally, he said, residents of the region have seen significant appreciation of their investments, both assets and real property, allowing for a high degree of disposable income. Finally, the region enjoys peaceful living under stable governments that have international support.

Dhamani cited a number of factors driving jewelry sales, including a growing young target market, a passion for luxury goods, conspicuous displays of wealth and elite status, and a strong affinity for diamonds and jewelry.

Dubai is also becoming a major world tourist destination, with some estimates predicting 40 million tourists visiting annually by 2015. About 90 percent of tourists buy some kind of jewelry on their trip, Dhamani said.

Currently, the region—especially Dubai—has the highest per capita jewelry sales in the world, equal to approximately $2,500 annually. In 2005, total jewelry sales amounted to $15 billion, and the Gulf region ranks fourth in the world in jewelry consumption, behind the United States, Japan, and India. The region accounts for 10 percent of the world’s consumption of diamond jewelry.