The New Voice of Kimberley Reform: Dubai?

Last year, the United Arab Emirates applied to become the Kimberley Process vice chair, the traditional stepping-stone to becoming chair. This was, to say the least, not well received by the KP’s coalition of nongovernmental organizations (NGOs), which for the last two years have engaged in an often-bitter cold war with UAE diamond center Dubai.

The groups have called Dubai a haven for transfer pricing and smuggling, and charge it has lax controls (which it’s denied). To block the bid, the organizations recruited Australia as a last-minute alternative. As neither country achieved absolute consensus, no deputy chair was chosen. 

At last week’s Kimberley Process intercessional in Luanda, Angola, it looked like the battle would be rejoined. However, Australia surprised many allies by basically backing out, offering to postpone its candidacy if Dubai agreed to a series of conditions—including a review mission, unlimited access for Israeli delegates, and working with NGOs on transfer pricing and due diligence. 

Dubai agreed, but then—in one of those head-spinning moments that illustrates the frustrations of getting anything done in the KP—the Russian head of the rules committee declared that such side deals weren’t permitted, sparking an argument over the sometimes-arcane KP bylaws. So the deal, if there is one, remains in limbo. (World Diamond Council president Edward Asscher told Rapaport terms are being negotiated.) Despite press reports, KP-ers say they still don’t know whether Australia is in or out. (The head of the Australian delegation did not return emails from JCK.)

Even so, it appears likely the UAE will assume the chair next year. But what is striking is its change in tone and rhetoric.

Dubai Diamond Exchange chairman Peter Meeus has repeatedly slammed NGOs in a series of fiery speeches. In one, he said they peddle “fantasies—some have called them lies.” Another Dubai official reportedly called for a public “divorce” from the NGOs.

But over the last year, the Dubai Multi Commodities Centre has employed a public relations agency—Brunswick Group, which specializes in, among other things, reputation management. (Its director declined comment on its communications strategy.) While in the past Dubai officials were open and reachable, now all questions have to be submitted by email. When I searched for one of Meeus’ more pointed speeches on YouTube, I found that it had been removed.

Perhaps more intriguing, at the KP Intercessional, the UAE presented its vision statement for its chairmanship. To some, it sounded like the second coming of the United States, whose year at the helm in 2012 was marked by an aggressive (if often thwarted) reform agenda.

The presentation begins by calling for a “new normal”: 

…a profound shift in mind-set beyond just piecemeal transformation. It requires championing of change consciously, rewriting social engagement into the sustainability DNA of industry…

It also calls for a “comprehensive approach to reform” that “covers business, social, governance, and environmental dimensions.” Clearly aware that Dubai has an NGO problem, it offers a number of olive branches toward them, stressing the “need for respect, understanding, transparency and good communication,” and proposes regular joint meetings throughout the year.

“For the diamond industry, it’s a question of leading or following change,” read one slide. “Proactively seeking a place in the driving seat of any transformative agenda is preferable.” (This, I should note, is the exact same argument made by proponents of the Jewelry Industry Summit, the Precious Stones Multi-Stakeholder Working Group, and similar initiatives that had been criticized by some in the industry, including officials from Dubai.)

Most surprising, and puzzling to some, the presentation called for a meeting of high-level government officials—similar to the 2002 meeting in Interlaken, Switzerland, that laid the groundwork for the Kimberley Process—which could spark major changes in the scheme.  

“I was quite surprised at their vision statement,” said one meeting attendee on the reform side of the aisle. “I loved the words and was surprised at the level of ambition. But I am a bit skeptical.”

The NGOs in the Civil Society Coalition are similarly dubious. Alan Martin, research director for Partnership Africa Canada, says, at this point, the coalition will not any attend KP meetings in Dubai, though it will still participate in KP-related projects.

“Our position toward Dubai will not change until they acknowledge the issues civil society has raised,” he says. “From where we left things in Luanda, there was no comfort given that they are going to honor past commitments.”

Meeus says via email that Dubai wants to work with the NGOs and is particularly “keen” to work on the transfer-pricing issue, though he notes it’s “complex” and involves many different governmental and tax issues.

“There is a real opportunity now to make the necessary structural changes within the ?KP and put forward new initiatives across the diamond industry,” he says. “This will involve our active collaboration with [NGOs].” 

So it does appear Dubai has made a rhetorical U-turn. Could that signal something more? Certainly, Dubai’s mixed reputation—which extends beyond diamonds—is a risky long-term strategy in this regulatory environment. Its diamond business also faces threats: Its traditional strength has been sometimes-troubled producers not aligned with major miners—in particular, Zimbabwe, Angola, and Democratic Republic of Congo. But Zimbabwe’s resources seem depleted, and the DRC has issues as well. If Antwerp gets its tax plan enacted, that could lure companies that migrated from Belgium to come back.

We have also seen many once-skeptical industry leaders admit lately that we really are in a new normal, and if the industry doesn’t clean up its act, it will face even worse problems with banks, governments, and consumers.

Dubai once dismissed these arguments. Now it is making them. The question is: Is it just talk? If Dubai really wants to take on its issues, that would mean tackling some thorny topics and changing the way some companies there do business. That would truly be a new normal.  

JCK News Director