DMCC and why long-term autonomy is the fastest route to success

On the 02nd December 2021, the UAE celebrated its landmark anniversary of fifty years since its foundation, and with it the opportunity to reflect on its growth, achievements and status as a global powerhouse of trade, tourism, economy and innovation. Seeded under the wise leadership of His Highness Sheikh Zayed bin Sultan Al Nahyan, affectionately known as “Father of the Nation”, the UAE rose from a trading outpost to a cosmopolitan beacon in the Middle East and a waypoint between east and west.

Aside from its unrecognisable transformation, which today includes record-breaking structures such as the world’s tallest building, six out of ten of the tallest residential towers, and the world’s tallest hotel, the country has also excelled in attracting a highly diverse population that has tilted foreign residents in favour of locals by almost 9:1. Despite this multicultural melting pot of different ethnicities and backgrounds, the UAE has successfully and almost uniquely promoted a culture of tolerance, communication and integration, which has propelled three of its largest cities to rank in the top ten in terms of safety.

Thanks to its handling of the pandemic, the UAE more recently led the world in its vaccination rollout, helping to ensure business could continue while responsibly attracting tourists, thereby outperforming the world’s top ten destinations, securing a tourist occupancy rate of 64% in hotel and tourism establishments between January and October of 2021. Consequently, and at the time of writing, Dubai International Airport has returned to its pre-pandemic position as the world’s busiest international airport, as measured by international passenger traffic.

While meteoric in terms of growth, the true magic of the UAE’s evolution was its willingness to think big, put faith in its leadership and retain an agile hierarchy of decision making, allowing for policy and investment to remain flexible inline within an ever-changing landscape of regional and global demand.

Aside from its national leadership, the above can be attributed to several local business leaders who shared their vision. Perhaps most notably, Majid Al Futtaim, whose courage as a visionary entrepreneur indisputably helped to shape the landscape of Dubai as a centre for commerce and entertainment, and while his recent passing has left a hole in our community, his legacy as a man who took risks long before people knew what risks were, shall live on for generations to come.

For Dubai Multi Commodities Centre (DMCC), its journey started before its formal establishment in 2001. Conceived to provide the physical and financial infrastructure required to create a hub for the global commodities trade, it wasn’t until a consortium of Standard, Deutsche, and Dubai Islamic banks helped to launch a ground-breaking gold Sukuk, which raised $200 million, the proceeds of which were used to finance the construction of its first commercial towers, namely Gold, Silver and Almas. It is important to note that, unlike other UAE free zones, DMCC stands alone in raising its funds and growing organically, based on a vision to attract and build a multinational community within an optimised trade environment. One of the many reasons it became Dubai’s first government entity to receive a fully interactive rating from Standard & Poor, and second only to ADIA (Abu Dhabi Investment Authority) in the UAE.

Assigned an “A” long-term and “A-1” short-term rating by S&P, the Sukuk was not only oversubscribed but repaid fully and on time, despite the looming global financial crisis. From this point on, Dubai’s attraction and reputation for gold steadily increased, along with its investment. Today, the United Arab Emirates accounts for 11% of the total global gold exports, with the gold sector accounting for 29% of the country’s non-oil foreign trade exports.

In 2004, DMCC created a state-of-the-art vault, delivered in coordination with Brinks.  Insured to hold over $1 billion in assets, it remains the biggest private vault in the Middle East and was developed to work in coordination with the banks to extend collateral to customers, thereby helping to enhance Dubai’s reputation for ease-of-doing-business. 

Through its ongoing relationship with Brinks, DMCC is connected to more than 120 countries worldwide while offering full in-house customs clearance services. It also provides the security and regulation of the UAE government, which continues to tackle some of the industry’s most prevalent challenges, including removing illicit metals from the value chain while preventing money laundering and terrorism financing. Recent examples of such initiatives include DMCC’s formal appointment to work with the World Diamond Council to promote greater awareness of its updated Systems of Warranties, which complies directly with the Kimberley Process Certification Scheme or its mandatory requirement to register a UBO (Ultimate Beneficial Owner) at the point of company formation before it became a federal policy.   

Through its commodity derivatives exchange, the first of its kind in the region when launched in November 2005, the DGCX has also been busy scaling new business while introducing new products and technologies to meet international demand. Over the past twelve months, DGCX traded close to 8 million contracts, with a notional value exceeding USD186 billion. In addition, the Singapore Regulator, MAS, recognized DCCC as a recognized clearing house, enabling it to offer clearing services to banks and financial institutions in Singapore, making DGCX more accessible to Asia-based investors.

In May of this year, DGCX received a permit from the Israel Securities Authority, enabling it to service Israeli-based market participants and investors with its products and services. With this permit, DGCX continues to expand its role as the leading Middle East exchange for derivatives trading. 

At the forefront of developing and shaping the Islamic finance sector, DGCX is involved in structuring through partnerships with leading institutions to introduce more Islamic products to the exchange, including its recent partnership with Global Islamic Financial Services focusing on gold products. To date, DGCX has traded some 2.046 tons ($101.2mn) of Shariah-compliant spot gold.

This year, DGCX launched several new products, including a PKR-USD Futures Contract, the first of its kind on a regulated platform, and has since traded $7 million of the region’s first daily 12.5kg gold futures contract.

Looking ahead, DGCX will soon be launching new currencies, including the Israeli Shekel. It is also preparing to enter the cryptocurrency world by launching Bitcoin and Ethereum futures, subject to regulatory approval – more on this another time.

Before moving away from commodities, it would be impossible not to talk about DMCC’s successes over the past two decades without mentioning diamonds. A commodity so central to our trading ambitions that amongst the first towers developed using the funds from the Sukuk was ‘Almas’; the Arabic word for ‘diamonds’.

Led by its government-backed Dubai Diamond Exchange, which includes state-of-the-art facilities, a growing appetite for financing, an unwavering commitment to the Kimberley Process, and a tax-efficient trading environment, the DDE is now host to more than 1,000 registered members and recognised as home to the world’s largest diamond tender floor. Even the challenges faced by the pandemic couldn’t slow trade, which saw the UAE’s largest rough diamond tender take place in December 2020 courtesy of organisers, Stargems DMCC, where 379,912 carats were sold, valued at $87.47 million with over 250 companies participating.

Having significantly closed the gap with Antwerp for rough and polished trade volumes, mainly thanks to the UAE Cabinet’s wise decision to reverse the five per cent VAT for investors at a wholesale level in May 2018, Dubai is likely to take the top spot in terms of trading volumes in the next twelve months, having grown from just $300 million in 2003 to $17.5 billion in 2020 – a move likely to be spurred on by the Dubai Diamond Conference, which is set to take place on 21st February 2022.

Amongst other commodities to have witnessed stellar growth thanks to DMCC’s commitment to embracing demand are tea and coffee.

Opened in 2005, the DMCC Tea Centre has developed its facilities to offer automated blending, tea bag packing, loose tea packing and flavoured tea blending and packing, with the capacity to store up to 5,000 metric tonnes of bulk teas at any given time. It also holds the title of the world’s largest re-exporter of tea, having facilitated over 320 million kilos since its launch.

Adhering to environmental best practices, even associated businesses such as Gundlach Packaging DMCC’s (a DMCC JV) tea tag and envelope printing facility was built to LEED Gold standards, resulting in 10.5% of the building made from recyclable content, a 22% reduction in energy consumption and a 50% reduction in water usage.

Based on the Tea Centre’s success, DMCC opened its Coffee Centre in 2019, the first of its kind in the Middle East, which not only hosts coffee training and competitions but features state-of-the-art infrastructure, including a Brambati processing plant solution which cleans, de-stones, roasts, blends, grinds and degasses green beans at a rate of six tons per hour. As a centre, its full range of verticals includes storage, white labelling, processing, roasting, packing and delivery, and standing by its dedication to both efficiency and HSE; minimal human interaction is required from the loading of the green beans for processing till the packaging of the final product. To date, the centre has traded coffee from over 35 different origins.

Under the guidance of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, DMCC’s position as a global hub for both commodities has led to ambitious plans to triple capacity in the near future, a process which will include the broadening of available products, ranging from herbal and medicinal tea to cold brew bottling facilities. Based on the success of both centres, DMCC has also launched its Cacao Centre and is in the process of looking at other agro commodities, including cardamom, nutmeg, cinnamon, cumin, cloves, ginger, sesame seeds and cashew nuts.

Where DMCC’s agility to a changing world is concerned, the launch of its Crypto Centre has continued to support the ‘Field of Dreams’ model of “if you build it, they will come.” To date, the Crypto Centre has registered over 100 companies and received interest from 800 more.

Through a culture of open-mindedness and a willingness to diversify, Dubai has placed itself at the very forefront of not only supporting but embracing and deploying ground-breaking technology. Over the past few years, the world has seen the rise and increasing acceptance of crypto and the fast-paced development of what is now known as the Token Economy. During this period, Bitcoin has evolved from being the original cryptocurrency used primarily to store and transfer value; into a revolutionary product responsible for changing the very nature of all transactions.

What was less clear to many, which was understood very early on by Dubai, is the greater significance of the underlying blockchain technology on which Bitcoin is built and its capabilities to enhance supply chains, financial services, healthcare records, and add efficiencies to many other private sectors and government services.

DMCC’s early interest in blockchain is not limited to its capability to enhance business services but also attract and support businesses throughout the digital asset and crypto sector. The drive to ensure that Dubai remains at the forefront of global digital transformation is stronger than ever, and with strong government support, a robust regulatory environment, easy access to funding and a population that is willing to adapt to change, it has quickly become a magnet for the global tech community.

Of course, with such demand comes the requirement of supply. With its original towers of One JLT, Almas, Gold and Silver at a capacity of between 85 – 100%, the need to expand became a straightforward business decision.

Built on a 10.8 hectares plot, the mixed-use development of Uptown Dubai centres around the Adrian Smith/ Gordon Gill-designed Uptown Tower and will feature hospitality, F&B, entertainment and 22 dedicated floors for commercial activity. Designed to top out at 340 metres, making it Dubai’s 12th tallest tower, this sculptural masterpiece centred around the plaza, an atrium that will come to represent the heart and soul of the district, and a wide range of unique F&B and entertainment facilities. 

Reverting to its self-sustaining roots, the development of Uptown Dubai was a straightforward decision for a single reason. DMCC has a clear mandate - to make Dubai an efficient and attractive destination for trade, which is flexible and accessible to stakeholder requirements. I am reminded of the strategy used by Kickstarter, whose founders could easily have made a lot more money through an IPO. Ultimately, they committed to being an impartial platform, and as such, never deviated from the fundamental goals of the company. Had DMCC become a PLC, where short-term profit was prioritized over long-term strategy, or if it were to be segregated by commodities or industries, I can guarantee you three things. Its contribution towards Dubai’s economy would be negligible, its future developments slowed in lieu of shareholder dividends, and its true sense of community that has enabled strategic, cross-sector verticals to blossom, missed. However, thanks to its unambiguous mission, it has been able to self-finance its unbridled vision of what the ‘Future of Trade’ means - by meeting and exceeding the expectation of its 20,000-member community while contributing more than 10% towards Dubai’s GDP in the process.

No matter which branch of DMCC you look at, it has achieved its world-leading status by not losing focus on what it was mandated to do and, despite a global recession and a pandemic, has continued to strive and succeed in attracting an ever-growing base of forward-thinking MNCs, SMEs and start-ups alike.

In the words of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai on our nation’s golden jubilee, “Challenges never deterred us from pursuing our path, and our major challenge was to challenge ourselves. We had to prove our ability to establish an efficient country and an ambitious development model.”

I would like to think that DMCC has embodied the spirit of this challenge and that it will continue to pursue the ambitious development of a nation that has come to lead through visionary leadership, collaboration, grit, and determination.