Dubai Plans to Revive Pearl-Produced Past as Popularity Rises

By Sean Cronin

April 8 (Bloomberg) -- Dubai plans to revive its pearl- producing past by restoring the industry that once was a mainstay of the economy before oil fuelled the emirate's present-day wealth.

The Dubai Multi Commodities Centre is in negotiations with partners from Australia and Japan to cultivate pearls anew in the sheikhdom, Tawfic Farah, executive director for Diamonds and Coloured Stones at the commodities center, said today.

``Pearls are back in fashion,'' Farah said in an interview. With gem industry marketing efforts and rising pearl demand among younger women, Dubai's casting an eye on its past by looking at two projects, both of which are in ``the final stage of approval.''

Hong Kong is currently the center of a $1 billion a year business in rough pearls. The Dubai state-run gold and gemstone trading center said it's planning to revive its pearl past with an exchange to rival Hong Kong's, where pearls can be bought and sold.

Pearl sales outside tax-free zones and government-owned developments in Dubai, one of seven emirates in the U.A.E. and once famed for its pearl divers, also could be helped by dropping a 5 percent tax, the commodities center said.

``We think this is an obstacle to the industry and bad policy,'' Farah said. ``What happens when you have duties like this is that a lot of people don't report the trade. This is a small margin business so 5 percent is a lot.''

Other pearl cultivation projects are also under study elsewhere in the Middle East, including Qatar, Bahrain and Kuwait.

``Policymakers and public officials here are very comfortable talking about pearls, they're like camels and falcons -- a (regional) legacy,'' Farah said. ``You meet a number of older people in town who remember their fathers diving for pearls and started out in trading by being involved in the pearl business.''

Pearls occur naturally when microscopic intrusions or grains of sand enter the oyster, which secretes a substance called nacre to cover it.

Cultured pearls started to be produced in Japan in the 1930's, which triggered the demise of pearling in the Gulf. In the case of Kuwait, that then led to exploration for oil, which was discovered in the country in 1938, helping start the region's oil wealth.

To contact the reporter on this story: Sean Cronin in Dubai at scronin2@bloomberg.net