India accounts for some 80 per cent of Dubai's re-export market. Despite the slowdown in its imports, India continued to remain the top re-export destination for gold bullion from Dubai in 1998, though due to the liberalisation in the import policy, the volume went down.

According to the figures for July 1999 released by the Dubai Port and Customs (DP&C), gold imports rose to 30.7 tonnes from 23.4 tonnes in June, an increase of 28.5 per cent.

The figure for April stood at 24.08 tonnes compared to 32.20 tonnes in April 1998.

The silver lining to Dubai's gold trade may come from Iran as Tehran plans to ease restrictions on gold imports. It may offset the loss from the fall in re-exports to India.

The Iranian gold market is estimated to be nearly 300 tonnes each year, with most of it being recycled. With the international gold market facing a turmoil, experts said the figures are promising despite the sharp decline in June as compared to the corresponding figure for last year.

In the first quarter of this year, Dubai's gold imports have taken a plunge by 54.4 per cent to 69.7 tonnes compared to 153 tonnes in the same period last year. In 1998, Dubai's gold imports declined 45.64 per cent to 359.81 tonnes. In 1997, gold imports had touched a record 660 tonnes.

``The Dubai government has been consistent in its support to the gold industry by creating a free market environment and exempting import duties for gold bullion to maintain Dubai's status as one of the major exporting centres of the yellow metal,'' according to a researcher for the Dubai Airport Customs Centre.

According to DP&C, several factors have contributed to the drop of gold bullion imports. These include the recent drop in value of the Indian rupee against the dollar, affecting the Indian demand for gold bullion re-exported from Dubai.

India had in January hiked customs duties on yellow metal imports by 60 per cent to Rs 400 for every 10 grams. According to gold traders here, people in India pay nine per cent more than the international price of gold. The duty differential in Dubai compared to India is as much as $6 for every 10 grams.

Under the new Indian gold import policy, local banks can directly import gold bullion from European countries such as Switzerland (the top exporter), Britain, South Africa,South Korea and Russia. The World Gold Council (WGC) says gold demand in the United Arab Emirates (UAE) rose five per cent to 26.6 tonnes in the first quarter of 1999 from 25.3 tonnes in the same period in 1998.

The growth in the UAE compensated for a fall in demand in Kuwait, Bahrain and Qatar by 0.2 tonne, 0.1 tonne and 0.7 tonne respectively. Oman registered a 0.2 tonne growth, the WGC said.

``Worldwide, gold demand has seen a 62 per cent rise over the opening quarter last year, continuing the recovery from a poor start to 1998,'' the council said. ``First quarter demand totalled 788 tonnes, just a fraction lower than the record for first quarter demand set in 1997 and just two per cent below the all-time record for any three-month period set in the fourth quarter 1998,''said the WGC's quarterly Gold Demand Trends.

``After a record first quarter last year, Indian gold demand also felt the effects of slower economic growth, increase in prices of basic consumer commodities and the depreciation of the rupee, making domestic gold prices higher,''it said. ``Gold demand in the largest gold market declined by 24 per cent to 192.4 tonnes in the first quarter of this year.

However, Pakistan gold demand registered a 10 per cent growth to 31.1 tonnes as the government pressed for greater transparency in the gold markets in line with neighbouring India.

In a related development, Dubai Customs figures show a sharp drop in silver re-exports. The figure for July stood at only 48 kg destined for France, while in June a total of 31.32 tonnes of silver was re-exported from Dubai.

According to the report, India has been the top destination for re-exports of both gold and silver from Dubai for the past decades.