Calling on Israel

Recently, trading figures about the four leading diamond centers were released by the local authorities, and it served as an interesting opportunity to compare them to the pre-crash period to see what has changed.

India, Belgium and Israel released figures about their rough and polished diamond trade in May, while the U.S. authorities, lagging a month behind, released figures about April.

In terms of rough diamonds, India, a manufacturing center, had net imports of $900 million, 3.6 percent higher than in May 2008, which was the height of the boom, and just a few months before the crash. Belgium, a trading center, increased net rough diamond trade by 16.7 percent compared to May 2008. Clearly, the two centers have recovered from the financial crash – at least in terms of rough.

Compared to May 2008, when Israel exported a net of $377 million worth of rough goods, rough exports in May of this year lagged some 33.5 percent.

Practically all large Israeli diamond manufacturers have moved their polishing plants to China, where the cost of labor is far lower than in Israel. It is possible that Israeli Sightholders are now sending their Sight goods directly from London to China, something that was not allowed in the past, thereby bypassing their Ramat Gan offices all together. I would like to think that these factors explain the sharp drop in Israel’s rough diamond trading.

Israel's main market is the U.S. In the first four months of 2008, Israeli imports accounted for 50.1 percent of all U.S. polished diamond imports by value. During the same period, India accounted for 20.1 percent and Belgium, the third largest supplier, held a 16.2 percent market share.

That was then. This year, Israel holds a 43.5 percent market share, India 30.1 percent and Belgium 15.8 percent. Simply stated, Israel has lost market share while India has increased its market share. We can keep tossing figures around, looking at volume, average value, total value in year to date, but they all say the same. While Indian traders have seized the opportunities that came their way, Israeli traders did not.

This issue came up in discussions with Israeli friends in the industry. Almost all of them had the same reaction: the Indians have the financing that we lack. That is true, but while Israeli banks have cut credit lines since the crash, the volume of activity has increased.

A couple of years ago, the Gem and Jewellery Export Promotion Council (GJEPC), the umbrella organization of India's diamond and jewelry industry, announced with great fanfare the results of research they had conducted with KPMG India. They mapped the global industry, defined strengths and weaknesses, drafted a multi-year plan and almost immediately started pursuing their just-set goals.

It showed what a very fragmented sector can do – if it decides to do it. In November 2008, after the crash hit us all hard, it decided to not buy rough. By August 2009 it already had a consumer marketing plan ready to roll out. Under the leadership of Sanjay Kothari and Vasant Mehta, the former and current GJEPC chairs, the Indian industry won new ground.

In Belgium, the HRD re-invented itself a few years ago, taking on a new lease of life altogether. True, the circumstance that led to this were less than pleasant, but much can be said for turning lemons into lemonade.

Israel, too, made its efforts. The Israel Diamond Institute (IDI) has come up with a series of initiatives to promote Israeli trade. They include enlisting cutting edge social media tools, setting up a Hong Kong liaison office and launching a beautifully designed quarterly magazine that is distributed to consumers through jewelry retailers in the U.S. Sadly this has not prevented the loss of market share.

As an Israeli, I care for the Israeli industry and want to see it evolve, grow and flourish. To do so, it needs to look at itself honestly and list all its weaknesses – as well as listing its many strengths. A number of shortcomings may be identified that can be corrected. More importantly, a multi-year strategic plan can play an important role in ensuring the vitality of the Israeli industry.

Is it possible to do? Yes. Do the needed funds exist? Yes, they do. Will it happen? I sure hope so.