After one and a half years, Belgium has finally replaced its
informal caretaker government with a new national government. But that new
government has a big job to do — and quickly.
Specifically, it has to raise approximately $15 billion,
either by cuts in spending or by new taxes. Effective immediately, company cars
will be heavily taxed and notaries are being forced to charge a 21 percent
value-added tax (VAT) on their services. By April, approximately 24,000 people
are expected to be dropped from welfare rolls. The wealthy are expecting to be
subject to a variety of new taxes. And government officials will be targeting
tax fraud to capture lost tax proceeds. It has been reported that more than $1
billion could be added to the federal coffers simply by eliminating tax evasion
in the country. That’s where the diamond industry comes in. Traditionally, the Belgium
diamond industry has been a favorite target of law enforcement officials
alleging fraud, smuggling and tax evasion.
The real advantage of having a legitimate government in
place is that there’s again room for thinking of the future. The fact that the
new minister of foreign affairs is Didier Reynders is considered a positive for
the diamond industry. As the country’s finance minister for several years,
Reynders came to know the diamond industry well.
Caroline De Wolf, spokesperson of the Antwerp World Diamond
Centre (AWDC), said “We’re glad that we do have a government now. As far as the
industry is concerned, we’re glad that talks can resume with the appropriate
authorities to help the Antwerp diamond industry create a better competitive
position for itself on the global scale.”
Global Witness Leaves the KP
A prominent founding member of the Kimberley Process
Certification Scheme (KPCS) has given up on the organization. “The Kimberley
Process’s refusal to evolve and address the clear links between diamonds,
violence and tyranny has rendered it increasingly outdated,” is the message
posted on the website of Global Witness, a nongovernmental organization (NGO)
instrumental in the organization of the KP. “Despite intensive efforts over
many years by a coalition of NGOs, the scheme’s main flaws and loopholes have
not been fixed and most of the governments that run the scheme continue to show
no interest in reform.”
Charmian Gooch, founding director of Global Witness,
elaborated. “Nearly nine years after the Kimberley Process was launched, the
sad truth is that most consumers still cannot be sure where their diamonds come
from, nor whether they are financing armed violence or abusive regimes. The
scheme has failed three tests: It failed to deal with the trade in conflict
diamonds from Côte d’Ivoire, was unwilling to take serious action in the face
of blatant breaches of the rules over a number of years by Venezuela and has
proved unwilling to stop diamonds fueling corruption and violence in Zimbabwe.”
Gooch’s comments came after two companies got KP
authorization to export diamonds from the Marange area of Zimbabwe, where abuse
of miners has been widely reported.
Encouraging Dialogue
Ari Epstein, chief executive officer (CEO) of the AWDC,
commented that “According to the mandate given by the United Nations General
Assembly, the Kimberley Process has always been characterized as an inclusive
process in which KP participating countries, together with the diamond industry
and the NGO coalition, fight conflict diamonds. It is therefore essential that
a constructive and inclusive dialogue with the NGO coalition continues to
preserve the credibility of the KP.” Epstein called upon the current KP chair,
the Democratic Republic of Congo (DRC), and the incoming chair, the United
States, to reengage with Global Witness in recognition of its essential role
in the future success of the KP.
Antwerp’s Position
The fear of such controversial shipments as those from
Zimbabwe is that Antwerp, which has worked in recent years to make its diamond
industry more transparent, could be at a disadvantage in competing with countries
that are less so. “The KP would certainly be a precious asset for the diamond
industry as a whole, if it were implemented everywhere,” said Shashin Choksi of Swati Gems.
“Unfortunately, while Antwerp is getting more and more transparent — to such an
extent that successful people are moving away at an increasingly fast pace
because they find themselves targeted by the tax authorities — direct contracts
are being signed between Zimbabwean and Indian or Chinese companies.”
What the Antwerp diamond industry wants is a level playing
field with all trading centers held to the same standards of transparency. What
it does not want — and what, in fact, it fears — is becoming so transparent
that it can’t be seen anymore on the global diamond map, especially in
comparison to other diamond centers that are far less transparent and far
easier places to do business.
The Marketplace
- The market is characterized not so much by lack of money
but by a major lack of confidence. Still, the situation is better than in 2008
because diamonds are indeed selling all around the world.
- Everything sells — for a price.
- People expect that 2012 will be a very challenging year,
even possibly a nightmare year.
- Intermediates are not stocking. They buy only what they
need.
- There is a consensus among many diamantaires that people
have been playing too long in a speculative market and now everyone has to pay
the price, even those who didn’t participate intentionally or actively in
speculation.
Article from the Rapaport Magazine - January 2012. To subscribe click here.