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Israel

Israel’s diamond trade is a dinosaur compared to the nation’s bustling startup scene, but plans for a tech incubator at the bourse could slowly change that.

By Joshua Freedman


   Few countries have a better reputation for enterprise than Israel. The nation was ranked second in the world for innovation — behind Switzerland — in the World Economic Forum’s “Global Competitiveness Report 2016-17.” Israeli hi-tech companies raised a record $4.8 billion last year, an 11% jump in capital, according to Tel Aviv’s IVC Research Center and law firm ZAG-S&W.
   Yet Israel’s diamond trade has only gained limited benefit from this culture. In stark contrast to some of their neighbors in the commercial city of Ramat Gan, where the Israel Diamond Exchange (IDE) is based, many technophobic diamond dealers were, until recently, missing out on business because they had no software for managing their inventory. Some diamantaires were forced to sell their stones to other traders who were savvier with technology and could market the goods more widely, according to one senior bourse member.
   The Israel Diamond Exchange (IDE) noticed this trend and offered free access to stock software, and in May this year opened an internet marketing room to help get members online.

Ring the changes
   But the latest move by the IDE is bolder, and could help the diamond industry compete more proudly with some of Israel’s other sectors. The bourse is in the process of opening a Diamond Tech Innovation Center, an incubator for new companies in both the traditional diamond and jewelry trade, and sectors that make alternative uses of diamonds, such as semiconductors, medicine and space technology.
   The bourse is pitching to the government to receive funding for the facilities, with the IDE still set to retain full equity. Several potential investors are also involved, including China’s Pantheon Pacific, which could back startups relevant to its specialization in robotics, and Ramat Gan-based Plus Ventures, an early-stage investment firm with experience in both incubators and diamonds.
   The initiative underlines a fact that IDE managing director Eli Avidar is keen to point out — that the old way of running a diamond exchange no longer works.
   “Since December 2015, when Yoram Dvash was elected [as IDE president], he has changed the approach of the IDE, from a bourse providing its members with a platform to do business, to a bourse that is heavily involved in the pipeline and actively supporting its members in their business,” Avidar explained.

Slow motion
   The project could help change the Israeli industry’s entire mind-set. Traders in Ramat Gan are not stuck in the past, but do tend to adopt technology more slowly than their counterparts in India, according to David Block, CEO of Sarine Technologies, a supplier of diamond-manufacturing equipment and one of the IDE’s partners in the initiative.
   “There’s still a concept [in Israel’s diamond industry] that the knowledge and experience passed down from generation to generation is what provides value,” Block said. “But technology also provides something that adds value.”
   Some changes have taken time. In July, the IDE board amended its rules to allow companies from outside the traditional diamond sector to rent office space on the exchange’s premises — something that had not been allowed since the first bourse building opened in 1969. Advances in the diamond trade are slower than in other Israeli industries, but this may be the first step to changing that.

Article from the Rapaport Magazine - August 2017. To subscribe click here.

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