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Israel Strengthens Indian Ties
May 7, 2004 1:20 PM
By Sheryl Katz
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Despite a harsh month for India due to the fluctuating dollar — which almost stopped both the rough and polished trade in its tracks — Israel’s March 2004 statistics indicate that there has been a significant increase in trade between the two centers. For years, Indian companies have been using Israel as a trading center, buying their rough here and sending it to cheaper polishing centers like India. It did not take long for Israel to follow the trend of polishing its rough in cheaper-labor countries.
Between January and March 2004, Israel’s rough exports to India more than doubled to $184 million — 23 percent of Israel’s total rough exports — compared to the corresponding 2003 period. In March alone, $57 million was exported — 25 percent of total exports — a 21 percent increase from March 2003. Once the rough is processed, it returns to Israel. Between January and March 2004, Israel imported $200 million worth of polished from India — 25 percent of total polished imports — a 38 percent increase on the 2003 period. In March alone, polished imports jumped 21 percent to $70 million — 23 percent of total — from March 2003.
Competition on the Rise
Traditionally, India polished small stones, and Israel, medium sizes and up. Over the past year, however, India has been polishing medium and larger sizes. Previously, Israel’s quality of cut was unmatched but Indian polishers have improved their technology and professionalism by leaps and bounds and are producing large, high-quality goods. Israel is not only having a difficult time competing with India’s cheap labor, but also India’s ability to mass produce.
Manish Mehta, Twinkle Diam Israel director, noted that Israel’s position as a manufacturer is definitely threatened by India, where labor is cheap, people are hard-working, and there are long credit terms, which Israel does not have.
Pravin Kukadia, partner of V. Goldi Ltd. in Israel, recalled how eight years ago, there was one-way traffic of Indians flying to Israel to buy polished. Now, flights are full of Israelis going to India to buy polished and Indians coming to Israel to buy rough. He said his firm even supplies Israelis in Israel with polished from Mumbai, a very big center for polished, both in terms of supply and in local demand. Another competitive edge India has is the speed with which business is done. If Israeli traders do not get their percent, they do not sell. “We’re less expensive in polished because of cheap labor, low manufacturing costs, equipment costs and even office supplies,” Kukadia stated.
Over the past few months, Israel’s industry leaders, rather than throwing in the towel, are seeking ways to bring polishing back to Israel by lowering labor costs. They intend to do this through high-tech developments in polishing methods. Simcha Lustig, Israel Diamond Institute (IDI) chairman, said that Israel’s import/export results for the first three months illustrate that “the Israeli industry is adapting well to changing conditions in the world diamond sector, energetically seeking new sources of rough, while pursuing increased efficiencies in diamond manufacturing. This trend, combined with the renewed vigor of the economies of our export markets, will lead to positive growth for the year 2004.”
Buying Polished in Israel
A newer trend is for Indian companies to buy polished in Israel that is in short supply in other centers. This further illustrates Israel’s continued transition from a manufacturing to a trading center.
Mehta buys rough and polished in Israel that is manufactured for export by M. Suresh, Twinkle’s parent company in India. The polished is also designed into jewelry in the U.S. He said that prices on certain goods are better in Israel than in Antwerp, for example, and that it is still easier to find goods like princesses. The De Beers Diamond Trading Company (DTC) rough allocation to Israel in certain large goods is also better than in India. He attributed this to the DTC’s not wanting to depend on one market. Although M. Suresh is a large sightholder, they still source rough on the open market, buying from the likes of Lev Leviev, BHP Billiton, Aber and the Democratic Republic of Congo’s MIBA mining company.
Kukadia commented that V. Goldi’s parent company in India, Shree Ram-krishna Export, is a major sightholder; however, he buys rough in Israel — mainly 1+ carats in all sizes and clarities, both expensive and medium goods — to feed demand from their Indian polishing factory with its 6,000-strong workers.
Banks and Credit
Indian dealers complain about Israel’s taxes, banking finance and living expenses compared to India. Banks in Israel are not lenient to the diamond industry, which many agree has become more of a banking business than a diamond business. They will not give credit without security, which makes diamantaires more
cautious and hampers growth in the Israeli diamond market. In India, Kukadia explained, banks call them offering credit. For this reason, they can afford to sell on long credit terms. In Israel, even though the company is a well-known sightholder, it does not ask for credit.
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Tags:
Banks, BHP Billiton, De Beers, DTC, IDI, India, Israel, Israel Diamond Institute, Jewelry, Leviev, Manufacturing, Polishing
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