RAPAPORT... Avi Paz, president of the Israel Diamond Exchange (IDE), was recently elected president of the World Federation of Diamond Bourses (WFDB). It is a time, he says, when the dynamics of the diamond industry are undergoing change. Rapaport Diamond Report met with Paz in Tel Aviv recently to gauge what may be in store for diamond bourse members in the coming years.
Martin Rapaport: What is your opinion of the current state of the diamond market?
Avi Paz: For a few years already, the diamond industry has been going through big changes. The economic situation in the United States, the shortage of rough, the distribution of rough, the fact that producer countries want to be more involved in marketing their own goods. So the truth is, the diamond industry is changing and developing very rapidly at the moment. I do know that diamond dealers have to be very careful and should participate in these developments.
Finding new markets is very important. China has very big potential but, for now, I think India is more dynamic as a consumer market. Russia is also developing as a major market, and I believe the U.S. market will come back. In addition, we just had the Panama Diamond Exchange join the WFDB, which is significant because it connects the South American, Latin American and the Caribbean markets. So there is potential for developing the industry.
MR: You mentioned all these markets, but you left out Dubai. What is your impression of Dubai?
AP: Speaking as the president of the WFDB, Dubai is a very important market not just on its own, but also as a door to all Arab countries. We now also have the Istanbul Diamond Exchange as a WFDB member, which can serve as another gateway. I think the Arab countries have great potential and we need to look at these markets as a good place to move into.
MR: What is the WFDB doing to facilitate the development of these markets for its members?
AP: The WFDB encompasses bodies that can speak on behalf of diamantaires before governments. This has been effective in India and China, where they reduced taxes on diamond imports. One of the goals of the exchanges in countries like Turkey and Russia, which have high taxes, should be to lobby government, explain the importance of the industry and convince them to reduce taxes, which would help open those markets to the world.
In addition, the WFDB has tremendous power to expel anybody who does not adhere to the Kimberley Process, and that effectively means expulsion from all diamond bourses in the world.
MR: Has a bourse ever thrown out a member for dealing in unethical or conflict diamonds?
AP: Yes, for sure. It’s made public if members are thrown out of any diamond exchange. Their pictures are displayed in the bourse and explanations are given as to why we are throwing them out. The message is made clear not to deal or work with them.
MR: What is the WFDB doing to alert its members and assure that they don’t deal in Venezuelan diamonds?
AP: We informed all Kimberley Process member countries not to accept shipments from Venezuela anymore. If rough diamonds from Venezuela should arrive at a port, they will immediately be confiscated. Secondly, we told our members not to buy any Venezuelan rough.
MR: What does the WFDB Mark stand for?
AP: Consumers today want to know that the diamond or jewelry they buy is clean and coming from reliable sources that didn’t use child labor, or treat workers badly, etc. They want the diamond to be a pure love story and we can prove that through the WFDB Mark. The Mark is given to diamond exchange members and not to just anybody who’s working in diamonds. I expect each and every diamond club to make sure its members use the Mark in the correct way.
MR: What are the standards for the WFDB Mark? Is there a written document somewhere?
AP: Yes, for sure, the WFDB Code of Principles.
MR: De Beers has its Forevermark, which you could view as a more sophisticated WFDB Mark. They’re saying, “We know this diamond came from this mine, was cut in this factory and has been sold by this retailer.” It looks like De Beers is not only competing, but also cutting out members of the WFDB. Where does that leave bourse members?
AP: Well, how many people have the Forevermark? We have 15,000 members!
MR: I understand that, but the Forevermark is now being branded by De Beers, and the money that was previously used for generic diamond advertising is now going to Forevermark advertising. That brand excludes the trading floors. Is the Forevermark not a threat to the WFDB dealer?AP: It’s not a threat, it’s a challenge. We have our Mark and I believe it can be as powerful, if not more so, than the Forevermark. We should leverage our Mark because De Beers may have more money, but we have more people, and we should work together to push it.
MR: Is there any way that bourse members could participate in the WFDB brand somehow?AP: I believe that this is one of my biggest goals today, branding the Mark. It’s true what you say, the consumer should look for the WFDB Mark and we can achieve this. We have to make as much noise as possible.
MR: Do you recognize the trend toward direct channels of rough going to a manufacturer, to a retailer and not going through the dealing market?
AP: There’s always been that trend but, if you look at the bourses, you’ll see that most of the diamonds still pass through the hands of its members.
MR: I’m talking about trading. Are you not worried that the small people in this industry are being pushed out?
AP: I’m concerned about it and we have to do everything we can to bring them in. The big companies can’t survive by themselves and need the smaller guys as much as the small businesses need them. The small companies can work with much less expense and buy a lot of rough that the bigger players cannot, or will not, use themselves.
MR: What message do you have for the diamond industry as the new president of the WFDB?AP: That we should work together. We should see the world as a global market that is open to all diamantaires. It is important to have free movement of people and diamonds among countries. So it is very important to ensure the globalization of the diamond business and this can only be done by joining forces and working together. We are a powerful organization and we should use this power to achieve our goals.
Article from the Rapaport Magazine - August 2008. To subscribe click here.