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Israel
By Avi Krawitz
The past year was not an easy one for Israel’s diamond industry as a slowdown in key consumer markets ensured trading levels continued to be depressed. However, its leadership expressed confidence that various advanced projects will better position local traders for 2017. “In this trading environment, it’s very difficult to buy rough and sell polished,” Yoram Dvash, president of the Israel Diamond Exchange (IDE) said in an interview with Rapaport Magazine. “However, we have a few initiatives that will support the industry in a number of ways moving forward.”
High on the agenda this year has been IDE’s negotiations with the Israel Tax Authority regarding its drawn-out investigation of activity in the bourse. Talks have also centered on allowing diamond companies leeway to declare backdated, unrecognized turnover, as well as clarifying tax methods that should apply to the industry. Dvash was confident an agreement would be reached before the end of the year, with a meeting scheduled with the authority during the week after press time. Already, IDE claimed a minor victory by preventing a law being passed in the Knesset that would apply unique standards for recognizing when to apply tax for a diamond transaction. While the proposed law would have put the industry at a disadvantage, it will now be treated as any other industry in this regard, Dvash stressed.
IDE also continues to engage with the banking sector as there is a general lack of understanding about how the diamond industry works, Dvash noted. While bank credit to the local industry has remained relatively stable at about $1.2 billion for the past few years, the trade’s relationship with the banking sector has at times been tense. A workshop has been planned in the Knesset for December aiming at improving that relationship. At the same time, raising the government’s awareness and knowledge of the diamond sector would also help raise available finances, Dvash said. The lack of government incentive for banks to finance the trade is the local industry’s biggest challenge, as it makes it very difficult to compete with other centers that enjoy that support, he stressed.
Within the bourse, IDE is focused on increasing both trading and manufacturing activity. It is developing two new factories, which will open in 2017, providing manufacturing specializing in large stones for companies looking to outsource. The factories, which will be located in the bourse complex, will be furnished with the most up-to-date equipment. Dvash expects approximately 200 people to eventually be working there. In total, Dvash estimates 20,000 people are currently working in the Israeli industry, with some 10,000 people passing through the exchange buildings each day. The aim for 2017 is to further increase the traffic as well as trading activity. To facilitate that, IDE is establishing a new center for rough and polished tenders that will officially be opened at the International Diamond Week in February. IDE has reached an agreement with four to five companies that will hold regular tenders in the center, Dvash reported. This will enable local traders easier access to supply, while encouraging greater international visitor traffic to the exchange, he added. IDE has also shifted its emphasis to encourage stronger online trading with the creation of its Get Diamonds platform for business-to-business (B2B) trading, and its partnership with James Allen, which enables local traders to sell directly to consumers through the ecommerce website. “I believe that the online trend will continue to grow, as people seek new ways to sell diamonds rather than in their offices or at shows,” Dvash said.
For now, Dvash recognizes that the market continues to struggle. Demand has slowed due to the triple impact of the slowdown in China, Russia’s slump in spending from the weak ruble and low oil prices and a decline in Middle East demand as that market was also hit by the energy slide. But Dvash is confident the worst has passed. He expects U.S. President-elect Donald Trump will encourage trade when he takes office, while the Chinese market will eventually rebound. “No one knows when China will come back, but it will happen,” Dvash said. “We saw an improvement in November and the U.S. market is working. So I’m optimistic.”Article from the Rapaport Magazine - December 2016. To subscribe click here.
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