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Challenging Congress

Editorial

Jun 20, 2014 8:00 AM   By Avi Krawitz
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RAPAPORT... The 36th biennial World Diamond Congress that took place in Antwerp this week offered an opportunity for industry leaders to tackle the trade’s most pressing issues. While much of the discussion focused on the reporting of activity rather than on setting policy, the discussion in itself is a worthy end goal. As a result, the atmosphere at the respective World Federation of Diamond Bourses (WFDB) and International Diamond Manufacturers Association (IDMA) annual meetings, which comprise the congress, was positive.

At the outset, the list of participants was as telling as the agenda, with high-level delegations from mining countries attending – including two African ministers. Significantly, there were representatives from Gokhran, the Russian state repository that tends to keep a low profile, at the Antwerp meetings.

The event presented an opportunity for host country Belgium to lobby its position as a leading rough diamond trading center. In arguably the most significant comment of the opening session, Kris Peeters, Minister-President of Flanders, asserted that Belgium would not support economic sanctions that might affect the diamond industry.

The trading centers are clearly focused on guaranteeing rough supply, and competition for procuring rough is as healthy as ever – both among manufacturers and dealers, and between the bourses that service them. Also aiming his message at the mining sector, Maxim Shkadov, IDMA’s president, opened the congress with a plea for the manufacturing sector’s survival. After Shkadov set the tone, manufacturers’ lack of profitability was a recurring theme throughout the three-day event.

Ernie Blom, who during the meetings was elected for another two-year term as WFDB president, outlined three challenges that dominated discussions – the lack of industry profitability being the first issue. He also highlighted the need to engage with the banks to ensure a responsible approach to financing that supports the entire supply chain. Thirdly, Blom noted that the industry is being challenged by “initiatives that are being launched without the industry’s involvement” – referencing the Precious Stones Multi-Stakeholder Working Group (MSWG) that recently met in Paris.

The congress also heard updates on issues pertaining to undisclosed synthetic diamonds filtering into the market, human rights violations affecting informal diamond diggers and “know your customer” initiatives to tackle money laundering issues impacting the trade. An update on the World Diamond Mark was also presented and representatives from the program penned a deal during the congress to launch the generic marketing initiative in Turkey later this year, with plans to subsequently launch in Dubai.

IDMA and the WFDB viewed the World Diamond Mark as at least a well-intended effort to drive up diamond demand and improve industry profitability, although there were skeptical undertones to the discussion. IDMA representatives questioned whether Turkey was the right pilot market for the campaign given the substantial amount of “unofficial” trade allegedly being conducted in the country. Still, they lent their support to the program.

Some issues were more contentious than others and none less so than the industry’s support, or lack thereof, for the MSWG. The MSWG is an initiative being driven primarily by U.S. jewelry retailers and non-government organizations to develop guidelines to ensure that trading in precious stones does not finance conflict and associated violence, or human rights abuses.

At the World Diamond Congress meetings, discussions focused on the apparent lack of engagement with the trade by the MSWG. “Other challenges we are facing are the ill-conceived processes being initiated by groups without taking the major stakeholders into account, such as the WFDB and other industry bodies, or the producing countries from Africa,” Blom said. “We are concerned that it’s being driven by parties with their own agenda.”

Following the MSWG’s May 2014 meeting in Paris, the group agreed that further outreach was necessary to attract the broadest possible participation in the discussion. Still, the congress may have missed an opportunity to have its own meaningful discussion on what guidelines the WFDB and IDMA would support in its future involvement in the MSWG.

Blom pledged to be more proactive to set the agenda at the MSWG and the newly formed Presidents Forum – consisting of the presidents of the World Jewellery Confederation (CIBJO), WFDB, IDMA, and the World Diamond Council (WDC) – has undertaken to engage with the MSWG.

It would have proved significant for the World Diamond Congress to take a stance on how to approach the establishment of these source verification guidelines, as maintaining the integrity of the industry’s sourcing capabilities is indeed a pressing challenge. Then again, it may not have been the right forum to set policy. Rather, as the World Diamond Congress is seemingly a platform to set the agenda for the coming year, engaging with the MSWG is apparently being given priority.

There is a concern that the industry is burying the initiative without giving it a chance, as the trade tends to direct its political efforts toward mining rather than the retail sector. It would have been encouraging to have some observers from the jewelry retail segment at the congress, in the same way that the mining fraternity was so well represented. Perhaps a shift from aggressively procuring rough toward aggressively driving stronger retail demand will help ease those profitability challenges for manufacturers.

Understandably there are political sensitivities. By nature, the WFDB walks a tight line given that it represents 30 bourses from 28 countries that are as diverse as Canada and South Korea, its two newest recruits. IDMA arguably has a narrower mandate.

Certainly, there might be clashes among various bourses regarding how to approach such challenges. Similarly, there might be disagreements between manufacturing centers regarding certain issues. After all, each bourse, as with each association, has its own agenda and interests. Given that perspective, while the three-day World Diamond Congress gathering was never going to solve the industry’s problems, it at least succeeded in defining its core issues. Without doubt, however, the real challenges lie ahead. 

The writer can be contacted at avi@diamonds.net.

Follow Avi on Twitter: @AviKrawitz and on LinkedIn.

This article is an excerpt from a market report that is sent to Rapaport members on a weekly basis. To subscribe, go to www.diamonds.net/weeklyreport/ or contact your local Rapaport office.


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Disclaimer: This Editorial is provided solely for your personal reading pleasure. Nothing published by The Rapaport Group of Companies and contained in this report should be deemed to be considered personalized industry or market advice. Any investment or purchase decisions should only be made after obtaining expert advice. All opinions and estimates contained in this report constitute Rapaport`s considered judgment as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. Thank you for respecting our intellectual property rights.
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Tags: Avi Krawitz, diamonds, IDMA, Jewelry, Rapaport, WFDB
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