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May 2, 2003
Diamonds regain their glitter
Shmuel Schnitzer is confident that 2003 could see record Israeli
exports.
SIMON GRIVER SPECIAL TO THE JEWISH BULLETIN
In an otherwise dire year for Israel's economy, the country's diamond
industry provided some positive and profitable statistics. Exports
of cut and polished diamonds rose by 15 per cent during 2002 to
$5.1 billion, just off 2000's record year of $5.3 billion. Exports
of rough stones added a further billion and a half dollars to Israeli
exports.
Shmuel Schnitzer, president of the Israel Diamond Exchange and the
recently elected president of the World Federation of Diamond Bourses,
explained that the United States is by far Israel's largest market
for diamonds, purchasing two thirds of the cut and polished stones
leaving the country. The Far East buys about 18 per cent of Israeli
exports and Western Europe about 12 per cent.
Schnitzer recounted that diamond sales fell from $51 million in
2000 to $38 million in 2001 on the back of the global economic recession
in high-tech and economic uncertainties following the Sept. 11 terror
attacks. But with the fears of a full-blown global recession dispelled
and the Asian economies (with the exception of Japan) having fully
recovered from the region's financial crisis of 1997/'98 and returning
to the growth that characterized the early 1990s, Schnitzer is confident
that 2003 could see record Israeli diamond exports.
Israel's Diamond Exchange, which is the largest of the world's 24
such exchanges, is located in a 100,000 square metre complex in
three high-rise glass buildings in Ramat Gan (adjacent to Tel-Aviv)
and contains 1,000 offices and 2,500 members. Thousands more people
are employed in lapidaries around the country, but it is within
the secure confines of the Ramat Gan towers that trading takes place.
And it is by coming to Israel's Diamond Exchange that international
diamond firms can find the best deals.
"Some of our American and European clients are reluctant to
come to Israel at the moment because of the security situation,"
observed Schnitzer. "But only a relatively small number of
Asian buyers are cancelling their visits, as by coming to Israel
they are getting the best deals.
"At the same time, we are very aggressive in our marketing
to compensate for the lack of visiting buyers," added Schnitzer.
"More and more Israeli companies are opening up offices overseas
and we are sending increasing numbers of delegations to participate
in major fairs."
The Schnitzers are something of a diamond dynasty in Israel.
"I am a lawyer by educationbut since I was a teenager I went
to my father's factory to learn about cutting and polishing diamonds,"
he said. "And it is the same with my son Shai who is studying
business administration at university."
Schnitzer's father, Moshe, who also served as president of the Israel
Diamond Exchange, founded the family firm of M. Schnitzer and Co.
in the 1940s after the owner of the lapidary in which he was the
foreman returned to Belgium after the Second World War. And in many
ways his story is the story of diamonds in Israel.
Sent by his parents to British Palestine from Romania in 1934 at
the age of 13, he was one of many immigrants looking for a better
life. Within a few short years he had joined the Irgun Zva'i
Leumi (National Military Organization), which aimed to reclaim
the land of Israel through military rather than political means.
This involved carrying out armed reprisals against the Arabs, which
provided relief for the settlers, smuggling "illegal"
immigrants into the country, bombing Arab buses and markets and,
after declaring war against the British administration, attacking
and blowing up government offices, military installations and police
stations.
When the tough, imposing, charismatic Schnitzer turned his energies
to building the new state, he had no problem convincing dealers
of the efficacy of building a diamond centre in Ramat Gan.
"It was a desert here in the 1960s, not one building then,"
he laughed. "People said we were crazy."
However, until Schnitzer had the funds to found the diamond exchange,
he would do business in a small Tel-Aviv coffee shop.
Indeed, the elder Schnitzer is seen as the architect of Israel's
diamond industry, which from the 1950s until the emergence of high-tech
in the 1990s, was Israel's largest foreign currency earner. Now,
following the dot com crisis of the past two years, the shine on
diamonds has suddenly returned.
However, the younger Schnitzer hastens to stress that high-tech
and diamonds are complementary rather than competitive sectors.
"This is a very competitive business and high-tech helps us
stay ahead of the field," he explained. "Because of cheaper
labor elsewhere in the world, Israel is cutting fewer very small
stones. We focus on medium size and large diamonds and we can't
be complacent about our hold on this market segment. High-tech can
help us do this."
The introduction of advanced technologies into the diamond industry,
such as computer programs to design the optimum cut for a stone
and laser technology for the actual cutting, has been achieved through
research and development conducted by the Israel Diamond Institute
on behalf of the entire Israeli diamond industry. Use of robotics
is another way forward for the diamond industry.
"High-tech methods are vital in helping Israeli firms maintain
and even increase their market share," said Schnitzer. "We
may even recapture part of the small gem market using advanced technology
to help us compete with the cheap labor around the world. But, ultimately,
robots, computers and lasers are no substitute for human expertise
and the ability of the experienced eye to evaluate the potential
of a large uncut stone. And we have an abundance of this experience
and expertise in Israel.
"Israeli firms also have excellent relationships with the De
Beers company," continued Schnitzer, "which guarantees
supply of the best rough stones."
Other Israeli companies have found innovative routes to enhanced
profitability. LLD, Israel's largest diamond firm with annual exports
of $441 million, owned by the Orthodox Jewish business magnate Lev
Leviev, has increased the added-value of its profits by purchasing
diamond mines in Angola.
In speaking of the future, Schnitzer talks enthusiastically about
the potential of China.
"It is already the world's eighth largest consumer of diamonds,"
he said, "and clearly China will contribute to significant
growth of global diamond sales in the coming few decades."
In the past few years, the Israel Diamond Exchange in general and
Schnitzer in particular have been very active in providing assistance
and know-how in the establishment of a diamond exchange in Shanghai,
China. And Hong Kong has traditionally been Israel's second largest
market, buying about 12 per cent of the country's cut and polished
diamonds. In addition, Schnitzer facilitated the acceptance of the
new diamond exchange in Baharat, India, as a member of the World
Federation of Diamond Bourses and talks of the vast potential of
the Indian market.
But despite the promise of Asia, Schnitzer knows only too well that
it will be the performance of the U.S. economy, which buys 66 per
cent of Israeli diamonds, that will determine whether 2003 will
be a record year for the country's exports.
Simon Griver is with the Israel Press Service.
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