Interview with Eli Avidar, MD, IDI

Q: Mr. Avidar, the world diamond industry has undergone a difficult year in 2006. How has that affected the Israel diamond center, and what do you see as the forecast for the coming years?

A: Despite the challenges we faced in the past year, Israel was able to reach almost the same level of polished exports, reporting a slight decline of 1.5% in dollar terms to $6.6 billion. January and February 2007 saw a rise of 9.2% in polished exports, and this year promises to be a better one for us in terms of export growth. However, despite the difficulties, 2006 was a milestone year for us in several ways. We received a clear vote of confidence when several international rough producers opened or enhanced their operations in Israel – Diamond, Aber, Alrosa–and others are currently considering opening here. State Bank of India opened a branch in the diamond complex. The World Diamond Congress, held in Israel in June, brought hundreds of diamond leaders to Tel Aviv, and this year we will be hosting the annual meeting of the World Diamond Council. We are very confident of Israel’s continuing position as a leading world diamond center.

Q: New diamond trading and manufacturing centers are gaining importance, such as China, Dubai and some of the countries in Southern Africa. Will these new centers affect the leadership of traditional diamond capital? How is Israel going to face this challenge?

A: The beauty of the world diamond market is that we have not exceeded the potential waiting to be explored. There is enough business for everyone and we should all change out way of thinking to a mode of cooperation and not of zero sum game. New and upcoming cutting and trading centers you mention are certainly welcomed by the Israeli industry. In the case of China, the Israeli diamond industry is in fact working with Chinese companies to manufacture diamonds and jewellery there, with many Israeli diamantaires enjoying the advantage of China’s huge industrial capabilities. The Israeli industry continues to manufacture the larger and more expensive stores in Israel, since these stores require the expertise of specially trained diamond cutters.

As for manufacturing centers closer to the producing centres, we recognize the importance of bringing manufacturing to those locations and again, there are several Israeli companies that have established manufacturing facilities in these places, often together with local partners.

Beyond that we welcome all diamond trading centers and as an active members of the World Federation of Diamond Bourses, Israel has worked to gain official recognition for new centers, such as Shanghai and Dubai.

I want to stress, we are not concerned about Israel losing ground as a major center for manufacturing and trade, since the special advantages we have a concentration of skilled diamond professionals, who are creative, innovative and flexible – will ensure our place in the world diamond industry. The new centres are growing and that is fine. We believe that there is enough business for all of us, especially if together we raise awareness and demand for diamond jewellery in new and developing market.

Q: Globalization has brought about a “democratization” of luxury, which has boosted the diamond industry worldwide. There are new markets opening up which until now were not considered consumers of luxury products, including diamonds. How is Israel gearing up to serve these markets?

A: We believe that diamonds have a universal appeal and that people throughout the world want to buy diamonds. Israel produces the widest selection of diamonds – in all sizes, shapes, colors and quality. So there really is a diamond for everyone. There are Israel diamantaires that specialize in the high-end, large stones, which you would describe as belonging to the world of luxury, but there are also many that offer smaller stones that are bought by people of more modest means.

Q: China is one of new markets that is opening up to luxury goods, and its potential is enormous. Is Israel actively seeking to develop this market?

A: The enormous potential of the Chinese consumer market provides a huge opportunity for sales of Israeli polished diamonds. We are already seeing that this market greatly values the goods that we offer.

At the Israel Diamond Institute we are focusing a large part of our marketing efforts on outreach to China. This year for the first time we participated in a trade fair in Mainland China. We are planning PR events, trade delegations and other initiatives. Moreover, we are opening a liaison office this year in Hong Kong, part of our long-term strategy of opening offices in key markets. Hong Kong is the ‘Gateway of Asia’ and it is essential that we have a presence there. This liaison office will function similar to our NY office, which has been very successful in helping Israeli diamantaires make contacts in U.S. markets.

Q: What about the traditional markets, such as U.S. and Europe?

A: The US market has been our leading export destination, accounting for about 60% of Israel’s polished diamond exports over the years. And about half of the diamonds sold in the US in dollar terms are Israeli diamonds. We are continuing to put major efforts in developing our business there. As I said, our New York office, located in the heart of the diamond center there, has been very active there since it opened over two years ago.

The European market is very diverse and in some locations we are stronger than in others. The Israeli diamond industry is very interested in expanding our trade with all of the European markets.

Q: There is a worldwide trend towards branding and more sophisticated marketing in the diamond industry. The IDI itself has launched its branding campaign worldwide. How are these changes affecting the Israeli industry?

A: Branding and strategic marketing have become important elements in the Israeli diamond industry. In addition to the branding campaign we launched “The Israeli Diamond Industry – All you could ask for in one”, many Israeli diamond companies have been very active in this area. Our branding campaign has brought us a great deal of attention and has been very well received by the industry worldwide. We are now working one the second stage of our branding campaign, which will be launched in the next several months.

Israeli diamond companies are more and more branding their own special cuts and special lines of diamond jewellery, and have been very successful in this effort. Israel is by far the largest producer of special cuts in the world diamond industry, a result of the magical symbiosis of creativity, design and high-tech. We believe that branding has brought more business to our industry and that it is here to stay.

Q: This year has seen a lot of emphasis on the ethics of the world diamond industry, and this has become one the most important issues industry today, Do you believe that the industry is doing enough to ensure a high ethical standard?

A: I believe that ethics is a crucial issue for the diamond industry, just as it is for many other industries - such as oil, gold and other metals. It did not start because of a movie but by a situation that existed and that brought us to become founding members of the Kimberley Process. I am convinced that the Kimberley process is the right answer to ensure ethical practices in the industry. It is actually the first time that industry, NGO’s and governments came together to create a mechanism to deal with these issues. This mode is being studied and copied by other international industries because of its effectiveness. The Kimberley Process is not perfect, but its more than 70 members are doing all they can to make it an even stronger tool for ensuring ethical practices in the diamond industry.