Pyotr Fyodorov, Vice President of the Russian Association of Diamond Manufacturers and Chairman of the Board of the EPL Diamond Group of Companies (Yakutsk):
The global crisis phenomena have immediately uncovered faulting areas in Russia’s economy space. It turned evident that we have insufficient production of goods ready to go to the retail market and we have no processing. Our petrodollars actually flow abroad as a payment for consumer goods. We should support domestic manufacturers positioned to supply both the internal and external markets.
Taking into account the growing dollar we may confidently forecast a drop in diamond import. Here I am inclined to see a chance for Yakut diamond jewelry manufacturers to bring their share in the market of similar products up to 10%. Cutting and jewelry enterprises should consolidate their efforts to develop diamond retail trade since this market segment is less exposed to violent fluctuations. To reach this purpose we have to boost business activity in the real sector by way of setting up an industrial, trade and financial centre – “Yakut Diamonds.” This is may be one of the feasible and promising enterprises in our climatic and geographical environment. And we have quite evident background for this. There is a raw material base of diamonds and gold created by the efforts of our senior generation. Yakutia’s inhabitants developed a world-level production of polished diamonds. Now we have a growing production of jewelry and our polished diamonds are one of the best in the world. I am absolutely confident that our jewelers will soon reach the most advance levels to keep abreast of the world’s leading competitors. There are retail networks of Yakut jewelry brands in various cities of Russia and the world. We have a bank in this republic bearing a name which means much to us – Almazergienbank, literally translated as “diamond-turnover bank.” Here we have also subsidiaries of Russia’s biggest banks. In other words, there are all the components existing separately. Such a centre will give new jobs, boost business and increase the turnover of the bank sector. Besides, it will give an impetus to developing infrastructure.
However, the main thing is that we are going to solve the problem of import substitution, which is a strategic task for the Russian economy to overcome the crisis. Russian jewelry and cutting enterprises must take every effort to balance production and sales of diamond jewelry on the Russian market to comparable amounts.
Roni Stschik, the principal of Majestic Jewelry (Ramat-Gan, Israel):
The worldwide economic crisis has affected Christmas sales, which are traditionally the highest season of the entire year. We too are undoubtedly feeling the impact. Buyers usually stock up in anticipation of seasonal sales, but uncertainty as to future sales has caused them to be much more cautious and to place more conservative orders. Following the Christmas season there is a certain improvement and customers are renewing their stock. Nonetheless everyone is still very prudent and orders are placed mainly for proven items that sell well. It is of course very difficult to foresee, whatever appraisal I venture today can be inverted tomorrow. However, despite the fact that the crisis is widespread and affects so many regions and realms worldwide, I tend to be optimistic. There will be no quick bounce back to what we were used to, it will be a gradual improvement.
Igor Kevchenkov, General Manager, Russkaya Yuvelirnaya Compania:
Saint Valentine's Day and March 8 are coming soon and jewelry on these days is always selling well – and it will be selling well. Of course, in January the buying spree was minimal – it was expected and there was nothing new about it. However, the general market has sagged by about 10 percent and the process is still going on. This is because the purchasing capacity of the Russian population is decreasing. Gold and gems are a hard-currency commodity, while our rouble is unfortunately not going up, but down. So far everything is going more or less OK with us - we are moving smoothly. Naturally, we started to prune our budget, but there were no layoffs. We are not increasing salaries any more but at the same time we don’t cut them. Which way the market will turn to will be clear this April or May. We have yet to see how it will look like and now we are working on various scenarios. However, already now it is evident that the market is lacking good diamonds. And our factory’s capacity cannot be utilized to a desired extent.
Flun Gumerov, President of Almaz-Holding:
Undoubtedly, everyone feels that customers’ interest towards diamond jewelry dropped by about 5-10 percent and there is a trend to switch over to less expensive items – today the middle class will be more likely to buy an 0.5-carat diamond instead of a one-carat diamond and an 0.25-carater instead of a half-carater. There is certain down-trend in VIP-clientele’s demand for diamonds, but it is insignificant, which is good news for us. There is a growing interest towards silver jewelry. In the diamond sector domestic manufacturers are visibly losing ground to imports: the 20-percent customs duty for imported jewelry is overruled by those duties and VAT, which are imposed on domestic manufacturers for everything: gold, inserts and diamonds. Western manufacturers buy gold and diamonds free of VAT. I have to pay the VAT and income tax – our tax systems is eating away the manufacturer’s working capital. All this is compounded by a sharp devaluation of the rouble: if yesterday one gram of gold cost 700 roubles, now it costs as high as 900 roubles and its increased dollar cost makes it necessary to scale up the company’s working capital in a strong way. There is a feeling that importers learned to beat the price down: the difference between a one-carat diamond and a 0.99-carat diamond is almost 40% and how can it be found out in a finished product? It seems that our customs service has no experts capable to correctly evaluate a jewelry piece and put the VAT and customs duty on its true market value – this turns to be a problem.
All the participants of the chain, including gold and diamond miners, gem cutters and jewelers should come to mutual understanding and elaborate a joint and coordinated position.
Ilghiz Fazulzyanov, CEO of the Ilghiz F. Jewelry Company:
The major problem is in ever more expensive consumables. To give customers an opportunity to buy jewelry now you have to make it within a cheaper price range. Generally speaking, the crisis is a bad time for production but it is good time for creativity: you don’t have to be in a hurry and, making a pause, may become creativity conscious. You are free to think of how you can make unique things since you have more spare time.
Branco Mazareckich, the owner and General Manager of the Yosipa Jewelry Company:
I hope that despite the crisis everything will be going on well this year as it was last year – despite all the negative forecasts. As before, the jewelry business in Croatia is attractive due to the price gap. Among our buyers there are many Italians purchasing the same assortment as they have back home, but there it is more expensive and mainly these are corals. The majority of our customers are foreigners, including Russians, who come to Dubrovnik to buy jewelry. So let crisis be crisis, but this year we are going to open one more store and it will be the third one.
