About 80 per cent of the world’s rough diamonds pass through Antwerp for mechanical cutting. The diamond trade, worth $45 billion in 2008 and $30 billion in 2009, accounts for 5 per cent of Belgium’s GDP. Freddy J Hanard, CEO of Antwerp World Diamond Centre (AWDC, a trade body), tells Rajesh Bhayani and Dilip Kumar Jha of India’s Business Standard that the demand from the developed world is yet to pick up. Excerpts:
Where do you see the diamond industry in 2010?
After a weak first half of 2009, the demand revived in July 2009 and has continued until now. In 2009, diamond supply declined by 45 per cent due to a fall in miners’ output, but consumption fell only 9 per cent. This essentially means that available diamond stocks have been fully used, creating room for new demand. The demand in January and February 2010 was equally good. Spearheaded by India, rough diamond prices have gone up, while polished diamond prices will go up. Trade with India increased by 200 per cent during the first two months of 2010 as against the same period of 2009.
What should India do to become a diamond hub like Antwerp?
I would answer this by saying why Antwerp is preferred. Antwerp has a multi-cultural business atmosphere where there is economical, financial, social and political stability. There are no religious or political issues. There is a critical mass of customers of different nationalities. Fiscal stability is obviously part of this. Some legal issues are there which are being addressed by the Belgian parliament.
Will you elaborate on these legal issues?
In a month’s time, a law is expected to be passed by the parliament addressing the issue of seizure of diamonds. At present, when a judge seizes diamonds, a company can file an appeal only after a month. The process to get the diamonds back takes months. Under the proposed law, an appeal can be filed the very next day and the judgment shall be delivered in a month.
What can India do to increase its share in diamond trade?
Allow more foreigners to trade here and without hurdles. Administrative hurdles are major issues for them. Tax issues can be one among the many issues, but should be worked out.
Recent cases of theft in Antwerp-based Indian Diamond Company has again raised the issue of security for the business. Have you taken up the issue with the local government there?
We have discussed the issue with local as well as federal police and the home affairs ministry, which has assured us increased security, equivalent to that provided to the banking industry. However, we insist that traders make private security arrangements.
What are the challenges that the diamond industry in general and Antwerp in particular is facing?
For Antwerp, major challenges are emergence of other trading and processing centers, including Botswana, India, China, Hong Kong and some small centres in Africa. But, we will continue to re-invent ourselves to remain the world leader. Countries like South Africa and Angola have a long way to reach this stage. We have prepared a plan to maintain our edge over other trading centres. For the industry, however, transparency is the biggest challenge and the biggest hurdle to capital inflows. As long as developed economies do not recover fully from the economic recession, the diamond industry will continue to face demand challenges.
You said one challenge for the diamond trade is availability of bank finance. What are you doing as an industry body?
As Basel-II comes into force, banks need to improve their capital adequacy and as far as financing diamond companies is concerned, they evaluate this as an industry risk first. Hence, financing for the industry is not a priority, as the capital is scarce.
We tell the industry to become more transparent. The biggest problem in financing is valuation of diamonds or trading stocks, as there is no third-party independent mechanism for valuing diamonds. We are working with Belgium’s Customs authority under the finance ministry to set up a joint authority of Customs and industry experts for a standard valuation of diamonds.
