New Israel Diamond Exchange President Avi Paz believes a new arrangement with Russia will provide significant new levels of rough stones for Israeli manufacturers, says he is “disappointed” with the DTC’s Gareth Penny, and is ready to start dealing with the new anti-money laundering laws. An interview with an optimist.

 

The recently elected Paz divides his goals for the IDE in two: the diamond trade and the IDE complex. As far as the diamond trade goes, polishing and trading is the main issue, he says. With 50 percent of the world’s rough diamonds in value going through Israel, Paz still believes the country should attract more rough diamonds and more rough dealers.

 

 

Paz said one of the other ways he hoped to increase the amount of rough reaching Israel would be by requesting the DTC raise the amount it sells to Israel.

 

But the recent decision by the Diamond Trading Company (DTC) not to include any Israeli companies among the 11 new Sightholders irked him.

 

“I met with [DTC Director of Sales] Varda Shine last week (when DTC executives were on a visit to Israel) and I told her that I was disappointed that DTC Managing Director Gareth Penny didn’t attend the meeting.

 

“And again he didn’t attend a meeting of the Israel Diamond Manufacturers Association, and again I expressed my disappointment,” Paz added. “At the cocktail event that night he apologized and invited me to meet him in London.”

 

The meeting will take place in London on July 24 and Paz says he asked for it to be a one-on-one meeting with Penny. He said he would express his “disappointment” with the DTC for not increasing the number of Sightholders in an announcement earlier this month which saw the number raised to 95 from 84.

 

“We were very disappointed with the DTC for not raising the number of Israeli Sightholders,” Paz said. “Direct rough supplies from the DTC to Israel will account for just 18 percent of the country's total rough imports this year.”

 

The additional rough diamonds from Russia will help Paz achieve the goal of increased supplies, and he sees Canada and Australia as possible additional sources, as well as Africa.

 

To that end, Israeli manufacturers would benefit from a recent agreement between Sightholder Lazare Kaplan and Israeli diamond dealer Yitzhak Lupatin who committed to sell $100 million in diamonds in the market, Paz said.

 

On a visit to Russia in October, Paz plans to secure additional supplies for the Israeli center after Russian Diamond Exchange President Serguei Oulin promised to consider holding rough diamond tenders in Israel.

 

Paz said increasing Israel's polished manufacturing capacity was another goal he had set for his presidency. "Israel can't compete on the polishing of smaller, cheaper goods but the cost of labor is a far less significant factor where larger or expensive stones are concerned. We have the workers with the experience and skills to get the best out of these stones."

 

Paz said Israel had a bright future as a manufacturing center. He aims to encourage the already existing young generation in the domestic diamond sector and says he has held talks with local banks about providing lending on easier terms to help the young generation create manufacturing facilities.

 

Rough supplier Diamdel committed to supplying small parcels for young manufacturers as part of the effort to support them, Paz said, adding that he spoke with Dan Gertler to help in this effort. “I believe that the combination of these bank loans and supplies by Diamdel and Gertler can create a new and young manufacturing generation.”

 

He said he was also making efforts to encourage foreign diamond companies to transfer their operations to Israel. To this end, the exchange has set up a committee that would help dealers with almost all aspects of a move, even bureaucratic aspects, adding that several dealers have already expressed an interest in either opening an office in Israel or even moving to Israel altogether.

 

Regarding the exchange complex, Paz said another aim of his presidency would be to increase office space at the bourse.

 

“We have one of the best complexes and infrastructures in the world, but we suffer from a shortage of office space. We need to increase the capacity.” Currently there is a need for around 6,000-8,000 square meters, but he wants to think forward and create more than that.

 

One option is adding 8-10 floors to the exchange's Maccabi building or constructing a new building on one of seven possible locations in the exchange area in Ramat Gan. The idea of purchasing the top floors of the Yahalom building, an idea entertained last year, is “out of the question” for now.

 

As far as government support for the Israeli diamond sector is concerned, Paz said Olmert and Finance Minister Benjamin Netanyahu were very supportive, and Olmert always put the issue of increasing the country's rough supplies at the top of his agenda on his visits to Russia and other diamond centers.

 

Paz added that government support for the diamond sector came from the very top. "I do not know if there are many countries where the Prime Minister calls the newly elected diamond exchange president to congratulate him" he said.

 

One of the most burning issues in the diamond industry today is compliance with new anti-money laundering (AML) laws.

 

“We are aware of the Patriot Act and we are looking at how to comply in the easiest way,” he says about the new requirments to keep additional records and appoint a compliance officer which are an added expense for businesses not only in the U.S. and Belgium, where such laws have been passed, but also for companies that do business with U.S. and Belgium based companies.

 

The AML laws, like several other new financial laws, were forcefully advanced internationally by the U.S. government in the post 9/11 era, and the diamond industry is feeling the effect.

 

Following this, Paz said there was already an exchange of letters recently between the IDE and those in charge of AML in the Israeli government. “They understand that a lot of red tape won’t help. We will work together to resolve this.”