An Industry Struggles to Keep Its Luster – by John Tagliabue (New York Times – November 6, 2012)

ANTWERP, Belgium — Step off the train here and you cannot miss the signs on the stores: Diamond World, Diamond Gallery, Diamond Creations or simply, Diamonds. Of late, there are the banners and posters reading simply, “Antwerp Loves Diamonds.”
Though this Belgian port has had a love affair with diamonds for centuries, of late it seems to be losing some of its passion. For years now, much of the lucrative but labor-intensive business of cutting and polishing stones has been drifting to low-wage centers in the developing world, like Mumbai, Dubai and Shanghai.

More ominously, in recent years, diamond traders have been accused of a range of violations, including tax fraud, money laundering and cheating on customs payments when buying and selling stones.

Local business leaders recognize the threat. This year, they embarked on what local newspapers described as a “charm offensive.” In a 160-page program, titled Project 2020, the World Diamond Center, a trade-promotion group, outlined plans to draw business back to Antwerp by simplifying and accelerating trading via online systems. That, the industry hopes, will win back some of the polishing business lost to Asian countries with new technology, like fully automated diamond polishers, and generally burnish the image of the diamond business in the public’s jaded eye.

“This is our strength,” said Ari Epstein, 36, a lawyer who is chief executive of the World Diamond Center and the son of a diamond trader, whose father emigrated from a village in Romania in the 1960s. “We have the critical mass so that every diamond finds a buyer and seller.”

Antwerp has by no means fallen out of love with the gems. In all, the market employs 8,000 people and creates work indirectly for 26,000 others as insurers, bankers, security guards and drivers. Last year, turnover in the local diamond business amounted to $56 billion, Mr. Epstein said, its best year ever.

While total revenues are expected to drop this year because of the troubled world economy, he acknowledged, a stroll along Hoveniersstraat, or Gardner’s Street, leads through the heart of the market, where almost 85 percent of the world’s uncut diamonds are still traded.

“I come here once a month,” said Sheh Kamliss, a trader in his 30s, who travels from his native India to buy uncut stones and sell polished diamonds. “This is the international market,” he added, chatting with fellow Indian traders outside the Diamond Club of Antwerp, one of many locations where deals are struck.

On any given day but Friday or the Jewish holidays, Hoveniersstraat, with its tiny Sephardic synagogue, is liberally sprinkled with Orthodox Jewish traders, many of them Hasidim.

But their once dominant presence has been squeezed by the arrival of traders from new markets, like Mr. Kamliss. Now people from about 70 nations are present, including Indians, Israelis, Lebanese, Russians, Chinese and others. Along neighboring Lange Herentalsestraat, Rachel’s Kosher Restaurant is now flanked by the Bollywood Indian Restaurant and the Shanti Shop Indian supermarket. In the nearby Jewish quarter, Patel’s Cash & Carry recently installed itself right next to Moszkowitz, the butcher.

Some here say this globalization of the business has opened the door to abuse.

Omega Diamonds, a major market maker, came under investigation and its executives fled Belgium when an employee-turned-whistle-blower revealed in 2006 how Omega had traded diamonds out of Africa for years, avoiding taxes by transacting deals through Dubai, Tel Aviv and Geneva, then moving the profits back to Belgium.

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