Can the Diamond Industry Give Israel’s Economy a Boost?

Israel’s GDP growth is projected to exceed 3% in 2019, according to OECD. Higher wages and natural gas development will help fuel the growth, but there may be another industry that will help drive growth: diamonds.

Israel’s diamond industry is flourishing, thanks partly to higher demand from Asian markets. The industry participated in the Hong Kong International Jewelry Manufacturers’ Show in late November in hopes of fueling demand in the region. This was the fourth time the Israel Diamond Institute Group of Companies participated in the event.

The Israeli Diamond Pavilion hosted 26 companies at this year’s events.

Shmuel Schnitzer, IDI Chairman, said the organization was seeing a positive trend in Asian markets, particularly in Hong Kong and China. Polished diamond imports to Hong Kong increased by 7% for the first nine months of the year, according to Schnitzer.

IDI also sponsored the HKJMA Anniversary Dinner, which attracts local celebrities, exhibitors and HKJMA members.

Hong Kong represents about 30% of Israel’s diamond exports, so growth in this area is crucial. With higher demand from Asian markets, the diamond industry appears to be in a good place right now. Success in such a lucrative industry is good news for Israel’s economy as a whole.

Israel has long been known for its diamond industry and is an important hub for international gem trade. In 2012, the Gemological Institute of America (GIA) brought is diamond grading laboratory to the country.

Recently, the Constellation Diamond (813 carats) was brought to Israel for laser cutting. The massive diamond was discovered two years ago in Karowe Mine in Botswana by Lucara Diamond Corp. Constellation Diamond was sold for an impressive $63 million, and may produce the largest certified flawless diamond in the world.

Yoram Dvash, President of the Israel Diamond Exchange, said having the Constellation Diamond brought to Israel highlights its role in the global diamond industry.

The Sierra Leone Peace Diamond, which sold for $6.5 million at auction was on display at Israel’s Diamond Exchange.

Israel’s reputation as being a hub for the diamond industry can help fuel economic growth, but we do face some hurdles that may do more harm than good.

Take, for example, Dan Gertler, who was recently named in the “Paradise Papers.” Gertler’s grandfather was co-founder of the Israel Diamond Exchange, and he served as president for quite a while.

According to the Paradise Papers, Gertler received $45 million in loan money from Glencore, the Anglo-Swiss firm, to secure and negotiate mining rights in the Democratic Republic of Congo.

Glencore also paid $537 million to Gertler for his stake in DRC mining interests. The deal allegedly cost the African republic hundreds of millions of dollars, according to a report from the BBC.

Gertler was also mentioned in the UN investigation in 2001 for giving DRC president Joseph Kabila $20 million to purchase weapons for his army to fight rebels. In exchange, Gertler would have a monopoly over the nation’s diamonds.

Shady business deals and corruption could undermine growth in the industry, particularly if those involved in these deals find ways to evade taxes.

Harsher punishment can help deter this activity, which would allow the diamond industry to continue growing and boosting Israel’s economy.