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Post By : IJ News Service On 02 December 2015 6:12 PM
{{Dear fellow diamond manufacturers and traders,}} As the primary representative of diamond manufacturers worldwide, I would contend that one of the major concerns all manufacturers share is the financial burden that we carry. Therefore, during my term as IDMA president, I intend to bring the discussion about financing to the top of the agenda. I want to try to engage all parties involved - rough diamond producers, bankers and diamond manufacturers - and look at each group and, if necessary, take them to task.%% Surely, we all agree that without a proper, well-oiled and transparent financing system, none of the players in the diamond supply pipeline would be able to conduct their business. Money is our lifeblood and the financial service providers keep our blood circulating. Unfortunately, parts of our body, i.e. our industry, suffers from anemia, experiencing high blood pressure, blood clots, and, in some instances, our body itself has executed deliberate blood lettings that have weakened and damaged the overall health of our industry. %% To run a healthy diamond manufacturing business, we need a finance system that fulfills its true purpose. The banks provide funds that are allocated to finance the purchase of rough goods and the operation of our factories. This includes, of course, the employment of cutters and polishers and the consequent fulfillment of all social responsibilities toward our employees.%% But the reality of recent years has proven that some of the banks, which play an integral and important role in keeping the industry healthy and profitable, have not kept their finger on the pulse.%% In India in particular, bankers have allowed clients from the diamond industry to use funds that were provided and earmarked to finance purchases of rough diamonds and for manufacturing to serve the narrow and destructive interest of speculating on rough prices. Add to that the infamous phenomenon of 'round-tripping' of diamonds that was so brilliantly exposed by a well known industry commentator and you have identified some of the 'circulatory' problems' that our industry has been experiencing in recent years.%% It seems that some of our own members have forgotten that bank financing is provided to purchase rough and to produce polished diamonds, and not to be used to finance non-related projects, thereby armlocking the rough. Banks which provided easy credit to clients who consequently allocate it to carry out financial trickery cause unscrupulous players to pay crazy prices for rough.%% And instead of intervening or putting a stop to this phenomenon, the rough producers and the players in the secondary market have allowed the price of rough to rise, making it impossible for the rest of the diamond manufacturing community - who are in fact the majority - to buy goods for production.%% So here we are. Diamond manufacturing has become a secondary, unprofitable and ineffective business. In Africa, the various beneficiation programs are collapsing because the rough sellers do not care about these programs or the diamond manufacturers who run them.%% Of course, I can understand that the banks look primarily to the rough diamond giants for an estimate of diamond pricing levels, expecting them to act rationally - and fairly - when defining their rough prices. Unfortunately, it seems that there, too, reason is not to be found.%% Why do we not see farsighted diamond producers, who have a long-term, strategically sound policy in place that looks at future needs and developments in our market? Has the 'here-and-now' profit idea become the key element of their strategies? Don't they see that speculation - that is: not caring for the industry's future - will lead to a collapse of the diamond manufacturing industry and consequently the polished trade, at large?%% It's obvious that two groups of major players -- the rough suppliers and the financiers -- in the diamond supply pipeline will need to make amends. And they will need to cooperate to make it work. Because if our industry's 'blood circulation' is not fixed, essential parts of our industry will collapse -- and ultimately shut down. The rough producers, most of whom can look back on a very profitable 2012, reporting record-breaking profits, will need to take stock of their short-term gains. The banks are invited to take a closer look at the sorry state of their diamond manufacturing clients.%% Ultimately, we all need to get around the table and come up with viable solutions because the current situation is simply untenable and unbearable.%% {{Maxim Shkadov,}} {{IDMA President}}

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