Diamond Company:israel Glitters With Its Diamonds

Israel Glitters with Its Diamondsthe bilateral trade between Israel and India and
The Israeli Diamond industry has designated Indiathe volume has been growing rapidly in the recent
as a strategic target for 2008. Diamonds accountpast.
for about 70 per cent of the bilateral tradeIf the diamond business is growing, the banks
between Israel and India and the volume hascannot be far behind. And that is where the State
been growing rapidly in the recent past.Bank of India (SBI) has entered the fray. The
The Israel Diamond Exchange is the official namebank has been in the diamond business for about
of the organisation in Tel Aviv that organises,30 years and already operates in other diamond
conducts and manages the industry to the benefitcentres such as Antwerp, Hong Kong,
of its members. The building looms large in theJohannesburg, New York and Mumbai.
Ramat Gan area of the city, and appearsMs V. Sasikala, my gracious host during my visit
disproportionately large in the tourist maps of theto the Diamond Exchange, is the CEO of
city.SBI’s operations in Tel Aviv and was sent
But I was hard pressed to explain my destinationthere to get the operations started. She has
to my taxi driver. After trying to say the namesuccessfully managed to find a strategic perch for
with different accents, I pulled out the map andthe bank by locating it physically in the bourse in
pointed it to him. ‘Ah, Borsa,’ hesuch a manner that the bank can be accessed
exclaimed. Everybody knows the borsa, or thefrom the rear by its diamond clients and thus
bourse, where diamonds are traded.have all the security protection they need At the
Interesting anomaly.same time, the bank can be accessed from the
But diamonds in Israel is itself an interestingfront by ‘market’ (or non-diamond)
anomaly. Early economic theories stressed thecustomers without being hassled by the need for
need for natural resources on which to base asecurity clearances.
country’s economic development till countries‘Cutting-edge’ technology
such as Singapore proved that what you neededThere are about 35 Indians in the diamond
was a vision, and hard work to makebusiness in the bourse and they have been
development happen. Israel is like that. Withoutoperating there long before diplomatic relations
diamond mines and without a major market towere established between the two countries in
consume the product, Israel is still a major player1992. One of them, Nimish Modi, who has been
in the global diamond industry.operating in Israel for about 30 years, briefed me
Israel is said to account for roughly half of theon the changes he has seen in the business.
rough and polished diamonds traded in the world,One has been the inroads that machines and
and has built this position based on its creativitytechnology have made, gradually taking over skills
and technological competence in polishing andthat were previously in the domain of human
designing equipment that is used in the industry.expertise. Israel’s traditional role in the
The Diamond Exchange is a comprehensivediamond business came from its diamond cutting
centre; a complex of four interconnected buildingsexpertise which, for cost reasons, has now largely
with what is reportedly the world’s largestshifted to other countries, such as India.
trading floor, offices for the traders, banks, postMr Modi explained that the two fields in which
office, restaurants, a synagogue, and day careIsrael has competence now is in its network of
facilities for children. You do not need to leave thetrading and marketing, and in its technological
place! Such a centre, in any place, needs to havecompetence in developing many of the machines
high security, and in Israel, which is not at peacethat have an important role in the industry.
with all its neighbours and faces violent attacks,One of the machines in the bourse’s technical
the need for security has the place tightly sewedcentre demonstrated how much of the skill had
up. I had to provide my passport particulars a daynow been transferred to the machine.
ahead in order to be cleared to enter the building.With the rough diamond placed in a compartment,
The security also seems appropriate for aa laser scans it, analyses the data, and provides a
business that has, at higher levels, been shroudedreport that gives the colour, carat and other
in secrecy, and is an industry that seems tocharacteristics. It then displays what could be the
deviate from all the accepted theories of businessmost efficient cut and is also prepared to mark it
and management. The official face of DeBeers,on the stone as a guide for the cutter. While the
the private company that controls the industry, isstandard mass merchandising diamonds go to
just innocuously called the Central SellingChina, the more creative cuts are done in India.
Organisation (CSO), not wanting to attractMs Sasikala took about nine months since landing
attention. Hmm. An organisation that does notin Tel Aviv to start the branch, which began
want publicity!operations in 2007 and was also the first foreign
Crafted by CSObank in the bourse. Often one thinks of starting
The diamond industry is carefully managed by theoperations in a new country as challenging due to
CSO, which has about 50 per cent of thethe need to understand the environment, which
world’s share of the market. Much like theincludes the regulations, the local business culture,
central planners of the former Soviet Union, itfinding the office space and people, and so on.
sets the prices at which it will sell its roughBut there is another side to it, namely, the need
diamonds to ‘sight holders’ who are itsto effectively convey to one’s head office
approved buyers. You take it or decline; there ishow some of the standard operating procedures
no negotiation. Even Russia, now a major diamondand rules will not work in the new environment
producer, prefers to let DeBeers take the lead inand secure the necessary permissions to design a
setting prices, for the company has mastered thenew structure and culture. So, a pioneering
art of managing both demand and supply to keepmanager has to manage both ends of the
price high. Interestingly enough, in the case ofoperation while at the same time, setting the right
luxury goods such as diamonds, nobody isprecedents.
interested in the prices crashing! It is obvious thatOpening up opportunities
the supplier wants high prices, but so does theThe diamonds sector makes up about 90 per
buyer, for it represents her/his status and luxury.cent of SBI’s business there now, but Ms
That same spirit of secrecy and securitySasikala sees enough opportunities in other
pervades other aspects of the operations of thesectors of Israel’s economy that do business
diamond exchange. In any other exchange, youwith India such as telecommunications, plastics,
will see listings of opening and closing prices andchemicals, and pharmaceuticals, to drop the
volume of trades in a day. Not here. Thediamonds’ share of her business to about 50
Exchange does not keep records of the volumeper cent in the near future. Not a small
of business conducted on the trading floor. Youachievement.
are not going to see flashing signs listing the goingHere is an interesting example of the kinds of
price.opportunities that have shown up on her door.
You will see two individuals seated across a smallSince religious strictures prevent orthodox Jews
desk, negotiating a price for a small piece offrom receiving interest from other Jews, they
stone wrapped in paper. A trader, who has justshun Jewish banks and are looking at SBI with
made a few millions in profit, will probably shufflegreat interest!
across the floor claiming to his friends thatIsrael is thriving and it will be wonderful if it can
business is bad, so as not to attract attention! Ashare some of that prosperity with its poorer
person transporting diamonds is not likely tocousins, the Palestinians. SBI can even play a role
advertise that fact too for obvious reasons.here with India having good relations with both
SBI in fraysides of the disputed territories. SBI’s
The Israeli Diamond industry has designated Indiaexpertise in lending to small businesses, weaker
as a strategic target for 2008, signalling that theresections, and priority sectors is applicable in the
is going to be increased cooperation between theWest Bank. Maybe we will see an office there too
two countries. The trend has been building for avery soon.
while. Diamonds account for about 70 per cent of