Israel Gives $284M Boost to Diamond Trade

RAPAPORT... The Israeli government has pledged $284 million (NIS 1 billion) to guarantee bank loans to diamond companies in an effort to easethe trade's severe credit difficulties. A lack of credit is stifling growth, especially among the smallerfirms that constitute about 70% of the Israeli trade, according to a specialcommittee set up to investigate the sector's challenges. The team - led by Naama Kaufman-Pass, deputydirector-general of the nation's Ministry of Economy and Industry - releasedits findings earlier this month, highlighting several ways in which the industry had hit a crisis. Banks' perception of the diamond sector as high-risk has ledto a decline in total lending to the Israeli trade from $2.5 billion in 2008 toabout $1 billion last year, the committee said in its report. Financialinstitutions are also refusing to accept dealers' inventory as collateral,while competition from India and Belgium has added further damage to Israel'smarket position. To this end, the government fund will back companies'borrowing, meaning that if they fail to repay a loan to a bank, the state willpay. While the committee submitted the policy to Eli Cohen, minister ofindustry and economy, as a recommendation, the lawmaker said the government wasset to go ahead with the program. "We have decided to allocateanother billion shekels over the next five years to the diamond sector throughcredit guarantees," Cohen told an audience at the International Diamond Week inIsrael last week. In addition, the committee suggested the government provide moneyfor the bourse's newly launched innovation laboratory, put cash into bringingmore diamond buyers to Israel, support efforts to develop e-commerceopportunities, and contribute to other projects to boost the industry. "The committee identified the main hurdles in smallbusinesses' activities in the sector, and its recommendations offer acomprehensive response to its needs," Kaufman-Pass said. The diamond trade is an important segment of the Israelieconomy, representing about 13% of total exports, and employing about 9,500people, according to the report. However, the 2008 global financial crash ledto a 27% slump in Israel's polished-diamond exports between that year and 2016,with the Chinese market slump in 2015 also denting demand. "Implementing the committee's conclusions, alongside othersteps, is essential, considering the crisis the sector has been through," Cohenadded in a statement. "Their purpose is to provide new tools to help deal withchallenges in the trade and to ease regulation, thereby growing both productionand exports." Shay Rinsky, director-general of the Ministry of Economy andIndustry, set up the committee in September to delve into issues of credit andgrowth in the diamond trade and examine how to bring the industry forward.Image: Three Photographers