Diamond trading hubs cry out for credit help

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Diamond trading hubs cry out for credit help

December 18, 2008

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Ramat Gan, Israel--The worldwide economic crisis--and subsequent credit crunch--have the world's major diamond centers looking for a little government intervention to help loosen up the flow of cash.

On Wednesday, Israel Diamond Manufacturers Association (IsDMA) President Moti Ganz called on the Bank of Israel to intervene and make credit available to the Israeli diamond industry.

In a letter sent to Prof. Stanley Fischer, governor of the bank, Ganz proposed that the bank establish a $2.25 billion credit fund for the diamond industry out of the bank's foreign exchange surplus.

In addition, Ganz asked the bank to reduce the credit margins charged to diamantaires to the level set in January 2008, between 1 percent and 3 percent.

Credit margins have increased between 0.25 percent and 1 percent since the beginning of the financial crisis.

"This increase is a major burden to the industry," Ganz stated in the letter.

He also noted the importance of the diamond industry to Israel--with polished exports in 2007 totaling about 20 percent of the country's total industrial exports--and concluded that the diamond industry is not the cause of the current financial crisis, yet it is being forced to deal with its consequences every day.

"We are the only industry in Israel that has not leveraged itself, has not issued bonds to the detriment of the economy," Ganz wrote.

Meanwhile, in India, Gem and Jewellery Export Promotion Council (GJEPC) Chairman Vasant Mehta is lobbying for governmental concessions that will help that country's ailing diamond-manufacturing sector.

According to a release on the GJEPC site, at a recent press conference held in Mumbai, Mehta said, "Overall exports of gems and jewelry are down by 34.25 percent in November. At the manufacturing level, exports of cut and polished diamonds are down by 20.18 percent for November, compared with last year, and there has been a 20 percent reduction in order for the period from April to October 2008."

The GJEPC has identified the two major issues that are having the biggest impact on the industry: inadequate financing (with those that are being issued credit carrying high interest rates) and issues surrounding the consistent supply and distribution of gold.

The GJEPC wants the government to, among other things, make available adequate credit lines from the Reserve Bank of India and release government reserves to create available credit lines to ride out the current crisis.

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