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History is being made here in Panama, and I feel fortunate to be part of it - Eli Izhakoff

27 july 2015

eli_izhakoff_xx.jpgEli Izhakoff, Chairman, World Jewelry Hub, Panama and Founding Chairman, Panama Diamond Exchange is also an Honorary Lifetime President of a host of Global organisations like  World Federation of Diamond Bourses, World Diamond Council, CIBJO, the World Jewellery Confederation, Diamond Dealers Club of NY,Diamond Industry Steering Committee and Bangkok Diamond and Precious Stones Exchange.
Among awards and decorations he has received are the Officer of the Order of Leopold from the King of Belgium, the Israel Diamond Industry Dignitary Award, the New York Diamond Industry Lifetime Achievement Award, and special honors from the President of the Republic of Sakha and the Government of Thailand. An astute businessman, Eli Izhakoff is partner of J. Izhakoff & Sons, a diamond manufacturing and import/export firm, with offices in New York at 580 Fifth Avenue.

Here, Eli Izhakoff talks to Rough&Polished about the issues being faced by the global diamond industry currently; and about the WJH, he is more than confident by proclaiming “History is being made here in Panama.”

You headed the World Diamond Council (WDC) for more than 13 years, and your compelling work on the Kimberly Process (KP) is well known. But what challenges did you face during your tenure before KP was put in place?

The key problem that we faced in the beginning was a challenge to the public’s confidence in the integrity of the diamond and jewelry industry. There were those who suspected that we somehow were complicit in what was happening in Africa, even though that was an absurd charge, because our industry and livelihood had been placed at tremendous risk by the situation.

We overcame that suspicion by demonstrating our commitment to a viable and effective solution. Not only were we be prepared to submit ourselves to regulation, but we – which is to say the World Diamond Council – actually submitted the document, which became the blueprint for the Kimberley Process.

Human rights have long been proclaimed by NGOs as one of the elements to identify conflict diamonds. What is the stance of the Kimberley Process on this issue now?

Let us be clear – human rights always has stood at the center of the Kimberley Process’ mission. KP’s primary task was not to protect the diamond industry, but rather to protect the people living in the areas where diamonds were being mined. If their lives were endangered, then their human rights were being violated.

But the Kimberley Process also recognized the potential of the diamond industry to be a constructive economic and social force. Consequently, it did not try to limit the trade in rough diamonds, but rather ensured that the traded diamonds would be kept out of the hands of people who violate human rights.
So we never had an issue with human rights. What we contended was that only diamonds that were are associated with organized violence should be included in the “conflict diamonds” equation, so as to avoid situations in which the diamond industry is attacked, simply because it is a soft target. In other words, if there is a human rights situation in a diamond-producing country, but that is not related to the industry, then it would be wrong to automatically define its output as “conflict diamonds.”

Indeed, not only would it be wrong, but it would be counter-productive, because it would limit the diamond sector’s ability to be a positive economic influence in that country.

WDC‘s handling of the Marange issue was a landmark success, but was Zimbabwe a difficult nut to crack? How did KP finally settle the matter?

It was a complicated situation because on paper the Marange diamonds did not qualify as “conflict diamonds,” since there was no civil war in Zimbabwe. Technically, therefore, they essentially should have been outside of the KP’s jurisdiction.

But since here was a great deal of public attention, both the KP and Zimbabwe recognized that it was in everybody’s interest that an agreed-to solution be arrived at, so as to protect the integrity of the diamond and the diamond industry. It should be remembered that, although it threatened to do so on a number of occasions, Zimbabwe never really left the negotiations.

It also was not simply a case of the KP against Zimbabwe. There were large number of KP member countries, which while not condoning what was going on in the Marange diamond fields, nonetheless were uncomfortable about what they considered was a patronizing attitude on the part of other KP member countries.

It was in bridging that divide that the World Diamond Council was effective, because we essentially had earned the trust of all sides. It is worth remembering that the breakthrough did not come at a KP meeting, but rather at the World Diamond Council Annual Meeting in Moscow in 2010.

Given the complexities of the global diamond industry, could KP reforms be designed to be more relevant to the present situation, as well as fit into the future changes that might come about in the industry?

The KP has to remain relevant, and consequently, because the industry is continuously evolving, it will need to adapt accordingly.

This is something that we recognized in the World Diamond Council, and, in fact, in 2012 I proposed that steering committee be established to formulate reforms that be undertaken by the WDC, so that it continues to be relevant in changing industry landscape. My proposal was accepted, a set of reforms was formulated, debated and approved by our general assembly, and the WDC evolved accordingly.

But I would caution about over-reaching. If KP tries to expand into areas where it is impossible to reach consensus, much of what we managed to achieve could be lost. KP was created to face the challenge of conflict diamonds. It has been effective because it has the means and has been able to establish consensus in that specific area.

What is your view of the role to be played by the Diamond Producers Association and the problem of generic diamond marketing?

It is a positive development, and I would hope that the Diamond Producer Association may eventually be able to provide the type of services the World Gold Council provides the gold industry.

With that said, I think it would be naïve to expect that the association returns us back to where were 15 years ago. The days that one or two mining companies bankroll generic advertising for everyone are extremely unlikely to return.

But it is important that, together as an industry, we come up with a paradigm that works. In the new media environment there are great many options, most of which did not exist during the old days of generic advertising.

The World Jewelry Hub in Panama is being developed at a tough time for the diamond industry worldwide. Can it be viewed as an emergency project to shift diamond sales to a more promising area after the hopes pinned on China did not quite materialize?

The World Jewelry Hub is certainly not an emergency project and the Latin American market does not require the poor performance of any other market to justify its importance. We are talking of a region of a 600 million people, with fast growing economies, which to date have largely been off our industry’s radar. There is tremendous opportunity here, and it will exist whether the situation in China is weak or strong.

In fact, I would strongly suggest that any attempt to write off China is very premature. Sure, things are tougher today than they once were. But all markets rise and fall, and it is unreasonable to assume that China could maintain the type of growth rates that it had been showing ad infinitum.

My prediction is that China will remain on course, although there will be bumps along the way, and at the same time Latin America will prove its potential as the world’s next great jewelry market.

Average wages in major Latin American countries range from $500 to $700 compared to $3,600 in North America. Do you think it’s a good market for diamonds?

Latin America is a developing market, and in many of the countries of which it is comprised you will find elements of both first and third world economies. This obviously implies that are massive disparities in earnings. Consequently, average wage statistics are of limited importance.

Take into consideration that the average wage in both China and India is lower than $500, and then you will appreciate what I mean. Both of those countries can easily be described as “good” diamond markets.

What is also true is that Latin America is more politically stable than it has been in decades, with most people living today in democratic countries with free-market economies. There is a fast growing middle class with a consistently increasing amount of disposable income.

There also is a very sizeable sector of the population with high income, which to date has not been adequately served by our industry.

All in all, I would propose that we are talking about a region that has the potential to be a great diamond market.

In your perception, how do see the World Jewelry Hub in Panama shaping up in the next say 5 years? With the current slowdown in global diamond industry, do you think its progress will go forth undeterred?

The Phase I building of the World Jewelry Hub is already operating, and the Phase II building, for which construction will begin this quarter, is scheduled for completion by the end of 2017. It will be a luxury office tower and commercial center, which will provide office space for hundreds of companies.

Thus far, we have hit all our targets, and I fully expect us to continue to do so. Consequently, in five years time I expect Panama to be the undisputed diamond, gemstone and jewelry trading center in Latin America, and an international business hub in its own right, serving markets all over the world. We will earn that through good planning, high construction and logistic standards, and through the policies of the Panamanian government, which is committed to providing an efficient and friendly business environment.

The current slowdown in the diamond industry will not affect our plans in any significant manner. Indeed, the potential of the Latin American markets may provide the industry with a way out of the current predicament.

As Honorary Lifetime President of WDC and a host of other organization, and now as you have taken up the mantle of Founding Chairman of the World Jewelry Hub, Panama, do you feel a sense of satisfaction when you look back at the challenges and achievements? Can you recall some of them, please?

I have been involved in the public life of the diamond and jewelry industry for about four decades, and as a result have experienced and played a role in many of the key developments over that period.  Throughout it has been challenging, and, while the process has sometimes been frustrating, the results luckily have been satisfying.

I am not inclined to look back, because that would imply that my work is done, and it clearly is not. The World Jewelry Hub and the development of the Latin American market is tremendously exciting, and what we have managed to achieve in just a short period of time is, in my opinion, tremendously impressive.

History is being made here in Panama, and I feel fortunate to be part of it.

Aruna Gaitonde, Editor-in-Chief of Indian Bureau, Rough & Polished