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Israel Gives $284M Boost to Diamond Trade
Feb 14, 2018 5:19 AM
By Rapaport News
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RAPAPORT... The Israeli government has pledged $284 million (NIS 1 billion) to guarantee bank loans to diamond companies in an effort to ease
the trade’s severe credit difficulties.
A lack of credit is stifling growth, especially among the smaller
firms that constitute about 70% of the Israeli trade, according to a special
committee set up to investigate the sector’s challenges.
The team — led by Naama Kaufman-Pass, deputy
director-general of the nation’s Ministry of Economy and Industry — released
its 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 led
to a decline in total lending to the Israeli trade from $2.5 billion in 2008 to
about $1 billion last year, the committee said in its report. Financial
institutions are also refusing to accept dealers’ inventory as collateral,
while competition from India and Belgium has added further damage to Israel’s
market 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 will
pay. While the committee submitted the policy to Eli Cohen, minister of
industry and economy, as a recommendation, the lawmaker said the government was
set to go ahead with the program.
“We have decided to allocate
another billion shekels over the next five years to the diamond sector through
credit guarantees,” Cohen told an audience at the International Diamond Week in
Israel last week.
In addition, the committee suggested the government provide money
for the bourse’s newly launched innovation laboratory, put cash into bringing
more diamond buyers to Israel, support efforts to develop e-commerce
opportunities, and contribute to other projects to boost the industry.
“The committee identified the main hurdles in small
businesses’ activities in the sector, and its recommendations offer a
comprehensive response to its needs,” Kaufman-Pass said.
The diamond trade is an important segment of the Israeli
economy, representing about 13% of total exports, and employing about 9,500
people, according to the report. However, the 2008 global financial crash led
to 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 other
steps, is essential, considering the crisis the sector has been through,” Cohen
added in a statement. “Their purpose is to provide new tools to help deal with
challenges in the trade and to ease regulation, thereby growing both production
and exports.”
Shay Rinsky, director-general of the Ministry of Economy and
Industry, set up the committee in September to delve into issues of credit and
growth in the diamond trade and examine how to bring the industry forward.
Image: Three Photographers
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Tags:
credit, diamond, Economy, Eli Cohen, guarantee, industry, International Diamond Week in Israel, Ministry of Economy and Industry, Naama Kaufman-Pass, Rapaport News, Shay Rinsky, special committee
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