Doug Ashbury
Northern News Services

NNSL (Aug 30/99) - The diamond business is not like other businesses. And it should not be treated like other businesses, according to a top Israeli diamond industry representative.

Any attempt to apply the normal rules of free enterprise to the diamond business would be a flawed approach, says Zvi Shur, Israeli Diamond Manufacturers Association general manager.

He spoke in Yellowknife, Wednesday, at a Yellowknife Chamber of Commerce luncheon.

When it comes to rough diamonds, "it's not a free market" because De Beers controls 70 to 80 per cent of the world's rough diamonds, he said.

Shur, who met with federal government diamond officials prior to coming to Yellowknife, said he found Ottawa's approach out of step.

Government should be there to help nurture and grow Canada's diamond industry because the free- market rules don't apply.

Once the industry has a solid footing, government can pull back, he said.

Shur said the Government of the Northwest Territories has taken a step in the right direction when it comes to financing the diamond business.

The GNWT guarantees bank loans made by lenders to diamond-cutting and polishing firms so those companies can buy rough diamonds.

The GNWT has said in the past that banks don't want to take on the risk.

Shur said in Israel, the state's banks loan about $1 billion US per year to the diamond-cutting and polishing industry. In 1998, Israel's net export for diamonds was $3.6 billion US ($4.1 billion US in 1997).

As well, in Israel there are banks that choose not to be involved with lending money to diamond-cutting and polishing firms, noted Udi Sheintal, Israel's diamond controller, the state's top diamond regulator.

Perhaps this is an area -- the lending of money to Canadian cutting and polishing firms -- where Israeli banks could enter into partnerships with Canadian banks, said Shur.

He also said despite the fact that the rough business is not the free-market system, there is a free market for cut and polished diamonds.

Israel buys 50 per cent of the world's rough diamonds by value.

"And we hear you have some rough," he said.

"I hope we have a good future, either by opening factories (here) or buying rough diamonds," he said.

"We might like to open a diamond manufacturing firm (in the NWT)."

Shur said any effort to set up a cutting and polishing plant in the NWT would be a joint-venture.

Shur, a former brigadier general in the Israeli army, has been the association's general manager since 1983.

He also said it may be too late to buy rough diamonds from BHP -- BHP already has rough diamond marketing arrangements locked up -- but there are other possible opportunities: Diavik, for example.

Israel's diamond industry employs about 4,000 people directly at 400 factories. Add indirect jobs and the number of Israelis who earn their living from the industry totals about 17,000, Shur estimated.

Israel, which has a well-established diamond industry, is now concentrating on a specific size range of rough stones to cut an polish.

Israeli firms focus on a range of diamonds, which are economically viable, to cut and polish given world manufacturing conditions.

The rough diamonds Israeli firms are cutting and polishing are of similar size to those that are economically viable to manufacture in the NWT.

While in Canada, the Israelis also will meet with Aber executives. Aber retains the right to market its 40 per cent share of diamonds from the proposed Diavik project.