Over the next few days, the second International Rough Diamond Week is taking place in Israel and will feature tenders in which the main international rough diamond suppliers participate. We reached out to Ehud Laniado, one of the leading diamantaires in the rough diamond industry, who is renowned for his know-how and unique experience in the sector, in order to hear his views on the International Rough Diamond Week which is currently taking place in Israel.
Ehud gained local recognition when the management of the Israel Diamond Exchange awarded him with "Honorary Membership" in October 2014 as a token of appreciation for his activities relating to the introduction of substantive quantities of rough diamonds to Israel and his welcome donation to the Modern Manufacturing Centre for Diamonds in Israel in recognition that the preservation, development and management of know-how form the basis for the continued existence and future of the diamond industry and provided us with an interesting and relevant point of view on the subject.
Ehud: First of all, I would like to express my gratitude to entrepreneurs and the leading suppliers of rough diamonds for their cooperation with the Israeli Diamond Exchange.
Any initiative to bring together stakeholders in the mid-stream for the establishment of dialogue and meetings between all the different parts of the diamond industry ranging from the main suppliers of raw material to traders of polished diamonds and including financial institutions, bankers and strategic planners in the industry, is of great importance to the future success of the diamond industry.
The introduction of tenders to Israel by the main international rough diamond suppliers will create dialogue and expose local producers to an additional supply of raw material which is not always available to them and is a particularly welcome development in the local market as well as in the wider diamond industry.
However, there is a catch. One must be a little cautious. While tenders can be advantageous, it is important not to get stung. The name of the game is "know-how". Rough diamonds are like people, no two are the same. All natural raw materials and rough diamonds in particular are open to different interpretations. Naturally, the tender is won by the highest bidder and therefore the tender process provides transparency to mine owners, banks and governments etc. However, does it always provide transparency to the winner who offered the highest price? Not necessarily.
In contrast to auctions where there is an "open offer" and the bidder can garner information from other bidders' offers and decide accordingly whether to continue in the tender or exit it, the tender process is a "closed offer" where the bidder needs to rely on his own knowledge. We hear very often about the disappointment of those who have purchased rough diamonds through the tender process and find out after the production process that the price of the final product – the polished diamond - is not profitable or worth less than that of the raw material which was purchased. It is not uncommon to hear the following saying among tender participants: "oi vey, oi vey, have I won or not".
Tenders certainly have their own advantages which are, principally, the access to additional sources of raw material, the option to bid on certain goods or on smaller packages of a certain value and of course the option to bid or not to bid.
As such, it is important to be equipped with the requisite know-how in order to derive the best results from the tender process and achieve a balance between the desire to win the tender, which can cloud the objectivity of the bidder, and the importance of making a considered business decision in relation to the applicable raw material and the product which can be made from such raw material.
In this context, I would like to use this opportunity to express my support for the Modern Manufacturing Centre for Diamonds, under the management of Rami Dvash and its members who act to preserve and bequeath know-how to the younger generation which, if assimilated, will enable further development. Tremendous know-how has been accumulated in Israel over the years which, as we say in Hebrew, cannot be weighed in gold. However, as the years have passed, this know-how has transferred from local private enterprises to large companies who are dictating the price of raw material, such that we only see the final produce and its value after final production and sometimes this can be too late.
Preserving, developing and managing know-how form the basis to the existence and continued success of the diamond industry in general. The combination of sharing and passing on know-how and cooperation with the main suppliers of raw material to establish tenders in Israel is undoubtedly a winning hand for the Israeli diamond industry.
The article was published originally in Hebrew in the Diamond Exchange Website here: http://goo.gl/rlkZbS