Ethics within the Business Practices of the Israeli Diamond Industry

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Ethics within the Business Practices of the Israeli Diamond Industry

  1. 1. ROBERT PINES PROFESSOR JUSTUS R. WEINER, ADVOCATE BUSINESS ETHICS AND SOCIAL RESPONSIBILITY: A MIDDLE EASTERN PERSPECTIVE BUSINESS AND ECONOMICS 48260 NOVEMBER 21, 2011 Ethics within the Business Practices of the Israeli Diamond Industry
  2. 2. World Diamond Industry <ul><li>Three major world diamond capitals: </li></ul><ul><ul><li>Antwerp, Belgium </li></ul></ul><ul><ul><li>New York City, USA </li></ul></ul><ul><ul><li>Ramat Gan (Tel Aviv), Israel </li></ul></ul><ul><li>Two categories: </li></ul><ul><ul><li>Gem-grade diamonds, used for their beauty </li></ul></ul><ul><ul><li>Industrial-grade diamonds, used for their molecular properties </li></ul></ul><ul><li>Most imported from Africa; global sales worth over $72 billion </li></ul>
  3. 3. Israeli Diamond Industry <ul><li>World leader in the production of cut diamonds </li></ul><ul><ul><li>Polishing Center </li></ul></ul><ul><ul><li>Trade Center </li></ul></ul><ul><li>Diamond Exchange District, Ramat Gan </li></ul><ul><ul><li>World’s largest diamond exchange </li></ul></ul><ul><ul><li>World’s largest trading floor </li></ul></ul><ul><li>Thousands of diamantaries, which are manufacturers of gem-quality diamonds </li></ul>
  4. 4. Israeli Diamond Industry, Statistics <ul><li>In 2000, Israel exported more polished diamonds than Belgium and India combined </li></ul><ul><li>In the first quarter of 2011, Israeli diamond exports reached $1.2 billion </li></ul><ul><ul><li>2010 Q1 only saw $829 million </li></ul></ul><ul><ul><li>39.6 percent increase </li></ul></ul><ul><li>Participation in trade shows in Mumbai, Vicenza, Hong Kong, and Basel </li></ul>
  5. 5. Industry Process <ul><li>Israeli involvement in: </li></ul><ul><li>Sorting </li></ul><ul><li>Cutting and Polishing </li></ul><ul><li>Jewelry Manufacturing </li></ul><ul><li>Retailing </li></ul>
  6. 6. Efforts to Eliminate Blood Diamonds <ul><li>Blood diamonds, or conflict diamonds, are: </li></ul><ul><ul><li>Mined from areas of conflict, often using slave labor </li></ul></ul><ul><ul><li>Sold to fund insurgencies, wars, battles, etc. </li></ul></ul><ul><li>Kimberley Process Certification Scheme </li></ul><ul><ul><li>UN-mandated process to eliminate blood diamonds from the market </li></ul></ul><ul><ul><li>Only the 75 countries that are members of the Kimberly Process (KP) can import or export rough diamonds </li></ul></ul>
  7. 7. Efforts to Eliminate Blood Diamonds <ul><li>International </li></ul><ul><li>2003: Israel was the first country to issue a KP certificate, showing that its diamonds are conflict-free </li></ul><ul><li>2010: Mr. Boaz Hirsch of Israel named Chair of the KP </li></ul><ul><ul><li>In favor of a supranational body to monitor and enforce the KP </li></ul></ul><ul><ul><li>Proponent of passing the chairmanship between trading and producing countries </li></ul></ul>
  8. 8. Efforts to Eliminate Blood Diamonds <ul><li>Domestic </li></ul><ul><li>Establishment of a Diamond Controller within the Ministry of Industry, Trade, and Labor. </li></ul><ul><ul><li>Monitors imports and exports in accordance with the KP </li></ul></ul><ul><ul><li>Represents the government in forums dealing with conflict diamonds </li></ul></ul>
  9. 9. Diversity and Integration in the Industry <ul><li>A traditionally “Jewish” occupation in pre-WWII Europe </li></ul><ul><li>Establishment of Israel brought Jewish immigrants from a variety of backgrounds </li></ul><ul><li>Tension between the richer Ashkenazim and the poorer Sephardim influenced employment in the nascent Israeli diamond industry </li></ul>
  10. 10. Diversity and Integration in the Industry <ul><li>Ashkenazim mainly worked in management, a legacy from their positions in Europe </li></ul><ul><ul><li>Belgium </li></ul></ul><ul><ul><li>Germany </li></ul></ul><ul><ul><li>The Netherlands </li></ul></ul><ul><li>Sephardim were relegated to lesser, more strenuous positions </li></ul><ul><li>In recent years, many foreigners have taken positions as diamantaries in Israel </li></ul>
  11. 11. Diversity and Integration in the Industry <ul><li>Mix of such diverse cultures resulted in tensions in the workplace during the early years </li></ul><ul><li>Today, the Israeli Diamond Industry is a standard for tolerance, diversity, and integration </li></ul><ul><ul><li>Every Israeli faces the same threats; no room for discrimination </li></ul></ul><ul><ul><li>Global Jewish connections/networks have made the industry quite prosperous for all employees </li></ul></ul>
  12. 12. Government Influence on the Industry <ul><li>During the early years of the state, the government encouraged construction of diamond plants in development areas </li></ul><ul><ul><li>Tried to encourage growth away from Tel Aviv </li></ul></ul><ul><ul><li>Attempted to create new sources of employment </li></ul></ul><ul><li>Dire need to populate and industrialize the Galilee and Negev </li></ul>
  13. 13. Government Influence on the Industry <ul><li>Eventual financial failures of most plants </li></ul><ul><ul><li>Locations deemed too remote </li></ul></ul><ul><ul><li>Inadequate amount of working capital </li></ul></ul><ul><ul><li>Irregular supply of resources </li></ul></ul><ul><li>Mass buy-up through government backed company called Pituach </li></ul><ul><ul><li>Fears of a government takeover </li></ul></ul><ul><ul><li>Protests from foreign governments, local manufacturing association </li></ul></ul>
  14. 14. Government Influence on the Industry <ul><li>Growth in plants, decline in employment </li></ul><ul><ul><li>Underutilization of plants </li></ul></ul><ul><ul><li>Frequent cessation of operations </li></ul></ul><ul><li>“ Plants… embroiled in wildcat strikes and frequent strife” </li></ul><ul><li>Mass migration back to urban centers </li></ul>
  15. 15. References <ul><li>&quot;Boaz Hirsch, Chair of the Kimberley Process.&quot; Israel Trade Commission . Israel Trade Commission, 26 Oct. 2011. Web. 20 Nov. 2011. </li></ul><ul><li>&quot;The Diamond Industry Fact Sheet.&quot; Diamond Facts . World Diamond Council, n.d. Web. 20 Nov. 2011. </li></ul><ul><li>&quot;Ethics Very Important Issue for the Diamond Industry.&quot; Diamond World . Diamond World, 30 June 2007. Web. 26 Oct. 2011. </li></ul><ul><li>Gradus, Yehuda, Eran Razin, and Shaul Krakover. The Industrial Geography of Israel . New York: Routledge, 1993. Print. </li></ul><ul><li>&quot;Israel Diamond Industry Reports Strong Export Growth.&quot; Jewellry Outlook . Jewellry Outlook, 6 Jan. 2011. Web. 26 Oct. 2011. </li></ul><ul><li>The Israeli Diamond Industry . Israel Diamond Institute, n.d. Web. 26 Oct. 2011. </li></ul><ul><li>Siegel, Dina. The Mazzel Ritual: Culture, Customs and Crime in the Diamond Trade . New York: Springer, 2009. Print. </li></ul><ul><li>Szenberg, Michael. The Economics of the Israeli Diamond Industry . New York: Basic Books, 1973. Print. </li></ul>

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