The Antwerp diamond sector is currently sitting on stocks of diamonds worth an estimated €4 billion, more than enough to allow the industry to ride out the crisis. The trouble is, banks who lend to the industry will not take stocks as surety, but only lend on the basis of payments outstanding on orders.
However, as even the rich tighten their belts in the current recession, sales of diamonds are down, and payment on those being sold is uncertain. "The diamond dealers themselves are no longer sure when or if they might be paid," said AWDC spokesman Philip Claes. "In such uncertain circumstances, the banks refuse to give any credit."
Flemish minister-president Kris Peeters visited the AWDC last week, and heard a plea for a guarantee system of €200 million, which the Flemish government would put up to allow the industry to borrow the money it needs to improve liquidity.
He also received a briefing on a plan the body is proposing to break the deadlock. This would involve the creation of a Diamond Warehouse, which would essentially be a pawn shop for diamonds. Dealers would deposit their stones at the warehouse, and the lending banks would lend money on a portion of the diamonds' worth, as determined by the AWDC.
The plan has the approval of both the trade and the banks, but it still has to be approved by the financial industry regulator, the Banking, Finance and Insurance Commission (CBFA).
Peeters is said to be keen on the idea of government guarantees but reluctant to make any promises at this stage. The diamond industry is likely to press its case by referring to government support for the banks and the car industry. "What's good for the banking sector and the automobile sector ought to be good for the diamond sector," Claes said. "The guarantee is not a cash injection or a subsidy. We are convinced our current problems are temporary, and that the diamond trade will get back to its normal level by the end of 2010."
Half of the world's cut diamonds, and 80% of rough diamonds, make their way through Antwerp at some point. The industry here employs 8,000 people, 7,000 of them dealers and the rest in processing. The industry claims another 26,000 are employed indirectly.