NEWSLETTER 1
Antwerp, July 27th 2007
Dear Member,
On behalf of the polished diamond traders and the Antwerp market, the new Board of Directors of BVGD has decided to inform you of its initiatives by email.
We are planning to publish regular Newsletters to keep you up-to-date with what is going on in Antwerp. These will also be posted on our website.
As the BVGD is an organisation strictly run by diamantaires for diamantaires, we are all volunteers. We do not have the staff of the AWDC/HRD, which certainly would help us to do more and better things; but, on the other hand, we pursue issues that are close to the diamantaires’ heart, as we are all personally concerned.
--- Intern Compensatie Fonds ---
By now, we have all received the letter from the Intern Compensatie Fonds asking us to contribute money to help pay the social charges of workers. This is a rebirth of the infamous “Social Plan” of 2002.
Our opinion, then as now, is that this amounts to an unfair and illegal subsidy from one group of companies to another. Our position still is that any subsidy is bound to fail. Why? Because, it invariably hurts one sector while not helping another. The Fund exists since 1960 and it has not prevented the disappearance of a manufacturing base in Belgium. Furthermore, there is no transparency in the use of the funds that are collected. Despite the fact that at the last General Assembly of the HRD, under questioning by the president of the BVGD, Mr. Denckens conceded that there was €56 million euro on the accounts of the Fund, a persistent rumor holds that €64 million would approach the reality. This represents a huge sum of money that was collected from the trade.
We discovered that a few individuals not holding any position and without any proxy signed an agreement last year without our knowledge. We can only regret that the new AWDC/HRD and its directors decided to continue the despicable practice of acting in secret without informing fully and fairly the market.
A Royal Decree was passed on March 26th and again the AWDC decided not to inform us or anybody else for that matter.
We find it ironic that although we insisted on a fair representation in last year’s restructuring of the HRD and pleaded to lower the limit of €30 million for the third category of voters, when it concerns taking our money, a €5 million limit was deemed appropriate.
Your Board of Directors is intent on seeking to block this decree by all means possible. We have contacted specialist lawyers for this case asking them what recourses are available to stop this senseless measure. We will of course, inform you as soon as we receive their advice.
----Supplier of Choice---
As you know, the BVGD has filed an appeal with the European Court of First Instance in Luxemburg against the European Commission’s decision not to continue to investigate our complaint against the Supplier of Choice program from De Beers.
On July 11th, the Court has annulled the “Article 9” decision by the Commission which made obligatory the commitments by De Beers to stop all its purchases of Alrosa’s rough as of 2009.
While our lawyers are examining in detail the consequences of the Court’s decision, we can reasonably assume that this decision will support our case, because the prevention of any purchases of rough by De Beers from Alrosa was the central and main argument by the Commission to decide not to act on our complaint. It seems safe to say that in light of this annulment, the Commission will need to reassess thoroughly both the De Beers and Alrosa relationship and SOC itself.
It is now clear after the judgment that the Commission has to tackle SOC heads on. Scrapping SOC, which is the main problem in our industry, is the only reasonable solution. As good as their publicly claimed intentions may be, De Beers is fundamentally flawed by seeking to select the most “efficient” or “capable” sightholder, for it is obviously a subjective decision, and thus arbitrary and in the end doomed to fail. DTC, abuses its dominant position by rejecting customers at whim or by influencing through “scoring” the economic behaviors of the sightholders. Only market based mechanisms are acceptable and indeed can ensure the functioning of a market in order to match in the most efficient way supply and demand. The BVGD fights for having once and for all an open, fair and objective selling system.
--- Diamond Derivatives ---
The BVGD has taken note of the recent developments by both Rapaport and ABN-Amro/Polished Prices regarding the creation of derivatives markets for diamonds.
We inform our members and the public that these are private initiatives that the trade has not asked for.
Nonetheless, we welcome the creation of such a market if it is controlled properly and with complete transparency as the guiding principle. Such a market should be created for the right reasons (hedging risks) and not to attract unwary investors investing in a dubious deal.
This is of crucial importance because should there be a collapse of a diamonds derivative market because the underlying product does not correspond to investors expectations; the fallout from the press and the investor community will inevitably have a negative impact of global consequences on consumer confidence in our precious product.
Our opinion is that a derivatives market can only be successful if the traded product is a commodity. We believe that there is a greater chance of success if the underlying product is rough diamonds. Polished diamonds with their infinite varieties of cut have different desirability factors to different buyers.
We will follow closely the progress of these initiatives and keep you informed as best as we can.
--- Judicial Raids in Antwerp ---
Sadly Antwerp witnessed again a raid by the prosecution authorities on a few companies. While the BVGD supports the strictest respect of the law, we cannot help but feel that in order to accomplish this aim some public officials are abusing their authority and are putting at risk the health of our sector. We have pressed our representatives to use their power to act upon this matter and they have largely done so. However only with the introduction of a law clearly defining the scope of the permitted action by the prosecution office can a meaningful change take place. We have contacted a lawyer for this case who will be charged with passing such a law.
--- Export facilities ---
We are continuing to look how to inform companies to abide strictly by Belgian laws while enabling them to pursue their business overseas. There are several options being studied. As each situation is different, please contact our Secretary for specific details.
We hope that you have found this Newsletter informative. Do not hesitate to send us any comment.
We wish you a pleasant holiday.
For the BVGD,
Andre Gumuchdjian
President
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