Antwerp, April 8th, 2004
Dear Member,
As you may have noticed on the agenda of our annual General Assembly of Associated Members, the Board of BVGD, following a specific request from several members, is asking all our members whether our not we should continue to participate as member of the HRD.
Because this is an important decision, it is important that we explain to you the reasons and potential consequences of such a decision.
But first a brief history of our role and why we have arrived at such a decision.
Mission of BVGD
The role of BVGD, created in 1958, is to protect and defend the interests of the polished diamond trader. It is the only organization authorized to represent the polished diamond traders to the authorities. We participated in the creation of the HRD in 1973 - of which we are one of 13 members - in the hope of speaking with one voice to the government. To achieve our goals we lobby inside the HRD or by meeting with the authorities in Brussels and Antwerp.
Intra-Community Trading
For example, one of our aims in the last three years has been to liberate the intra-community trading of diamonds (shipping within the countries of the European Union) from the obligation of passing through the Diamond Office (DO), which is a waste of time and money for all of us.
We have been struggling for three years now to force the HRD to communicate to the sector that Intra-community trading (shipments of diamonds within the European Union) does not need to pass through the Diamond Office.
This is in fact the case since 1993 but the realization gained steam in 2000.
After numerous talks at the highest level at the Ministry of Economic Affairs, everyone (including the HRD's Daily Board) acknowledged that EU diamond shipments do not need to pass through DO.
Yet HRD so far, has failed to communicate this to the sector. Why? It's anybody's guess but we assume that the fact that HRD rakes in about $250,000 per month in fees from the situation is not irrelevant.
Officially, to support its inaction on this matter, HRD claims that the obsolete and obscure Belgian law requiring European diamond shipments to pass through DO for statistical purposes has not yet been changed - as it must to conform to EU regulations.
Yet, even at the Ministry, they recognize that one does not need to wait for a change in the Belgian law, as EU regulations supersedes national laws.
We have also argued that rather than focusing on the potential income loss, the HRD should be concerned about the potential tremendous growth that ease and speed of EU shipments could foster for the Antwerp diamantaire, like the abolishment of customs formalities benefited the other economic actors. This was, by the way, the original intent of the European Authorities and economists that took effect on 1/1/1993.
GIA
Another objective that BVGD tried to obtain is to encourage the GIA to open a laboratory in Antwerp. During meetings with the direction of GIA, it was asked, in order to assure the GIA that it is welcome in Antwerp, that the HRD -as coordinating council of the various Antwerp Diamond Associations- issue a formal letter welcoming the establishment of the GIA in Antwerp. Needless to say, the HRD never issued such a letter.
Yet the GIA is not the enemy of the Antwerp Diamantaire!
Conflict of Interests
These two examples show the inherent conflict of interests vested in the HRD. On the one hand it is supposed to represent the views of all the associations (who often are diametrically opposed to one another) on the other hand the HRD is behaving as a commercial enterprise intent on maximizing its profits from its various activities.
Yet the aim of the HRD should not be to enrich itself but to make sure that the Antwerp diamantaire prospers as much as possible.
Withdrawing
The rationale for withdrawing from HRD is based on the following facts: We will list the pros and cons.
Pros:
1. Mandate. As the only professional organization representing the traders in polished diamonds recognized by the Council of State, by withdrawing from the HRD we are withdrawing the mandate we implicitly give them by being a member. If we withdraw, the HRD cannot claim anymore to speak on behalf of the Polished Diamond Trade.
2. Representativity. We have voted against the last restructuring of the HRD, because the Trade, which represents 90% of the economic activity only got 25% of the voting power in the Board, while the Industry which has all but disappeared, also has 25% of the votes. Nevertheless, we wanted to give a chance to the new Board to show that real changes would be coming, but in fact we notice that the HRD and some of its directors are afraid of changes while the world around us is evolving at an ever-fasting pace.
3. Bad faith. We tried to negotiate with the President and the Director of HRD but we cannot help to notice that there is bad faith. The promises made are never implemented and there is constant stonewalling or use of delaying tactics.
4. Obligation as Professional Organization. As a professional organization we can alienate to no one our duty to defend the interests of our members. As we feel that remaining within the HRD does not help the interest of our members or the traders of polished diamonds as a whole, we have no choice but to take back our responsibilities and do the work ourselves.
Cons:
1. Outside of HRD we cannot influence the debate from within.
2. Our voice may not carry as much weight.
3. This will lead to a bigger involvement, workload and commitment for BVGD, which will require increased means.
To that our main answer is that we are not more listened to anyway by staying in. If the interests of the Traders (which includes Antwerp manufacturers with plants outside Belgium) run counter the interests of the local manufacturers or trade unions, the last group almost always prevails.
Your representatives will still be active in the HRD Committees, as they are open to all diamantaires.
In our view though, with the BVGD out, it is more of a problem for HRD who cannot claim to represent the whole sector anymore. The BVGD on the other hand can defend the 45% of the market it represents in all liberty and with full force.
Consequences.
The consequences are potentially far reaching.
We will definitely reexamine the efficiency and usefulness of the Diamond Office as well as the monopoly they now enjoy as this runs counter European Union directives. Indeed why couldn’t e.g., the transport companies have their own in-house experts, thereby speeding imports and exports at a fraction of the actual costs?
It is also a fact that the Belgian Government, under pressure from the United Nations, would like to withdraw the experts from the payroll of HRD, as this is again a conflict of interests: On the one hand they are supposed to be impartial but on the other hand they are paid by diamantaires…
To those of you who are concerned about the changes or future transformation of DO, let us reply that in no other country, be it the US, the largest and most liberal of our partners, or China, the most communist of our trading partners, is there such an institution.
To those of you who are afraid of controls by the authorities, we reply that the 27 companies that were thoroughly controlled on September 9th 2003 and had their paper seized, etc., were all shipping their goods through DO and complying with Kimberly Process. For the BVGD, presenting your goods to DO does not give any guarantee that the authorities might not control a diamond company.
But our objectives are not only limited there. By teaming up with other forces, we will defend your interests in all areas that are of importance for you and your business.
Conclusion
We hope that we have informed you as fully as possible. If you have any further questions do not hesitate to contact any member of our Board.
It is up to you to tell us on April 27th the future course of our organization. We will ask you to give the Board of Directors a clear mandate.
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