In the 21st Century, Antwerp can no longer claim to be the diamond polishing capital of the world. Cheaper labor forces in India and other parts of Asia have caused that industry to shift Eastward. Antwerp is, however, still the center of the world’s rough diamond trade. Eighty-five percent of the planet’s rough stones are traded in this city even today.
In recent years the diamond industry has opened up to globalization. As the polishing centers have shifted to India, many Indian diamond dealers now come to Antwerp to purchase rough diamonds and sell their polished stones. Whereas the diamond business in Antwerp used to be dominated by Hasidic Jews, the globalization of the diamond market means one is just as likely to find a Bollywood style restaurant in the diamond district as a kosher one.
Many claim that this globalization has opened the business to fraud as merchants and companies try to avoid customs fees and other taxes. In 2007 and 2008, Police started to crack down on tax fraud, raiding many diamond companies in the city. News of these raids spread around the world, worrying investors as to whether the city was a safe place to do diamond business. The reputation of Antwerp was at stake, even if the abusers of the tax system were a minority of the diamond dealers in town. Constant interference by the tax and judicial authorities have caused many dealers to leave town for more business-friendly diamond centers.
Some, including Belgian deputy prime minister and minister of foreign affairs, Didier Reynders, believe that the industry needs to adopt new fiscal regulations in order to compete internationally. A “diamond carat tax” is being proposed to tax diamonds based on their weight rather than their value. Proponents of this tax system say it would make Antwerp more competitive vis-a-vis other diamond centers such as Dubai or Mumbai.
Compared with 2007, exports of rough diamonds from the UAE increased 17% in 2011. During that same time period, exports jumped 21% in India while exports from Antwerp dropped 25%. The Belgian city, however, remains the leader with 107.1 million carats exported in 2011 to the UAE’s 47.2 million and India’s 37.1 million, according to Kimberly Process data. The city is looking to defend its position by developing a “Diamonds from Antwerp” brand. Currently Antwerp is home to facilities of the largest miners including De Beers, Alrosa, Rio Tinto Group and BHP Billiton. Presumably it would take some time for other diamond centers to build up such an infrastructure.
At the same time, changes in strategy of the biggest diamond producers could greatly affect the city. De Beers recently moved its sorting and trading of rough stones from London to Botsawana as part of the country’s efforts to construct its own trading center. This is bad news for Antwerp as the city will no longer have the advantage of being relatively close to London; sight holders who used to make to 200-mile trip from Antwerp to London will now have to fly over 5,000 miles to reach Botswana. The move to Botswana is part of a 10-year plan, and at the moment, very little rough stone trading is done there.
Whether Antwerp will treat these changes as opportunities or threats remains to be seen.