Antwerp, April 28th 2008
Dear Member,
Some time has passed since the last Newsletter, although we have sent two specific mails concerning the ICF, on November 12th and on December 19th. Since the beginning of the year, we have been extremely active on various fronts. We wish to inform you hereby of the latest developments:
Interncompensatie Fonds
As you remember, thanks to our action calling on the market to oppose the recent Royal Decree, the AWDC and the original signatories of the “Protocol of understanding” with the trade unions and the Industry, realized that they had been abused because the text of the “Protocol” had not been translated into Law.
Two events then unfolded:
A series of meeting took place towards the end of 2007 to call on the Ministries, the lawyers and the AWDC to adapt the law and the Royal Decree so that the original intent of the signed “Protocol” be respected.
A meeting between the AWDC’s representative and the Industry with the trade unions took place on December 7th to review the numbers and the future rate of taxation. The BVGD supported that meeting but was not allowed to participate by the Industry representatives.
Recently, on April 14th, a new meeting took place.
At this date, the BVGD confirms that, while there has been some activity, no legal texts have been signed or published in the Official Journal yet.
At the December 7th meeting, the rate for 2008 was set to 0.15 per thousand for the first six months of 2008 (the previous rate was 0.36 per thousand).
At the April 14th meeting, the numbers released for 2007 show that the ICF collected €4.7 million but paid out €1.7 million. The rate for the second half of 2008 was set at 0.05 per thousand.
While the BVGD has been instrumental in obtaining these reductions, we are not satisfied for three reasons. First, the reduction of the rate while seemingly important does not respect the very Protocol that both AWDC and the Industry signed, (namely that the new “Social Plan” should not collect more than €800,000 above what it pays out). Furthermore, even though the money collected is seemingly small, it is still a totally useless tax that serves nobody, least of all the diamond workers of Belgium, because the Fund already has more than € 64 million sitting in the bank. There is absolutely no need for further funds.
Finally, with the most recent developments in the diamond industry and the latest announcements made by many sightholder manufacturing companies that they are closing their diamond cutting plants in Belgium in order to relocate to Botswana, Namibia or South Africa, the ensuing dramatic reduction in employment means that, even if they wanted to, the Industry cannot even use the interest of the existing € 64 million for its stated goal of maintaining let alone increasing diamond manufacturing in Belgium.
In the meantime, this tax only adds for no reason an extra layer of red tape, costs and cumbersome administrative work and certainly does not encourage diamond companies to come or remain in Belgium.
The BVGD is calling on all parties to use common sense and scuttle this useless tax now in order to promote a climate of business-friendly atmosphere in Antwerp.
Supplier of Choice and the procedure in the Court of First Instance of the European Union
The first three months of 2008 have seen a major increase in the activity of the various parties. The battle has intensified considerably. Luckily no shells are fired, but if each page emanating from the lawyers, the European Commission, the European Court of First Instance and the BVGD were bullets, it would be described as a very heavy battle.
The European Commission, who clearly was trying to stall the procedure and delay its appearance in Court (it has asked four extensions) finally submitted its Defence Memoir. The BVGD and its team of lawyers are now examining carefully the Commission’s defence in order to submit our response.
Furthermore, unsurprisingly, De Beers has asked to intervene in support of the European Commission against BVGD. We oppose the move by underlying (among others) the inconsistency of De Beers. No doubt our members will appreciate the irony and cynicism of De Beers who decides now to support the Commission in its case against the BVGD but previously decided not to do so in the Commission’s case against Alrosa. As the reader is aware, the Commission lost its case against Alrosa.
We are as resolute as ever to carry this case through and change fundamentally the distribution of rough diamonds and hence the polished diamond landscape. It is evident that no matter what De Beers claims, they still control and manipulate the market. In 2008, nearly 30 sightholders lost their sights, allowing De Beers to control the remaining sightholders even further. It is important to remind our members that by relocating in Botswana or elsewhere, De Beers cannot escape European laws. As long as diamonds come on European Union soil, European laws apply.
In these trying times, only a return to economic laws will provide the needed assurance to everyone on the market.
Hence, a complete and uninhibited move to a real and free open market should be achieved as quickly as possible. The restrictive procedures and allocations that are still in place today create dangerous imbalances in the diamond market and huge misallocation of funds as well as increasing dangerously the overall indebtedness of the diamond industry. Manipulation and price control is still prevalent. If prices keep rising, fuelled by speculation, the risk of a dramatic break of the diamond bubble becomes ever more threatening. Only the application of a truly and totally free, open and competitive diamond market will allow market forces to equilibrate supply and demand of diamonds.
Many of you have expressed their support for our cause; indeed this one fundamentally affects us all. However, we continue to rely on your continuing support. This battle is a “bottom’s up” battle. We believe that this action is in the economic interest of all as the vast majority of us will gain in the end because in an open and free market, favouritism or inside politics has no place. Everyone has an equal chance.
In the end, some sort of an open selling system for all of De Beers’ rough should be applied. As we have repeatedly said, the particular difficulty and delicate nature of our business is compounded by the fact that it is a very narrow market. It is not difficult to understand that such a market can very easily be manipulated by a dominant company. The so called “auction” by Diamdel is the best proof of that.
Time and experience has proven that a free market system is the best way to achieve fair and efficient economic growth. BVGD will continue relentlessly to defend its case at the highest level of the European Judicial Courts to secure a fair and open diamond market.
Law proposal
At the BVGD’s initiative, the AWDC has been very active to prepare and write a new law proposal that aims to reduce the extensive powers of the investigative judges. The law proposal is in the various stages of the rigorous examination in order become applicable. We are following the situation.
AWDC
The elections for the six “Trade” seats to the Board of Directors of the AWDC are due soon and the tentative dates for the elections are June 17th and 18th 2008.
We inform you that the BVGD has written to the AWDC and obtained, at a recent reunion, that candidates who are directors of different companies in different categories can only be candidates in the highest category.
We are further working on reducing the threshold defining the three categories. The current numbers are €100 million and €30 million in order to be a candidate and/or elector in the 1st and 2nd category. With the added consideration of the declining dollar, these numbers are too high. We are pleading to reduce both numbers to respectively €50 million and €10 million in order to ensure a more balanced representation.
We hope you have found the present Newsletter informative and remain at your service should you have further queries and/or suggestions.
Andre Gumuchdjian
On behalf of the Board of Directors of the BVGD
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