Transcript Diapositive 1

The Diamond-Cutting Cluster in
Antwerp, Belgium
Sofie Junger, Morgane Corbet, Claire
Crausaz, Julia Simon, Holly Basile
Tuesday, March 22nd
MoC – Winter 2010
International University of Monaco
Outline
 Introduction
 Overall economic performance and composition
of the economy
 Business environment
 The diamond cluster
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Legacy
Value Chain
Current Situation
Map and Diamond Model
 Global Issues
 Policy recommendations
Introduction
 Belgium: federation of 3 states
 Hardly hit during WWI and WWII
 Did not receive supposed funds
from Germany after WWI
 Flanders benefited from
Marshall Plan => led economic
growth
 Founding member of European
Union (1951)
 Trade surplus led by diamond
industry
 Support from federal
government
Source: Google Maps
Composition of Belgium’s Economy
Automotive
•4th largest Belgian industry
Chemicals
•€30 bn turnover (1/5th Belgium)
Diamond Cutting
•22% of world exports
Food Processing
•4% of total European added
Iron and Steel
•€3.6 bn (2006) in value-added
Logistics
•9th “Logistics Performance Index”
(World Bank)
Sources: Févia (2010), Lagneaux and Vivet
(2009), Institute for Strategy and
Competitiveness (2007), Logistics of
Wallonia (2010), Global Finance (2010),
Index Mundi (2008)
Main Exports Commodities
Machinery and equipment, chemicals,
diamonds, metals and metal products,
foodstuffs
Main Imports Commodities
Machinery and equipment, chemicals,
diamonds, pharmaceuticals, foodstuffs,
transportation equipment, oil products
Partners
Germany, France, Netherlands, UK, US +
China for imports
Agriculture
0,8%
Services
76,1%
Industry
23,1%
Demographic Indicators
Demographics and Labour
Population (2001-2009)
•10.4 million
•Average annual growth: 0.45%
Productivity (2008)
•-1.3%
•+3.1% in wages
•GDP/ hr higher than EU27 average
Federal Government Spending (million)
Social Protection
Education
Health
Economic Affairs
2001
Innovation
Patents
•Average 371 yearly between 2000 and
2006
Technology Achievement Index (2001)
•0.55
•Before USA and Japan
Sources: UNDP (2001), OECD (2009), The World
Factbook (2010)
2008
Public Order and
Safety
Defence
General Public
Services
0,00 €
20 000,00 €
40 000,00 €
60 000,00 €
Source: National Bank of Belgium, 2010
Economic Performance Indicators
Real GDP Growth
Economic Performance
GDP Per Capita (2008)
•$36,600 (2nd in Europe)
•Among the highest wolrdwide
Real GDP Growth
•Postive, but negative pattern
•-3% over 2008-2009
Inflation (2008): +4.5%
Unemployment Rates
•2000: 6.9%
•2009: 8.3%
•Europe: 8.3%
5,00%
4,00%
3,00%
2,00%
1,00%
0,00%
-1,00%
2000
2004
2005
2006
2007
2008e
2009e
-2,00%
-3,00%
-4,00%
Sources: The World Factbook (2010), World Economic Forum (2009),
The World Bank (2009), Global Competitiveness Report (2010)
Competitiveness Analysis
+
Institutions
Belgium = 24 ; France 26
Macroeconomic Stability
Belgium = 56 ; France = 58
Health and Primary
Education
1. Basic
Requirements
Infrastructure
Belgium = 18 ; France = 4
Health and Primary
Education
Belgium = 3 ; France = 11
2. Efficiency
Enhancers
Labor Market Efficiency
Belgium = 44 ; France = 67
Higher Education and
Financial Market
Training
Sophistication
Belgium = 8 ; France = 15 Belgium = 25 ; France = 21
Goods Market Efficiency
Technological Readiness
Belgium = 13 ; France = 25 Belgium = 22 ; France = 24
Market Size
Belgium = 25 ; France = 8
3. Innovation and
Sophistication
Factors
Business Sophistication
Belgium = 11 ; France = 10
Innovation
Belgium = 14 ; France = 18
Belgium:
18th
France:
16th
Germany:
7th
-
Source: Global
Competitiveness Report
(2010)
Productivity
Labour input
ICT capital
Non-ICT capital
Source: OECD (2007)
Multi-factor productivity
7
6
5
4
3
2
1
0
-1
Source: GDDC (2008)
National Diamond
 Low government intervention
 High concentration of
corporate head offices (strong
local rivalry)
 Recognized for ease of doing
business
Low corruption (CPI)
- High labor costs
- High levels of taxes, although
improving
 Highly educated / motivated /
productive workforce
 Strong innovative capabilities
 Excellent infrastructure (land, sea,
air)
 Numerous educational institutions
and research facilities
 High wages attracting workers
- Economic slowdown due to global
recession
 Sophisticated consumer
demand
 Strong support of local
industries
 Very high purchasing power
(among the highest)
 Large pool of international
consumers (EU membership)
- Small market potential locally
 Interrelations between all
clusters (logistics, ICT,
chemicals, food processing)
 Strong IFC network (overall
and for each cluster)
- Heavy dependence on EU
neighbors and associated
clusters
ANTWERP’S LEGACY
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16th century:
Major role in the European trade (40% of world trade)
First proof of diamond trade
Quick development of high expertise in diamonds cutting and polishing; achieving worldwide renown
1582:
First diamond cutters guild
1890s:
Cluster has been developed in a restricted district of Antwerp
Creation of the 1st bourses – The Diamantclub van Antwerpen
1930s:
Creation of the Syndicate of the Belgian diamond industry
Creation of education center and financial institutions focusing on diamonds
-------------------------------------------------------------------------------------------------------------------------Antwerp’s port is the second largest in the world
Small family owned businesses – Jewish community that influenced way of doing business
High skilled workforce
World War II  high structural and social changes
Historical migration flows due to wars have created a highly diversified origin population
Sources: Diamonds.net,
Henn, S., & Laureys, E. (2010). Bridging Ruptures.
The Diamond Value Chain
 Involves 8 steps; from exploration to retailing
 Two types of stones; gem stone quality & industrial
stones
 In 2000 diamonds mined at a cost of $2 billion and
sold at an expense of $7.8 billion. Out of these
diamonds, jewelry worth $57billion was created
Value Chain Actors Worldwide
Source: Porter, Marciano, Wathurst (2009)
Exploration & Mining
Exploration
 300 exploration firms in year 2000
 When a mine is found; samples in order to test and produce a
prediction of the reserve and the mine productivity
Mining
 Open pit mining, hard rock mining & Coastal mining
 Progression time from exploration to mining: 12-15 years
Mesured by Volume
Measured by Value
30%
25%
25%
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
Botswana
Russia
South Africa
Angola
Australia
Botswana
Russia
DRC
Source: Porter, Marciano, Wathurst (2009)
Rough sorting
Rough sorting
 Stones are sorted based on several factors or characteristics:
shape, size, clarity, color and ability to cut
 In 2000, De Beers more than 50% of the world’s rough
diamonds  Sold onto the secondary markets (Antwerp)
Distribution
 The Diamond Trading company is the main distributor on the
market
 As of 2000, 23 non-profit worldwide diamond bourses
Processing, Grading, Jewelry
Processing
• Involves cleaving, cutting and polishing
• The processing stage takes place in 30 countries around the world
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4 leading locations; Antwerp, Mumbai, Tel Aviv and New York
Antwerp has a work force of 2000 people and is considered as the leading cutting
location in the world, measured in both value and volume
India is catching up
Grading
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Gemological Institute of America, grades finished stones before they are put
into pieces of jewelry
Jewelry Manufacturing
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USA 40%, Japan 15% & India 5%
Retailing
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In 2000, 200,000 diamond
jewelry retail outlets worldwide
Current Situation
 Diamond in 2007
– 8% of Flanders' exports and 5% of Belgium’s exports value
– Antwerp accounted for 80% of worldwide trade of rough
diamonds
 Economic recession affected the cluster
– Relocation to cheaper labour-costs markets (since 1970s
lost of 25.000 jobs)
– Decrease in Exports of polished and rough diamonds:
Source: Antwerp World Diamond Centre,
Federal Public Service. (2002, October 08). Minister Neyts : Keeping Antwerp at a Cutting Edge,
Speech at the 2002 Antwerp Diamond Conference, 8th October 2002, Provinciehuis, Antwerp.
Situation in 2009
 Fall in demand for uncut diamond of 50%
 Reduction of stocks by wholesalers
 Belgian government is very committed in
regenerating the diamond industry
 Flemish government might spend €200 million as a
guarantee for banks
 July 2009: trading volume had already recovered
50% of its value in rough and polished diamonds
Source: Antwerp World Diamond Centre,
Certified Gems. The Antwerp Diamond Market,
BMO Capital Market. Retail demand for diamond jewelry and forecast growth.
Cluster Map
30.000 people are directly or
indirectly employed in the Belgian
diamond sector
Antwerp’s Cluster Diamond
Factor Conditions
Strengths
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Available infrastructure
Antwerp’s ports
Antwerp’s district
High-skilled workforce
30 000 workers
Antwerp Diamond High Council
Education - Diamonds schools, training
programs and workshops
Antwerp Diamond Bank
The Antwerp World Diamond Centre
Diamond Office
The Antwerp World Diamond Center certificate body, most important
grading laboratory
– The Scientific Research Centre for
Diamonds (WTCOD)
– The Condiam – technologies supplier
– The Institute of Gemology
– Precious Stones Laboratory
– Gem Defence Initiative
Weaknesses
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One of the highest labor costs per Carat
India undercutting labor cost advantage
Regular immigration leading to social and
structural changes
Labor cost (US$) per carat
Related and Supporting Industries
 Security cluster
 Transportation cluster
– The Port of Antwerp – 2nd largest in Europe and 7th largest
in the World - permitting trade – freight volume: 157,8
million tones
– Shipping: 200 forwarding companies
 Tourism cluster
– The Antwerp Diamond Museum
– The Diamond Land – Diamond Showroom welcoming over
120 000 visitors each year – collaboration with the city of
Antwerp, the Diamond High Council, the Belgian Tourist
Federation, The Provincial authorities, the Chamber of
Commerce
 Specialized banks cluster
Demand
Strengths
Weaknesses
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 Negative effects of the
crisis leading to decrease
of exports and imports of
polished and uncut
diamonds
Strong base
Sophisticated
Well informed
Experienced
Creation of a Marketing
Department within the
Diamond High Council to
organize trade shows,
biennial Diamond Award
to push competition
Context for Firm’s Strategy & Rivalry
Strengths
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Correspondence office for the diamond industry (COFDI)
Collaboration between COFDI and De Beers
The Belgian government has created incentives to attract new labor force
+ Fiscal detraction and financial facilities
The Diamond Office implemented a nominal levy on imports and exports
The Antwerp Diamond Conference
The Antwerp Diamond Exchange – Center of the trade in diamond
(Diamond Bourses)
World Diamond Congress – discussion about specific industries issues
Weaknesses
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Increasing worldwide and national competition
Emergence of new trading centers
Family businesses and close network
Global Issues
Supply-side
Demand-side
• Cutters & Polishers issues
• US credit crisis
– Low margins
– Demand shift
– Cash up front for rough gems
• Blood Diamonds
– Traffic inside the European
Union
• De Beers troubles
– Negative cash flows for 3
years
– Facing increasing competition
– Most important market
– Companies are applying hard
discounts => change in
customer behavior now looking
for the lowest price
• Indian power rising
– Producing second category
diamonds
– But, mines are depleted so
India is specializing in
processing
• Chinese Demand Rise
– Follow the GDP per capita
– Follow Chinese tastes for
traditions
National Recommendations
What?
Why?
How? Who?
Promote restrictions
-Still too many blood diamonds coming from - Proposal to the European Commission
on blood diamond
other European members states (other
-Diamond Council?
traffic at a higher level members are not differentiating them)
(Europe)
Allocate more
resources for cluster
development and
implement strategic
communication
between all actors
involved in the cluster
- Closed cluster no rivalry = no development - Incentives
- Need for investments and innovation
-Federal and Regional Governments
- Need for opening, the cluster is still too
focused on Family Business Development
(Jews & Jain families)
Encourage private
- Enhance competitiveness through greater - Use high expertise and legacy in innovation
investment in
competitive advantage (especially versus ) development and know-how
education and research
institutions to enhance
innovation capabilities
National Recommendations
What?
Why?
How? Who?
Participate in more - Limit the negative impact of the shift of
global competitiveness towards
European cluster
- Consolidate leading Belgian industries
initiatives
- Develop partnerships with , as currently
being undertaken within the logistics cluster
Simplify the paying - Attract small and medium business willing
of taxes
to establish themselves in
-Re-launch a phase of attractiveness of
Improve
government finances workers to the country, hence improving
productivity
over the long run
- Federal and regional government
coordination
-Deep structural reform of the tax system:
equilibrate tax levels in the country and
harmonize regional budgets
Diminish complexity
of overall business
environment in in
terms of time and
costs
- Simplify legal procedures of contract
enforcement and credit acquisition
- Reduce costs of trade across borders (align
to neighbouring countries), through more
public-private cooperation
- Federal government and private institutions
further
-Enhance cluster economic performance
- Facilitate dispute resolution, both for
individuals and companies
- Encourage trade and therefore economic
activity
- Facilitate the arrival of new businesses and
accelerate and simplify the functioning of
financial markets
Cluster Recommendations
What?
Why?
How? Who?
Secure rough supply
(through
diversification)
- Ensure sustainability of the value chain
- Increasing direct purchasing
- Shortage of rough diamonds
from mines to further reduce
-Cutters and polishers’ dependency on supply dependency on the DTC
-Federal government & firms
Promote diamonds as
investment source
-Generate cash inflows from customers to
banks going directly to the Cutters and
Polishers (who need cash)
- Banks campaign on cluster & investment
practices thanks to government incentives
-Specialized Banking Sector in
Vertical Integration
(partnerships with
Indian Mines)
- Lower the costs
- Create new opportunities
-Foster innovation
-New ventures for delivery or in processing
(Indians want know-how and knowledge
transfers); actors: firms
Portfolio & revenue
diversification
- Partners & clients
-Banks and shareholders
-Marketing incentives (need for awareness
and attractiveness)
Institutions pull and
efficient cluster
competitiveness
strategy
- No communication between firms and IFCs - Create equal opportunities for all firms
- No specific strategy to pull the cluster
- Coordination of training and management
- Not enough participation from institutions Programs
Thank Your for Your
Attention !
Any Questions?
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Sources for Antwerp’s Diamond
Cluster
Antwerp Diamond Bank. (s.d.). History. February 12, 2010, on Antwerp Diamond Bank:
https://www.antwerpdiamondbank.com/index.php/ADB_en/profile/
Antwerp World Diamond Centre. (s.d.). AWDC - Home Page. February 13, 2010, on Antwerp World Diamond Centre:
http://www.awdc.be/
Antwerp World Diamond Centre. (s.d.). History. March 04, 2010, on Antwerp World Diamond Centre:
http://www.awdc.be/history-awdc
BMO Capital Market. Retail demand for diamond jewelry and forecast growth.
http://www.diamondsnorthresources.com/i/misc/2008_DiamondValues.gif
Beurs voor Diamanthandel. (s.d.). Home Page. February 18, 2010, on Beurs voor Diamanthandel:
http://www.diamondbourseantwerp.com/
Certified Gems. (s.d.). The Antwerp Diamond Market. February 20, 2010, on Certified Gems: http://www.certifiedgems.com/Antdiamondsmarket.htm
City of Antwerp. (s.d.). Diamond Museum Province of Antwerp. February 23, 2010, on City of Antwerp:
http://www.antwerpen.be/eCache/BEN/16/455.cmVjPTQzNDU.html
Diamonds.net. (s.d.). Home Page. March 01, 2010, on Diamonds.net:
http://www.diamonds.net/Default.aspx?LoginOutSet=LoginOutSet
DiamantClub. (s.d.). Home Page. March 02, 2010, on DiamantClub: http://www.diamantclub.be/
Diamantkring. (s.d.). Home Page. March 01, 2010, on Diamantkring: http://www.diamantkring.org/
Diamond-key. (s.d.). Keyguide. February 13, 2010, on Diamond-key: http://www.diamond-key.com/
DiamondLand. (s.d.). Antwerp Diamonds. February 10, 2010, on DiamondLand: http://www.diamondland.be/
Henn, S. (2010). Indian Diamond Dealers in Antwerp.
Henn, S., & Laureys, E. (2010). Bridging Ruptures.
Port of Antwerp. (s.d.). Home Page. March 02, 2010, on Port of Antwerp: http://www.portofantwerp.com/#0