This article is the second in a two-part series. Read part one here.
The world’s busiest rough diamond corridor, which runs a $4 billion annual business between Antwerp and Mumbai, is seeing a change for the first time in 80 years. The ongoing wars between Ukraine-Russia and Israel-Hamas have subdued global demand and prices for diamonds for two years running. The fallout of these geopolitical events masks a foundational shift taking place in the Mumbai-Antwerp diamond supply pipeline that may upend the primacy of Antwerp for Mumbai. An indication of this is the movement out of Antwerp since 2018[1] by many Palanpuri Jain diamantaires who are either opening offices in Dubai or shifting there with their families because of the ease of doing business in Dubai compared to Antwerp[2]. This is a significant change: Antwerp has been home to the largest concentration of overseas Indian-origin diamantaire families, some of whom have lived in Antwerp since the end of the Second World War.
A key factor for the shift has been increasingly stringent Belgian and European Union compliance requirements and tax laws.[3] In contrast, Dubai is both conducive to business and geographically close to Mumbai, the largest diamond market and industry in the world today which supplies 11 in 12 diamonds sold globally. Dubai is also close to Africa, currently the largest source of rough diamonds as Russian diamonds remain sanctioned. In Dubai, there are no problems in getting visas for staff members including the maharaj (cook), the centre of any Jain business family’s kitchen, and a key staff member for the diamantaire’s wife who supports business operations by ensuring the office lunch tiffin reaches on time.
Far weightier than extra paperwork and visas is that rough diamonds, a speciality of the Indian trader, are now being offered by a few De Beers Sight Holders[4] in Dubai’s diamond market, making it unnecessary for those with no sizeable presence in Europe’s polished diamond markets to continue in Antwerp.[5] [6]
“India is today the largest manufacturer of polished diamonds in the world and Indians control the global diamond trade whether in Belgium, United States, Hong Kong, Dubai,” points out Mehul Shah, vice president of Bharat Diamond Bourse, current treasurer general of the World Federation of Diamond Bourses [7], and head of Star Brillian diamonds. This makes any overseas Indian traders’ proximity to the Mumbai-Surat corridor advantageous. Of the $4.3 billion roughs imported from Belgium in 2022-23, after value addition, $2 billion worth of diamonds were exported while the local markets absorbed the rest.[8]
Much before India became independent, Palanpuri Jain diamantaires like Kirtilal Manilal Mehta[9] (known as Bapaji in the community) travelled to Antwerp and Tel Aviv in British-administered Palestine in 1945. The triangle of his trade travel was Antwerp, Amsterdam and Tel Aviv. Life in the aftermath of the war was hard due to shortage of food, living in a foreign culture, and the barrier of language. Despite these hardships, Gembel (Gems of Belgium) was founded.[10]
Over almost eight decades, the Indians carved a niche for themselves in Antwerp by purchasing cheap roughs (often small and near gem quality diamonds that artisans in India became skilled in cutting-polishing) that were unwanted by other traders. Packets of these were sent to Mumbai from where they were carried by Angadias (couriers) to the manufacturing centers of Navsari and Surat. They were then cut and polished in small workshops or the homes of local families, after which they were returned to Mumbai for domestic sale and for export.
Satish Mehta, trustee and secretary of the Shree Palanpuri Jain Sthanakvasi Association[11], and proprietor Unik Gems LLP, says till the late 1990s, the trading network was dominated by Palanpuri Jains. “Because diamonds are a high-value commodity and the business is transacted on trust, our ancestors sensed the huge opportunity in Antwerp and began introducing blood relations, even distant family, which ensured safety and credibility in business transactions. It boosted the growing diamond corridor between Belgium and India,” he points out.
Mehul Shah was taught everything about the business by his Mumbai-based uncle, who mentored him in the trade from the age of 17 till two years later when at 19, he started his own business. On his first trip to Antwerp a year later, community members whom he had never met, trusted him with lakhs of rupees without any written agreement because they knew his father. Many had not forgotten the hospitality they had experienced when they passed through Kolkata and lived at the Shahs’ home there.
Hosting out-of-town community members at home or inviting them for meals is intrinsic to this community’s ethos. It is also practical, as getting Jain vegetarian cuisine is difficult not just abroad but even in restaurants in India. In distant Antwerp, where margins are thin and profit is possible only on high volume turnover, it makes business sense to keep overheads like food and accommodation clean but frugal. This is where the wives of the Antwerp diamantaires step in with invaluable support.
When Indian buyers travel to Antwerp, to inspect and buy rough diamonds from their Antwerp-based compatriots[12], they often eat in the Antwerp-based diamantaires’ offices. It falls to the lady of the house to organize a full lunch for up to 25 people every one of those days. “In Antwerp, most families have a maharaj because even on regular days, lunch is sent for everyone in the office,” Sonali Mehta says.[13] The wives then make the tiffin delivery to the office. Few wives are involved in the business – it is usually three to four brothers of the family who head various operations.
This ecosystem is replicated in other major diamond centers like London, Hong Kong, Tel Aviv, New York, and Florida, and its flexibility allows for the constant travel and migration of this trading community between India and overseas markets.
Although Palanpuri Jain diamantaires ventured to Antwerp soon after the War to reclaim India’s colonial period diamond trade (see Part 1), India’s first Prime Minister Jawaharlal Nehru and his government continued the ban on the import of diamonds which was in place under the Defence of India Act & Rules (1939) in a bid to conserve precious foreign exchange. They did not then understand the industry’s potential to earn foreign exchange and generate employment. [14]
Consequently, “It became more a smuggling business as diamond parcels were sent here unofficially. In those days the government was not so strict, so people made money,” remembers Suresh Mehta of Diamond Cutters NV[15], who started out in the diamond business in 1960. The ban slowed the growth of the trade in India, but Palanpuri families continued to go overseas to Antwerp, London, New York, Tel Aviv, and Hong Kong, seeking opportunities to make money.
In 1952, the Indian government permitted limited imports on the condition that the bulk of finished diamonds be sold abroad. This, along with the establishment in 1966 of the Gems and Jewellery Export Promotion Council (GJEPC) under the aegis of the Ministry of Commerce, gave to this then-unorganised industry a platform to approach the government. The timing could not have been better, as the devaluation of the Indian rupee that same year led to a ban on diamond imports – one that was soon reversed under a compromise formula.
The ‘opening up’ of India’s diamond industry[16] was accelerated by a growing Palanpuri Jain presence in Antwerp, which was able to access cheap credit in Europe and the banking services of the Bank of Baroda which opened its Antwerp branch in 1958.[17] De Beers too recognised the importance of India’s expanding industry and in 1962 appointed Indian Diamond Export Corporation, a consortium of three Antwerp-based dealers comprising Mohanlal Raichand, H.B. Shah, and Hashamali Jhaveri, as its first Indian sight holder.[18]
The ambitions of Antwerp’s Indian-origin diamantaires and India’s incremental policy changes finally came together in 1991-92 when the Indian economy reformed, and all barriers to foreign exchange trading on current accounts were removed. This made Mumbai-Surat the most important diamond manufacturing corridor in the world – a title it has kept till today. This would not have been possible if Antwerp had not been a friendly, conducive city to live in and trade with. Dubai may be the new hotspot for the diamond trade, but the Antwerp-Mumbai ties remain strong, rooted as it is in their 100-year legacy and extraordinary success.
Sifra Lentin is Fellow, Bombay History, Gateway House.
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References
[1] Interviewee Sonali Mehta who now lives in Dubai, pointed out that in 2018 when diamantaire wives , many formerly from Antwerp met for coffee there were just nine of them. They formed a WhatsApp group then, which today hosts 51 ladies and their families who all have now settled in Dubai.
[2] Belgium has no export or import taxes on diamonds. Since 1 January 1999, imports of diamonds from non-EU countries have attracted a Value Added Tax of 21% calculated on the “customs value”, i.e. the amount mentioned on the invoice (freight and insurance included) converted into Euros (at the rate imposed by the Ministry of Finance). See: Import and Export Procedures for Diamonds in Belgium, https://www.awdc.be/sites/awdc2016/files/documents/DO%20Import%20and%20Export%20Procedures_0.pdf
[3] Diamond traders are now required to file detailed monthly paperwork. This requires more staff and higher overheads for traders whose mantra is keeping operations lean, uncluttered, and within the family.
[4] De Beers once enjoyed a monopoly in the sale of rough diamonds, which enabled it to regulate global market prices. It sells gems in parcels to only designated Sight Holders and Accredited Buyers. These sales presently take place ten times a year in London and in Botswana. There are about 128 DTC Sight Holders listed on the De Beers website, many of whom are of Indian origin. See Customer Directory, De Beers Group, https://gss.debeersgroup.com/customer-directory
[5] What has also helped Dubai’s diamond markets are the Abraham Accords of 15 September 2020 which has facilitated direct trade between the United Arab Emirates’ and Israel’s diamond traders.
[6] The De Beers monopoly and control over global gem-quality rough diamond supply and prices, which was exerted through its traditional system of selling only through its Sight Holders and Accredited Buyers, has dissipated greatly, because of several factors: (1) Anglo American PLC’s 85%holding in De Beers is currently up for sale and the new buyers may not want to continue with the traditional distribution system; (2) the 15% holding of the Botswana government in De Beers is not up for sale, and under current agreements De Beers currently allocates 25% (target is eventually 50%) of all its roughs mined in Botswana and Namibia to the Botswana government’s agency, Okavango Diamond Company, for distribution that is done outside the De Beers system; (3) Russia’s Alrosa, which is currently under sanctions, is the largest supplier of gem quality roughs in the world today and once sanctions are lifted will be a major source of gem quality diamonds. See: https://rapaport.com/analysis/whats-next-for-de-beers/
[7] The World Federation of Diamond Bourses (WFDB) headquartered in Belgium regulates 30 affiliated diamond bourses across the world including the Bharat Diamond Bourse at Bandra-Kurla Complex in Mumbai. This makes disciplining errant traders or those who cheat (like mixing lab-grown diamonds with mined ones) easier because any sentence of limited suspension, fines, and even outright removal of a trader from a bourse, will be enforced in all 30 bourses. The arbitration committee also hears trade disputes of its members that include disputes between them and members from other affiliated bourses. This internal arbitration mechanism ensures the creditworthiness of the business and protects against litigation, although cases are known to go to court. Two senior office bearers of Bharat Diamond Bourse, Anoop Mehta (president of BDB) is a board member of WFDB, and Mehul N. Shah (vice president of BDB) is the treasurer general of WFDB.
[8] See The Gem and Jewellery Export Promotion Council (Ministry of Commerce), India, data https://gjepc.org/commodity-vs-country-wise.php
[9] Mumbai’s Lilavati Hospital in Bandra Reclamation has been endowed by Kirtilal Manilal Mehta and his family.
[10] Kirtilal Manilal Mehta settled in Savyon, Ramat Gan, Tel Aviv, close to Israel’s diamond bourse. His four sons developed the Gembel business in Antwerp.
[11] The Palanpuri Jain Sthanakvasi Association is an association of Sthanakvasi Jains, a subsect of the Shvetambara (“white-robed”) sect of Jainism, from Palanpur, a former princely kingdom and today a part of the Indian state of Gujarat.
[12] There are many Indian sightholder companies on the De Beers Global Sightholder Sales’s (DBGSS) list of authorized bulk purchasers of rough diamonds. De Beers Group is currently the second-largest miner of diamonds. DBGSS was previously known as Diamond Trading Corporation. Besides the De Beers mines, large diamond sources are located in Russia, Canada, Australia, Africa (mines other than those controlled by De Beers).
[13] The big Indian-origin diamantaires like Rosy Blu, Eurostar, Dia Rough, Blue Star, maintain flats in Antwerp for buyers from India, where they are housed. Lunch and dinner are inevitably from or in their hosts’ home and they are also taken out for dinner as many Antwerp restaurants offer special vegetarian and Jain menus.
14 In contrast to the Indian government’s early policy is that of Israel, which became a nation a year after India in 1948. Israel crafted special policies to attract the diamond trade and cutting industry to Tel Aviv and its suburbs, and in development townships like Beersheva in the Negev where diamond factories were set up.
[15] Suresh Mehta’s first overseas posting as a young man was in Colombo where he lived for only two months as he found it unremunerative. He then moved to Aden for a year, which was profitable. This was followed by Hong Kong where he got his big break and a partner, and then finally settled in Antwerp, which is his company’s headquarters today.
[16] In terms of physical trading, the Mumbai market transitioned in the 1970s from the sidewalks of Dhanji Street (Zaveri Bazaar) and the old trading hall of The Mumbai Diamond Merchants Association (est. 1906) to a new MDMA trading hall in Panchratna building where many dealers had offices, and in 2011 to the sprawling complex of Bharat Diamond Bourse in Bandra-Kurla Complex.
[17] Chinmay Tumbe, ‘Transnational Indian Business in the Twentieth-Century,’ The Business History Review, Vol. 91, No. 4 (2017), 651-679.
[18] See the article “40 Years of the Indian Diamond Industry” in https://www.diamondworld.net/archival/8713