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Home > Israeli Diamond Industry > History > 1960s


The Israeli Diamond Industry in the 1960s

By Shira Ami

For the Israeli diamond production industry, the key word at the end of 1959 was expansion. Israel’s diamond exports rose by 37%. The number of employees increased. By the early 1960s it was already clear to everyone that the Israeli diamond industry played a very significant part in the Israeli economy


Fritz Cohen - Courtesy of the Government Press Office


Workshop for polishing of precious stones of the Israel Gem Corporation at the Jerusalem House of Quality – in the 1960s

For Israel, the major event of the 1960s was the Six-Day War (1967), which brought far-reaching, unprecedented changes to the country. Along with the rest of the nation, the members of the Israel diamond industry were also called up for military service during the war. Two weeks before fighting broke out, about 50% of the workers had already been mobilized. When the war began, more were recruited. The younger factory owners were also mobilized, and some factories closed. The factories that remained open could not manufacture on a regular basis, because of problems in the production chain. Substantial quantities of goods remained in factories at different stages of production, because they couldn’t be finished. Most of the production exported came from the stocks, and the majority was sent abroad on consignment, to allow representatives of Israeli companies to continue trading diamonds while circumstances prevented doing so here. In the second half of June, the factories gradually resumed regular operation, although a large portion of the workers were still in the army.

During this difficult period there were also some uplifting, moving moments. Many of the Israel diamond industry’s clients wired the suppliers, manufacturers and exporters messages of encouragement and solidarity. Mr. Wiggen of the Central Selling Organisation and Mr. Rothschild of Hennig visited Israel during these tense times, in a gesture of friendship to the Israel diamond industry. The CSO decided to allot the Israel diamond industry 1,800,000 pounds sterling of goods and to keep the balance for the Israeli diamantaires rather than selling it elsewhere. This decision served as an example for other rough diamond suppliers, who followed suit. The signs of support from the buyers, the CSO and other rough suppliers made a deep impression on the diamond community in Israel.

World Recession in the Diamond Industry

During the 1960s, the Israel diamond industry operated under conditions of local and world recession. From 1964 on, the world diamond industry experienced some slack in the price of polished diamonds. In 1966, when the CSO announced a rise in the price of rough diamonds, there was no parallel rise in the price of polished diamonds.

The United States, which was the major market for the world’s gem-quality diamond production, suffered a moderate economic slump, despite the steep rise of prices on the stock exchange in late 1966. Sales in the United States did not decline, but neither did they grow. The major markets in Europe suffered a temporary economic recession, particularly in Germany, France and Italy, which were then Israel’s main diamond customers. In Japan, the large clients refrained from buying new stock, due to a government decision to get rid of the old stock it held by selling it to Japanese merchants at reduced prices; the riots in Hong Kong also had a negative influence. Israelis were afraid to extend credit, and stocks of polished diamonds accumulated in Israel.

Recession in Israel

In contrast, the recession in the Israeli economy prior to the Six-Day War had a favorable effect on the work force in the diamond industry. Veteran professionals who had left the industry to look for better-paying jobs began to return to diamond manufacturing. The movement among factories ceased almost completely. Employees began to appreciate their work places more. The quality of work and discipline in the factories improved, and young people began responding seriously to offers of work in the israeli diamond industry.


Fritz Cohen - Courtesy of the Government Press Office


Workers at the ‘Moldowsky’ diamond polishing factory in Givatayim near Ramat Gan in the 1960s

The recession did not affect finances in the industry. The Israel diamond industry enjoyed 6.25% interest, as was customary for export industries. Because the government was the main partner in the export financing fund, the banks’ problems with liquidity did not affect the industry as they did other aspects of the country’s economy.

Rough Diamonds Supplies

For many years the supply of rough diamonds from the CSO was limited, because of the organization’s commitment to the Belgium diamond industry. Israeli manufacturers bought rough second-hand diamonds from suppliers in Belgium, Holland and elsewhere. Supplies from Africa were also sent directly to Belgium and from there, after being resorted, to Israel.

In the 1960s signs of change emerged, both because of political changes in the western African states, which had large quantities of diamonds, and because of the opening of new sources of rough diamonds of different types. Supplies began to come directly to Israel. The government encouraged major diamond suppliers from Africa to send their goods to Israel. To a certain extent the activities of the Hevra Lepituah in Guinea and the Ivory Coast also helped.

The government of Israel told the Central Selling Organisation that it would not be pleased to see discrimination against the Israel diamond industry. They also adopted a policy that discouraged the purchases of CSO goods second hand.

As a result of these measures, the diamond suppliers of melees throughout the world (including the CSO) reached the conclusion that direct relations with Israel were the best guarantee of commercial success.

In 1961, following negotiations between representatives of the Israel government, the Israel diamond industry and the CSO, an agreement was signed determining the status of Israel for direct supply. The representatives of the Israel diamond industry undertook a commitment to buy an average of 1 million pounds sterling of melees from the CSO monthly. The CSO recognized Israel as the almost exclusive buyer of melees, and promised to supply it with five-sixths of all world sales of this rough.

Thus the Israel diamond industry controlled the manufacture of melees. However, the fact that it was restricted to manufacturing diamonds of one type limited the industry’s possibilities.

In 1966, the industry began working other types of rough diamonds in addition to the traditional melees. Initially, a few manufacturers turned to processing less expensive rough, which reached Israel directly from Africa. Within a short time they saw that this was profitable. Consequently, efforts were invested in processing and marketing the polished diamonds, which was sorted into different types. This phase in the history of the Israel diamond industry, which began in 1966, was characterized by diversity, both in rough and polished goods.

New Market Factors

Two new factors appeared on the diamond manufacturing scene – the Soviet Union and India. In Israel, the diamantaires asked themselves to what extent these two factors were likely to influence the diamond industry in this country.

The Soviet Union also began to set up polishing plants to process the gem-quality diamonds. However, this was a fledgling industry; in 1967 it only employed about 200-300 people. All the facts at the time indicated that the industry was in a phase of learning and searching for tools. It seemed that the Soviet Union was not planning to set up a large diamond industry, but would suffice with an experimental industry alone.

In India a diamond industry based on low labor costs began to develop. At the world diamond congress held in Antwerp in 1967 (the Israelis were absent, because of the Six-Day War), it was reported that India employed 12,000 workers for a salary of 11 dollars a week. When Hayahalom 1 was published it still seemed that “it will take a long time before the Indians are able – if ever – to play a serious role in the diamond market.”

Nevertheless, there were a few who believed that the Indians’ strong will, the private initiatives and their accomplishments in dealing with problematic rough would lead to a successful industry in that country. “There is no doubt,” they predicted, “that in the future we will hear much more about the Indian diamond industry.”

Another new factor was the addition of a new target market for polished diamonds: Japan.

Construction of the Israel Diamond Exchange

In 1968, the Israel Diamond Exchange inaugurated its new building in Ramat Gan. At that time, diamond exchange deputy president, Shimshon Rosenblum, passed away. In his memory, the new building was named the Shimshon Building.

The Shimshon Building towers 24 stories high, and when it was built it was already considered one of the largest and most modern diamond bourses in the world. In keeping with the vision of diamond exchange president, Moshe Schnitzer, who had been elected to office a year earlier, the concept of “everything under one roof” was adopted. All the services necessary for diamond trade – from import of rough diamonds to export of polished, all the organizations related to diamond commerce, relevant government ministries, banks, customs and a post office, insurance companies and more – were housed in the new building. To this day, there is no other center that has implemented this concept to such degree. The Israel diamond exchange complex now comprises four multi-story towers, and is the largest and most modern diamond center in the world.

Source: Hayahalom - State of Israel Jubilee edition

By: Shira Ami
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