Research Paper_3rd Revision

The Clean Diamond Process: Kimberley Process
by Song Hee Lee

Introduction

The most peculiar feature of the jewelry industry is its exclusiveness, especially in the diamonds trade. Consumers have had only indistinct ideas of where the dazzling diamonds on their fingers come from and how the rough diamonds are distributed to markets. In September 2006, Hollywood movie “Blood Diamond” from Warner Brothers released. The movie highlighted the critical issue of “conflict diamond” trade, and brought a huge public attention to the smuggled diamond transaction. The timing of movie release made the whole jewelry industry paranoid because the negative publicity could disturb the upcoming holiday shopping season critically (Kavilanz, 2006). Consumers become confused good diamonds with “conflict diamonds” which funded rebel violence in some regions in Africa and associated all of the diamond transactions to illegitimate exchanges through the black market.

The public attention naturally shifted to an international rough diamond certification system: the Kimberley Process. It has been designed to prevent the illegal trades of “conflict diamond” and facilitated the legitimate trade of rough diamonds since 2003. Through this program, It is possible to track the origins of rough diamonds with certificates. The object of this research is to explore the background of Kimberley process, its constituencies and how it affects international trade of rough diamonds in the jewelry industry. Finally, this research projects the current concerns and the future of the Kimberley Process as a clean diamond act.

Background of Kimberley process

The “conflict diamonds” were from in few Central and West Africa where large deposits of rough diamond exist. These areas are relevantly easier to mine and smuggle than other areas because of the uncomplicated access to rough diamonds. The illegally traded rough diamonds were financed the rebel movements and their allies to operate arms in Sierra Leone, Angola, Liberia, the Democratic Republic of Congo and the Ivory Coast in 1990s (Clean Diamond, n.d.). As a result, 50,000 of innocent people were killed during the nine years old civil war only in Sierra Leone (Walt, 2006). NGOs which were workings for human rights in the area argue that more than four million of citizens were dead associated with the trade of conflict diamonds.

According to the case study of Smillie, “Conflict diamonds” were firstly issued in 1998 by a British NGO and reported to the United Nations Security Council. In 2000, a Canadian NGO published a report on the rough diamond which has been fueled for Sierra Leone’s civil war. Until then, the problems of diamond industry were totally ignored with the exclusiveness of the jewelry market. Release of the movie “Blood Diamond” made a huge contribution to start an international debate and resume the urgent need of proper campaign to the public in rough diamonds trade to avoid the conflict.

Constituencies

There are only two narrow channels in distributing rough diamonds to market; one is De Beers which controls more than 80% of gem quality rough diamonds in the world. The other is Antwerp where is the main centre of the world’s diamond trade for two centuries. De Beers is the one who would be directly affected by sustained banning campaigns against conflict diamonds and understand the vulnerability in this market very well. Antwerp serves as an intersection for almost 90% of world’s rough diamonds and one of the major contributors in the Belgian economy. The government of South Africa also takes important role in this play, because it has been highly involved in the diamond industry in history and called a meeting to discuss the issues first.

The meeting was held in Kimberley, South Africa where the first diamond was discovered in 19th century with the participating of industry leaders, governments and NGOs. Leaders on the conflict-prevention sides were South Africa, Botswana, Namibia, Canada, and Britain. They indicated that the need of certification system which prove the origin of diamond which is from conflict free–zone. Even though the Belgian customs data started recording the country of origin or provenance of diamond since 1998, the system was ineffective with the large numbers of smuggled diamonds which changed the their origins completely(Smillie, 2005).

Kimberley Process

Official website of Kimberley Process describes explicitly that the United Nations General Assembly adopted the agenda to create an international certification scheme for rough diamonds and formed the Kimberley Process Certification Scheme (KPCS) as a regulator among countries, rough diamond entities, and regional economic integration organization in May 2000. Participating with Amnesty International and other NGOs in the Kimberley Process and KPCS was finally launched in January 2003.

A Kimberley Process Certificate is prerequisite that all of the participants can trade only with the other participants who meet the minimum requirement which KPCS designated. Total 71 governments were involved, participants should work as groups in Monitoring, Statistics, Diamond Experts, and committees in Participation and Selection to guarantee the integrity of the certificate and dedicate to stop trading of “conflict diamonds”.
(Kimberley Process, n.d.)

Lustgarten, a senior writer of Fortune magazine, said that the Kimberley Certification Process has attributed to decrease the rate of “conflict diamond” from 4 % to 1 %, even though several scandals were emerged after the regulation was launched. It also made a great attempt to systemize the transparent trade in the rough diamond transaction and enforced the member nations to trade among them. Now industry studies claim that 99% of diamonds on the markets are “conflict-free diamonds” thru legitimate channels under the Kimberley Process.

Critical Issues around KPCS

Still, there are many weak links remained under the monitors of KPCS. Especially several African countries and Brazil where are under the extremely weak controls. For example, diamonds from one region easily smuggle to the other region and it is almost impossible to detect them. The main reasons of the weakness of the control are capacity, technological shortcomings, and corruption in the country (Smillie, 2005). Governments are aware of the situations and working on making the stronger regulation when diamonds are exported to Belgium along with incentives and penalties to change the informal system of current black market. As Walt (2006) reports in her article, Sierra Leone became a success story of the Kimberley Process after the number of officially exported diamonds jumped up from zero in 1999 to $142 million in 2005.
Collecting consistent and comparable statistic data is another concern to the KPCS. Most countries submit data as based on the inconsistent formulae, diverse valuation technique and time lags. But before the Statistic, there are also remaining problems of submission of annual reports, follow-up on review visits and effective application of internal controls in each country (Smillie, 2005).

Smillie(2005) argues that, there were still lots of tensions among the members who disagree with some part of the process, which are never proven to be relevant enough to deal all of the foreseen problems so far. At last, June 2006, the European Commissions hosted a meeting in Brussels to review after the three years of its operation. All of the members discussed about strengthen the scheme and agreed on amendments for its improvement of the effectiveness and transparency in the world diamond trade (Kimberley Process, 2007).

Conclusion

Mordechai Rapaport, whose Rapaport Group reports the diamond price list to the industry annually, said "Diamonds are essentially worth nothing," (Walt, 2006). He explicated that the important feature of diamond is not the price but the signification as a gift. If any consumer realizes that somebody was killed for the stone, the diamond will lose its dignity and become mean nothing but “blood diamond”. It is said that there were only less than 15 percent of “conflict diamond” carried even during the civil wars in Sierra Leone, Liberia, Angola and the Democratic Republic of Congo (Walt, 2006). Not only with help of the film “Blood Diamond”, the diamond producers and dealers have been realizing that carrying those “conflict diamonds” will become a pain in the neck in their business even though the portion is tiny of the entire business. It could dim the glow of other good diamonds which came from deep-level mines of well controlled International Corporations.

Today’s Kimberley Process Certification Scheme is getting evolved toward making more effective mechanism for banning export of “conflict diamonds”. The bright future of the Kimberley Process will be only achieved by industrious efforts among governments, industry leaders and civil society representatives in the world if they have a strong aim toward a world free of “conflict diamond” and work continuously all together (Background. n.d.).

Reference

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Kavilanz, P. B. (2006, September). Jewelers sweat a 'Blood Diamond' holiday.
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