Research Paper_4th Revision

The Clean Diamond Process: Kimberley Process

The most peculiar feature of the jewelry industry is exclusiveness, especially in the diamonds trade. Consumers have had only vague ideas of the origin of dazzling diamonds on their fingers and the distribution to the market. In September 2006, Hollywood movie “Blood Diamond” from Warner Brothers 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 violences in some regions in Africa and associated all of the diamond transactions to illegitimate exchanges in the black market.
The public attention naturally shifted to an international rough diamond certification system; the Kimberley Process (Kavilanz, 2006). It has been designed to prevent the illegal trades of diamond and facilitated the legitimate trade of rough diamonds since 2003. Through this program, it has been possible to track the origins of rough diamonds came with certificates. The object of this research is to explore the background of the Kimberley Process, its constituencies and its achievement on the international trade of rough diamonds. As a final point, this research projects the current problems and the future of the Kimberley Process as a clean diamond act.

Background

The “conflict diamonds” were from in few Central and West Africa where large deposits of rough diamond exist. The areas are relevantly easy to mine and smuggle than other areas because of the easy access to the deposits of diamonds. The illegal trade of 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 Africa during 1990s (Clean Diamond Trade, 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). Non Governmental Organizations (NGOs) which were workings for human rights argued that more than four million of citizens were dead associated with the trading of conflict diamonds (Walt, 2006).
According to Smillie(2005), “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. Release of the movie “Blood Diamond” made a huge contribution to start an international debate and resumed the urgent need of a proper campaign to the public in rough diamonds trade to avoid conflicts in future.

Constituencies

There are only two narrow channels in distributing rough diamonds to market (Smillie, 2005); one is De Beers, the biggest diamond company, controlling 80% of rough diamonds in the world. De Beers is the most vulnerable party who would be affected directly by banning campaign against “conflict diamond”. The other is Antwerp, Belgium where serves as an intersection for almost 90% of the world’s rough diamonds for two centuries. The government of South Africa also highly involved in the diamond industry in history and called a meeting first to discuss the issues of illegal exports of rough diamonds.

Even though the Belgian customs data started recording the origin of diamond since 1998, the system was ineffective because a lot of smuggled diamonds could easily changed origins completely (Smillie, 2005). Therefore, the certification system was needed immediately to prove the origin of diamond whether it is from conflict free–zone or not. With the help of industry leaders, governments and NGOs, the first meeting was held in Kimberley, South Africa where the first diamond was discovered in 19th century. (Smillie, 2005).

The Kimberley Process

Official website of Kimberley Process (www.kimberleyprocess.com) describes that the United Nations General Assembly (UNGA) 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. With the attending of Amnesty International and other NGOs, KPCS was finally launched in January 2003.

The KPCS prerequisites that all of the members can trade only with the other participants who fulfill minimum requirements which KPCS designated. Participants should work as groups in Monitoring, Statistics, Diamond Experts, and participation & selection committees. So far 71 governments are contributing in the process for the integrity of the certificate(Kimberley Process, 2007).

Achievement

According to Lustgarten, (2006) a senior writer of Fortune magazine, the Kimberley Certification Process has attributed to decrease the rate of “conflict diamond” from 4 % to 1 % after the regulation was launched. Governments are also working on making the stronger regulation under KPCS not only with penalties, but also with incentives to change the informal system of current black market. It helps to systemize the transparent trades and enforce each member-nation to trade among them.
According to Walt (2006) in her article, Sierra Leone is one of successful regions under the KPCS. Literally, there was no formal export of diamonds in 1999 and it jumped up to $142 million in 2005. Even though, there were lots of tensions among the members who disagree with some part of the process when KPCS was starting (Smillie, 2005), all of the members finally agreed on the amendments for improvement the effectiveness and transparency in the world diamond trade in Brussels, Belgium in June 2006. (Kimberley Process, n.d)

Criticism around KPCS

However, there are still many weak links remained under the control of monitoring KPCS. The main reasons of the weakness are capacity, technological shortcomings, and corruption in the country (Smillie, 2005). For example, several African countries and Brazil are under the extremely weak controls, and smuggling diamonds from those regions are comparatively easy.

Collecting consistent and comparable statistic data is another concern to the KPCS (Smillie, 2005). Most countries submit data based on the inconsistent formulae, diverse valuation technique and different time lags. In addition, there are also remaining problems in submissions of annual reports, follow-ups on review visit and effective applications of internal control in each country (Smillie, 2005).

Conclusion

In the article of Walt (2006), Mordechai Rapaport, the originator of Rapaport Group who reports the annual diamond price to the industry, said "Diamonds are essentially worth nothing." He indicated that the important feature of the diamond is not the price but the signification as a present. If anyone realizes that somebody was killed for the stone, it will lose the dignity and becomes meaningful nothing.

The bright future of KPCS will be accomplished by protecting people in diamond trade and helping them to labor in the safe and healthy working condition, because diamond is not only the luxury item but also the way of living for people in Africa. Furthermore, it will be only achieved by a strong will toward a world free of “conflict diamond” among governments, industry leaders and civil society representatives in the world with constant efforts.

Reference

Back Ground. (n. d). Kimberley Process. Retrieved September 22, 2007, from http://www.kimberleyprocess.com/index.php?option=com_content&task=blogcategory&id=18&Itemid=35

Clean Diamond Trade, (n. d.). Fancy diamond . Retrieved September 22, 2007, from http://www.fancydiamonds.net/Info_Center/Articles/_Clean__Diamond_Trade_and_the_Kimberley_Process.htm

Kavilanz, P. B. (2006, September 11). Jewelers sweat a 'Blood Diamond' holiday.
CNN Money on the Web. Retrieved September 22, 2007, from http://money.cnn.com/2006/09/11/news/companies/diamondjewelry_movie/index.htm

Kimberley Process: key players meet to strengthen efforts against conflict diamonds.
(2007) Kimberley Process. Retrieved October 17, 2007, from http://www.kimberleyprocess.com/images/stories/docs/press1/press%20releases%20ec/i07_791.en.pdf

Lustgarten, A. (2006, October 2 ). Diamond mines are forever. Fortune.
Retrieved September 22, 2007, from
http://money.cnn.com/magazines/fortune/fortune_archive/2006/10/02/8387622/index.htm

Smillie, I. (2005). The Kimberley Process Certification Scheme for Rough
Diamonds. Comparative Case Study 1. Verifor, Retrieved September 22, 2007, from http://www.verifor.org/case_studies/KimberleyProcess.pdf

Walt, V. (2006, December 7). Diamonds aren't forever. Fortune. Retrieved September
22, 2007 From http://money.cnn.com/magazines/fortune/fortune_ archive/2006/12/11/ 8395442/index.htm