What was to become the Israeli diamond industry began in 1937, eleven years before the State of Israel was established, when the first diamond polishing plant was opened in Petah Tikva by refugee experts from the Netherlands. In 1938 the 15% import duty on imported rough stones was removed. By 1944 the industry employed 3,300 workers in 33 factories, with £P 1,320,000 capital investment, entirely Jewish. The value of exports was over £P 3,200,000 mainly to the United States, Canada, and India; it was the largest value of any single commodity exported from Mandatory Palestine that year. ,1945 Between 1944 and 1948 the industry suffered from the increasing lawlessness and in February 1948 closed down completely.
After a state was declared, the consumer economy was shifted to a war economy. This came at the height of a diamond crisis, as many war-torn economies were struggling to re-establish. During the first fifteen years of Israel's existence, diamonds and Jaffa oranges were the new state's main export products. After reaching its lowest point in the wake of the 1948 closedown, the industry has continued to grow, producing a world leader in the diamond industry.
Current state
In the beginning of the 21st century, Israel is one of the world's three major centers for polished diamonds, alongside Belgium and India. Israel's net polished diamond exports slid 22.8% in 2012 as polished diamond exports fell to $5.56 billion from $7.2 billion in 2011. Net exports of rough diamonds dropped 20.1% to $2.8 billion and net exports of polished diamonds slipped 24.9 percent to $4.3 billion, while net rough diamond imports dropped 12.9 percent to $3.8 billion. The United States is the largest market accounting for 36% of overall export market for polished diamonds while Hong Kong remains at second with 28 percent and Belgium at 8% coming in third. In 2007, when diamonds still constituted almost 24% of Israel's total exports, 12% of world diamonds were polished in the country. In 2010 this number decreased to 9%., diamonds amounted to 28% of Israel's total exports and they were still 12% of the world's production.
The Israeli diamond industry guarantees all diamonds are 100% naturally made and participates in the Kimberley Process, a certification scheme whose goal is to ensure no blood diamonds enter the marketplace. Some human rights campaigners, however, say the Kimberley Process defines conflict diamonds too narrowly, only relating to uncut stones, enabling Israel's diamond-cutting industry to avoid attention. The Boycott, Divestment and Sanctions campaign, among others, has called for diamonds processed in Israel to be considered conflict diamonds.
