Israel's net polished diamond exports fell 22.8% to $5.56 billion in 2012. This is the largest decline in the country's polished diamond exports since 2009 when exports fell 37.1% to $3.92 billion.



The sharp decline in Israel's exports is an unusual one. Belgium, one of Israel's two main competitors, is expected to post a single digit decline while India, Israel's other main competitor, is expected to post an increases in polished diamonds exports.



One of the leading causes for the decline can be attributed to the Tax Authority and police raids on the Israel Diamond Exchange that started last January. A series of arrests, office searches and closing of a suspected illegal bank that operated in the Exchange led diamond traders to move a large part of their trade to offices abroad.



Of course, that only worsened the already difficult market conditions caused by the global economic hardship and lower consumer demand for diamond jewelry.



Exports to the U.S., which in the past accounted for about 50% of Israel's polished diamond exports, was the destination of just 36% to exports, $2.044 billion, as Israeli traders sought alternative markets.



One such market is Hong Kong, accounting for 28% of exports, $1.585 billion. It was followed by Belgium, (8% / $433 million), Switzerland (5% / $290 million) and the U.K. (5% / $281 million).



Polished diamond imports also declined, falling 24.9% to $4.265 billion, according to the Ministry of Trade, Industry and Labor.