Chamwe Kaira
Japan plans to build a synthetic diamond plant in the United States under a memorandum of understanding signed with the United States.
The agreement sets a framework for up to US$550 billion in Japanese strategic investments aimed at strengthening economic and national security ties between the two countries.
The move could further weaken Namibia’s natural diamond exports, as the United States is one of the country’s largest markets.
The Bank of Namibia has already said that growing competition from synthetic diamonds is pushing down prices for natural stones.
Late last year, Debmarine Namibia chief executive officer Willy Mertens said the company, together with the government, wanted to reshape consumer perceptions at a time when synthetic diamonds are eroding demand for natural diamonds at an unprecedented pace.
Synthetic diamonds now account for nearly 20% of global diamond sales, up from about 1% in 2015.
They sell for up to 80% less than natural diamonds and appeal to cost-conscious buyers. They also dominate the United States engagement ring market.
Beyond diamonds, the agreement provides for Japanese investment in priority sectors including semiconductors, pharmaceuticals, metals, critical minerals, shipbuilding, energy infrastructure such as pipelines, and artificial intelligence and quantum computing.
Under the arrangement, the President of the United States will select individual investments based on recommendations from a newly formed Investment Committee chaired by the US secretary of commerce.
The committee will include other members and involve relevant federal departments or agencies where investments affect strategic interests.
For each approved investment, the United States will set up a special purpose vehicle managed by the US or its designees as a general partner. All free cash flows will be distributed through these vehicles.
Distributions will first be split equally between Japan and the United States after US taxes until a set threshold is reached.
Thereafter, 90% of distributions will go to the United States and 10% to Japan.
The memorandum states that neither government is required to submit investment opportunities to the committee and limits liability for decisions taken under the framework. Each country will cover its costs, with possible reimbursement from available funds within the special purpose vehicles.
