ISRAEL is a thoughtful lover. When it wooed the European market, it sent flowers. Now, Israeli growers can sell tulips in Amsterdam, roses in England and fleurs de lis in France. But Hong Kong is a cannier mistress. In its long love affair with the Pearl of the Orient, Israel has always been careful to match her charms with diamonds. Today, Israel exports diamonds worth more than US$500 million a year to Hong Kong, more than one sixth of its total diamond exports worldwide. Israel supplies about 50 per cent of the world's demand for cut and polished diamonds - its largest single export product. Business is tougher this year because of the downturn in the world economy but Hong Kong remains a healthy market. A diamond, as every woman knows, is both forever and a girl's best friend. But there is more to this decades-old romance than the Oriental woman's delight in expensive presents and dressy jewellery. As locally based Israeli diamantaire Claude Cohen said: ''The freedom here is the best in the world. ''In the diamond trade, people do not want to be bothered by controls and heavy taxes and bureaucracy. And the only thing we have to deal with here is an import duty of 0.0035 per cent. It is more a declaration fee.'' Another major attraction was safety, said Mr Cohen whose Diamond Express Company is part of Cohen & Sons-Orion, one of the biggest Israeli diamond houses. While robberies have happened in Hong Kong, the territory has a better record than many other parts of the world where diamonds are traded. But a large part of what makes the Hong Kong market so attractive is its internationalism - people come from all over Asia to buy here. Much of what is sold in Hong Kong is re-exported around the region, often through specialist Israeli forwarders. Even Indian diamond merchants, who usually find themselves in direct competition with Israelis, are in the market for Israeli goods here. ''It is not the same product,'' Mr Cohen said. ''We are not in competition.'' The reasons for this lie in the Israeli diamond industry's determination to innovate and specialise to stay ahead of the field. Diamonds account for about 20 per cent of Israel's exports. But the raw materials - thousands of carats a month of rough diamonds - are imported, mainly from South Africa through De Beers, although increasingly also from Russia. The value added by processing in Israel is relatively low. To compete with low-wage producers such as India and Thailand, the Israeli diamond industry has gone hi-tech and specialised in fancy cuts. These fetch higher prices and cannot be supplied from elsewhere. Whether set in finished jewellery or sold lose, Israeli diamonds have the edge as a result. Israeli firms have pioneered innovative shapes which are easier to set by industrial jewellery manufacturing methods and allow more of the stone's natural beauty to be seen and admired. Shallower and specialised cuts, sometimes achieved by laser technology, allow for less-obtrusive settings. Meanwhile, computers help decide the optimum cut for the shape of stone, and automatic bruting and polishing robots cut the number of skilled workers needed to produce the perfect jewel. Mr Cohen said his company's new Orion Diamond-Tec factory employed all the latest and most sophisticated technology, leaving it with a smaller, more specialised workforce. However, the personal touch was not lost. The finish of every diamond is personally hand-worked by the company's highly skilled polishers, and expertly and individually inspected. Whether they are looking for traditional round cuts or fancies, by the time Israeli diamonds get to Hong Kong, buyers know they are getting consistent quality every time. The Israeli flower sector may employ more people. And, one day, who knows, it might get around to exporting bauhinias to Hong Kong. But, currently, the 10,000 people employed in the diamond industry are making the biggest contribution to Israel's Far East trade.