The proceeds can be increased manifold by curbing export of un-cut stones and smuggling


Oct 07 - 13, 2002

Gems and jewellery have always held a magical allure. They have been the sign of power, prestige and wealth. Women of this sub-continent have always been the biggest buyers. With the settlement, temporary or permanent, of Pakistanis abroad the export of gems and jewellery has also gone up substantially. Entry of Pakistani exporters in some of the developed markets has also encouraged the local jewellers to introduce their branded jewellery. Pakistan's main export markets are USA, the Gulf region and the UK. Pakistan mostly exports ethnic designs and hand-made jewellery. Lately export of machine made jewellery has also increased.

According to the statistics for the year 2001-2002 released by the government, export of gem and jewellery was around US$ 35 million. However, some industry sources say that the figure is under stated and the amount is nearly US$ 60 million. They also say that if efforts are made to curb smuggling of gems and jewellery and stop export of un-cut precious stones, Pakistan's exports of these items can be enhanced to over a billion dollars per annum in next five years.

Pakistan is among the top 10 consumers of gold. The local consumption of gold is estimated over 120 tonnes per annum. The quantity of officially imported gold was around 29 tonnes for the year 2001-2002. This figure looks ridiculously low when compared with the official figures of export of jewellery. According to an industry expert, Pakistan's jewellery exports were US$ 27 million which had a gold content of US$ 17 million. The dismal figure of import of gold can be attributed to two factors: 1) massive inflow of gold bars into the country and import of gold against export of jewellery.

According to a report bulk of gold inflows into Pakistan and India is through people carrying gold bars. This inflow has increased manifold after the two governments relaxed rules about carrying gold and availability of these bars of guaranteed purity in the Gulf region. A lot of people prefer to carry home these gold bars for a number of reasons, ease and the premium being the top two. These bars have ready market in both the countries. Jewellers also prefer to buy these bars due to variety of reasons. Therefore, the official import of gold has always remained low as compared to the domestic consumption of gold.

The GoP has recently taken a historic decision to liberalize the import of gold. According to the new policy, now any one can import gold after paying Rs 63 per tola duty. This step is expected to curb inflow of gold through informal channels the main reason being that there will be no more monopoly of a few. There will also be no incentive the difference of gold price in the Gulf region and the local market. The policy is expected to increase influx of gold into the country substantially as well as increase export of jewellery from Pakistan.

This policy has been received with mixed feelings. While some people believe that massive inflow of gold will increase the export of jewellery, others believe that it is a disincentive for jewellers. Till recently jewellery exporters were allowed to import gold equal to the content of jewellery they export. Some of the exporters had complaints about the delays in clearing of imported gold. Therefore, it was decided to liberalize the gold import.

According to an exporter of jewellery free availability of gold, particularly branded gold bars, will allow the investors to also invest in this commodity. Therefore, the jewellers will not be required to make massive investment in gold. They will be able to buy gold as and when they require it. As such, bulk of the jewellery cost comprise of gold. The other two components are gems, if stone studded, and casting charges.

In Pakistan bulk of the jewellery is produced manually using the expertise of skilled workers. Mostly lost wax casting procedure is used. This process has two limitations: 1) jewellery can not be produced in bulk and wastage is high. As opposed to this production of jewellery by modern machines allows massive production and minimizes wastage. The wastage in hand casting is as high as 15 per cent. This is reduced to around 5 per cent by using modern machines.

Tessori has written a new chapter in the history of export of jewellery export from Pakistan. They are first ever producer of branded jewellery in Pakistan. After getting the tremendous response from Pakistan, Tessori also started exporting its branded jewellery. According to Kamran Khan of Tessori, half of Pakistan's total export of gems and jewellery is by his company. The efforts were acknowledged by the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) by conferring number of trophies and medals to Tessori and Kamran.

Kamran has a very strong belief that gems and jewellery export from Pakistan can be increased manifold in a few years. His level of optimism is that gems and jewellery sector has the potential to earn even higher export proceeds than the amount Pakistan currently earns from export of textile products. To achieve this target all the stakeholders have to play their due role.

An area which has been grossly ignored in the past is capacity building of local workers. This includes, further training of workers already involved in this trade and developing of designing capabilities. Though, the GoP has established a jewellery designing institute, it is hardly making any contribution. In this regard the World Gold Council (WGC) arranged two designing competition in the past.

According to Faisal Hashmi, the local representative of WGC, organizing the two designing competition gave us the conviction that Pakistan has enormous potential. We also sent two of the winner designs to Italy. These designs were not only appreciated but also were among the top hundred designs of the competition. Thousands of designs are submitted in this particular competition every year.

Hashmi also say that Pakistan's conditions are not very different from those faced by India in the past. However, the Indian government came out with excellent policies and the result is that presently earns over US$ 10 billion from export of gems and jewellery a amount even higher than total exports of Pakistan. The reason India was able to do such a miracle was that it provided the most conducive environment for production of world class jewellery. This included encouragement of machine made jewellery.

According to some industry sources the jewellery exported from India is studded with the precious stones smuggled from Pakistan. However, it is also a fact bulk of these stones are smuggled to India in un-cut form. Once these stones are cut and polished in India they fetch millions of dollars.

According to Mohammad Saleem of Almas Gems and Jewellery, the recently announced policy is good but has failed to address some key issues. If the GoP is serious in increasing export of gems and jewellery, it must declare jewellery production an industry. In the absence of such a status local financial institutions are not willing to extend long-term financing for the import of machinery used in gold casting. The same is also true about gem cutting equipment.

Saleem is of the view that due to non-existence of modern gem cutting facilities, bulk of the export of precious stones is in un-cut form. This deprives the traders as well as the country from the receipt of real worth of the gems. He said that significantly large quantity of Pakistan's precious stones is smuggled to neighbouring countries. After cutting and polishing these stones are sold in global markets and some quantities are also brought back into the country.

According to Mohammad Yayaha, Director, Export Promotion Bureau, the GoP has also realized the potential of this trade. The Bureau is following a multipronged strategy. This includes, recommendations to the government to make necessary changes in government policies. The Bureau is actively persuading cluster development philosophy. Above all efforts are being made to ensure greater participation of local jewellery manufacturers in international jewellery exhibitions.