PAKISTAN HAS GREAT POTENTIAL IN GEMS AND JEWELLERY INDUSTRY

NIGAR ZEHRA
July 16 - 22, 2007

GLOBAL SCENARIO OF GEMS AND JEWELLERY SECTOR:

World Top Exporters of Gems And Jewelry, 2005

(Million US $)

Gold, non-monetary
(excluding gold ores and concentrates)

USA

Australia

Canada

Peru

China

5,543

4,442

3,701

3,072

2,803

Jewellery, goldsmiths' and silversmiths' wares, and other articles of precious or semiprecious materials, n.e.s.

Italy

USA

Hong Kong
Special Adm.
Region of China

India

China

5,039

4,359

4,275

3,821

2,826

Gems and Jewellery sector has global importance in the world. This sector is divided into two categories Gold, non-monetary (excluding gold ores and concentrates) and Jewellery, goldsmiths' and silversmiths' wares, and other articles of precious or semiprecious materials, n.e.s. The top five exporters of Gold, non-monetary (excluding gold ores and concentrates), the largest exporter of Gold, non-monetary (excluding gold ores and concentrates) was United States of America which export about $ 5,543 million, followed by Australia ( $4,442 million), Canada ($3,701 million), Peru ($ 3,072 million) and China ($ 2,803 million) in 2005. While the world's largest exporter of Jewellery, goldsmiths' and silversmiths' wares, and other articles of precious or semiprecious materials, n.e.s was Italy which export of worth $ 5,039 million, followed by United States of America ($ 4,359 million), Hong Kong Special Administrative Region of China ($ 4,275 million), India ($ 3,821 million and China ($ 2,826 million) in 2005.

OVERVIEW OF PAKISTAN'S GEMS AND JEWELLERY SECTOR:

Pakistan is a country with a rich tradition of craftsmanship in jewellry manufacturing. Skilled/semi-skilled labour force is available at relatively lower rates, which offers a comparative advantage to the country. Their skill enhancement through training would lead to greater competitiveness. Pakistan has been gifted with abundant resources of several precious and semi-precious gemstones, at present mostly found in Northern Areas and NWFP, but with a huge future potential in Balochistan. Most important of the currently found stones are emeralds of Mingora (Swat), pink and golden topaz of Katlang (Mardan) and aquamarine of Chitral and Neelam Valley. At present, there is no final survey available to identify the geological resources of gemstones in the country. Furthermore, due to lack of realization of its importance as an industry, those who are engaged in the mining, cutting/polishing and trading of gemstones in Pakistan have not been able to exploit the full potential of this sector.

The first gemstone mine in Pakistan was discovered in 1951, in the Haramosh Range in Gilgit. But it took no less than 27 years for the establishment of Gemstones Corporation of Pakistan (GEMCP), under the administrative control of Ministry of Petroleum & Natural Resources, in 1978. GEMCP was responsible for exploring, mining, auctioning and exports of gemstones. Within 15 years of its establishment, GEMCP was disbanded in 1993-94 and private sector was encouraged to invest in the sector. The impact of privatization proved to be positive, as exports of gemstones have risen since then, albeit slightly. In 2003, the total value of gemstones export was worth US$4 million. Factors including lack of appropriate skills, vested interest, regulatory bottlenecks, technological limitation and so forth, have been responsible for hindering the efforts of new investors to make any significant progress in this regard.

Likewise, the Free Trade regime in addition of removal of international barriers is posing a great threat to the highly fragmented market of Pakistan gem a jewellery sector, being denied of gold loans by banks, is operating with the lack of training facilities besides the lack of standardization and quality assurance.

The industry experts said that the country had not been given its jewellry sector any kind of financial help from any of the banks or financial institutions. The experts termed the delay in establishment for jewellery exports an expensive mistake.

EXPORT OF GEMS AND JEWELLERY IN MILLION US $:

Pakistan export two categories of Gems and Jewellery sector which are Precious & Semi Precious Stones and Jewellery. The major export share of Gems and jewellery sector was gone to Jewellery items as seen from the above table. The export of Gems and Jewellery has been decreased by 24.5% since last five years from $28.48 million in 2001-02 to $ 21.49 million in 2005-06. Although, the volume of exports of jewellery from Pakistan is of no great significance in the total global trade of US$84.4 billion but the growth potential of exports in the sector is huge.

YEAR

GEMS JEWELLERY

PRECIOUS & SEMI-PREC. STONES JEWELLERY

2001-02

28.480

1.500

26.980

2002-03

24.774

2.173

22.601

2003-04

28.182

3.693

24.489

2004-05

23.763

3.874

19.889

2005-06

21.493

4.628

16.865

Currently, Pakistan imports more than one hundred and twenty tones of gold per annum, which makes it the eighth largest consumer of gold in the world.

REASONS DUE TO WHICH THIS INDUSTRY IS NOT FLOURISHED:

*Lack of finance availability, not a single Pakistani bank or even the State Bank of Pakistan has ever been involved in the import of gold. Banks in countries like Turkey, Italy, Malaysia, India and have played an extremely vital role in the jewellery sector. Banks could add value to their banking services for their clients in the jewellery business and provide loans, which were a substitute for the money loans.

Banks make a margin on the loans and commission on the letter of credit. Banks also get a large amount of foreign business because every transaction in gold is with a bank, where basically they are buying gold and customers are giving money in local currency. 'When gold is given out in consignments to manufacturers on behalf of overseas buyers, there is a charge for the delivery of gold'.

*One of the main hindrances in the development of this is the lack of it being recognised as an industry due to which none of the banks and financial institutions support.

*There was a dearth of skilled, semi-skilled and relatively cheap labour available in Pakistan. The jewellery trade in Pakistan involves a large turnover of jewellery worth million of dollars, but the drawback is that the jewellery industry still relies on traditional designs which can only satisfy the local demand of consumers in Pakistan.

*A major handicap to the development of jewellery products for exports from Pakistan is the lack of facilities for training of manpower in design, craftsmanship, quality assurance, standardisation and marketing management. The Pakistani manufacturing industry if continues to stagnate will eventually decline as it will fail to compete with Asian countries (Thailand, Hong Kong and India) and European countries in its domestic market when trade barriers are removed.

*Most of the jewellery exported from Pakistan was being purchased by Pakistani expatriates. They stressed the need for improving our understanding of international designs and trends to increase our customer base beyond our traditional clientele.

SUGGESTIONS AND RECOMMENDATIONS:

1) Gemstone industry should be given a boost by introducing Pakistani stones in the international markets through meaningful participation in international gem shows. The exhibitors should be encouraged to bring out the best gems and put them on display keeping in view the expectations of the consumers. The stones in the exhibitors should show the richness of the area.

2) The Gems and Jewellery industry should be announced at zero rated industry, as it is export- based industry.

3) Incentives for Exploration, Mining, Cutting and Polishing of Gemstones for Export on Scientific lines are required to be rationalized at par with the Neighboring Gems producing countries.

4) The Gems industry should be given loans to the nominal mark up.

5) Gemstone industry should be given a boost by introducing Pakistani stones in the international markets through meaningful participation in international gem shows. The exhibitors should be encouraged to bring out the best gems and put them on display keeping in view the expectations of the consumers. The stones in the exhibitors should show the richness of the area.

6) Holding special displays in major markets like USA, UK, Switzerland, Thailand, Sri Lanka and India can be an important source not only of introducing but also establishing the credibility of Pakistani stones in international markets.

7) To be competitive in the global market, soft loans and ready financing were essential, making a tremendous difference to the industry if gold jewellery fabrication was recognised as a priority sector by banks.

With the passing of time corporate finance has taken on an increasingly important role in the management of jewellery companies. 'Financial help becomes extremely important in a highly fragmented sector, which has to compete with the external competition'.

ROLE OF GOVERNMENT:

*Government is focusing on the development of gems and jewellery sector and plans to enhance its exports from $21 million to $500 million through skill development, market access and tapping its rich potentials in the country.

*Pakistan offers a lot of potential of foreign investment in Gems and Precious Stones Sector which can be exploited by Thai investors. Pakistan government was giving equal treatment to foreign and local companies. Government was not only upgrading the mine sector but also focusing on the training for cutting, polishing of the precious stones in order to develop this sector.

*Government was committed to untapped the natural resources especially gems of the country and in this regard it had taken numerous steps and established Pakistan Gems and Jewellery Development Company (PGJDC) with the aim to develop this sector. Pakistan has a market of 160 million people with rich natural resources including gems and Jewellery and urged the investors to take benefit from it. This sector requires proper training, management and marketing for the development of Gems and Jewellery sector.

*Initiatives taken by the government to upgrade this sector and government has also established training institutes for the development of the sector and invited master trainers from Thailand to share its knowledge and experience with Pakistan for the mutual benefit of the two countries. Pakistan has rich natural resources especially gems and assured that TGJMA would extend its all possible support and technical assistance to Pakistan for the development of this sector. Thai experts could train Pakistanis for proper cutting, polishing and marketing of the Gems and Jewellery sector of Pakistan and its exports to international markets.

PACKAGE FOR GEMS AND JEWELLERY SECTOR:

By considering that gems and jewellery sector have considerable export potential. Therefore it is decided to announce the following package to facilitate this sector.

i. Presently exporters are required to export jewellery made from imported gold within a period of 90 days. This time limit has now been extended to 180 days. Similarly, proceeds from export of jewellery were required to be remitted within 120 days. This time limit has now been enhanced to 240 days.

ii. Presently a Valuation Committee is functioning for the clearance of gems and jewellery before export. The procedures involved were retarding the growth of exports of this sector. It has therefore been decided to abolish the Valuation Committee.

iii. A scheme, in consultation with State bank, Pakistan Bankers Associations, commercial banks and jewellery exporters is being developed whereby exporters will import gold by utilizing financing from private banks under a collateral arrangement acceptable to commercial banks and jewellery exporters. Non availability of running finance has been a major problem in the growth of this industry.

iv. It has been decided to declare this sector as an industry so that they have easy access to credit and have advantage in utility rates and taxes.