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Gems export on the rise

August 10, 2009


EVEN though exports of gems and jewellery have registered a phenomenal rise in the last few years, the recently announced trade policy seems to have taken a lukewarm approach towards optimising the potential of the sector.

This has dampened the spirit of the stakeholders who were expecting a better deal in view of their export performance despite all the trouble that has characterised life in the northern areas in recent times.

According to figures maintained by the Trade Development Authority of Pakistan (TDAP) and Pakistan Gems and Jewellery Development Company (PGJDC), which is a pubic-private initiative taken by the ministry of industries and production, exports, which were floundering at $23 million in 2004-05, rose by more than 100 per cent to $47 million in 2006-07 and went up by more than 400 per cent to $210.86 million in the 2007-08 fiscal. Gems include precious or semi-precious categories like rough, uncut or cut and polished or unpolished stones, pearls, diamonds and corals like emeralds, topaz, lapis, peridot, sapphire, kunzite, ruby, aquamarine etc.

By any yardstick, the figures are impressive enough to deserve a more focused approach to the sector. The establishment of the PGJDC is a fair indication that the government is not totally unmindful of the promise that the sector holds and the spike in exports since its establishment cannot be discarded as a mere coincidence.

With Rs1.4 billion in allocations for its developmental projects and Rs150 million for its operational expenses, the PGJDC has worked on the value chain dimension, identification of gaps and projects and a broad mine-to-market strategy that includes modern marketing and branding initiatives.

However, there are areas that need government's attention in the sector. A number of mine-owners and exporters based in Peshawar were hoping for some kind of relief in taxes and duties that continue to be levied on the trade despite the fact that life has remained paralysed in the region for a considerable period of time.

Chairman of All Pakistan Commercial Exporters Association (APCEA) Ziaul Haq Sarhadi pointed out an example that, according to him, indicates lack of understanding in official quarters of the ground reality. Lapis lazuli stone, he said, used to come from Panjsher in Afghanistan through Chitral for onward export. It was suggested to the relevant authorities that the import should be exempted from duty because it was ultimately adding to the export after a bit of local processing. It was not done and once the Afghan Transit Trade (ATT) agreement took effect, Pakistan lost out completely on that count.

“The route remains the same, but it is now adding to the Afghan export at the cost of Pakistan's,” said Mr Sarhadi, arguing that if the duty-waiver was given, Pakistan would have been the beneficiary because 80 per cent of those dealing in precious and semi-precious stones on our side of the border also happen to be Afghan immigrants. “They would not have been lured by the ATT had they been making enough money,” he said.

Another expectation of the stakeholders was in terms of relief on the import of machinery that is badly needed for mining purposes. Bulk of mining is still done with the age-old method of dynamite blasting. The PGJDC website itself concedes that “more than 60 per cent of the gems deposits are wasted during mining”, but people in the know of things claim the percentage to be much higher, putting it around the 80 per cent mark.

Other than the massive wastage of gemstones, the dated mining process also results in the loss of human lives and crippling injuries to the workforce. Some locally manufactured mechanical contraptions have made their way, but they are far from what the world at large uses for mining. With the trade policy being silent on the issue, the required machinery is not likely to be imported anytime soon, which means the loss of material and manpower will continue to be a part of the mining activity.

In terms of marketing, the PGJDC has started organising Gems Bazaar to attract buyers in Peshawar and Quetta. Officials at its headquarters in Karachi were not available for any input on the matter, but those heading the operations in the two provincial capitals - Tahirul Qasmi and Waliullah Kasi, respectively - spoke highly of the potential of the initiative which involves vendors and buyers in a simple across-the-table setting.

Eight such bazaars have been held in the last years or so, but vendors like Mohammad Arif, Haji Wali Mohammad and others are unanimous in their view that in the absence of foreign buyers, the initiative is not as productive as it may sound. Even buyers from Karachi and Lahore were few, they pointed out. Yousuf Ali, in fact, said he preferred to attend similar exhibitions in China “instead of wasting time at the local bazaar” because “we get much better value” there.

While Gem Bazaar is a day-long, periodic activity, the Gem Exchange is a permanent facility in Peshawar's Namak Mandi area. The infrastructure is there, but as far as business is concerned, it is as good as dead because out of about 30 shops, only a couple put their shutters up in the morning. Lack of business activity owing to the missing foreign buyers is surely one big reason, but vendors also complain of higher rent of these shops that ranges between Rs10,000 and Rs12,000. The rent that the PGJDC pays for the building is said to be more than Rs300,000 per month.

Zia Sarhady, who, in his capacity as the APCEA chairman, is also on the PGJDC Board of Directors, regretted that the management was taking its decisions in Karachi and Islamabad while ignoring on-ground stakeholders who, in his words, “are in a better position to suggest practical solutions like shifting the venue to some place foreigners could feel comfortable visiting.”

Despite all the hiccups, exports during the 2008-09 fiscal remained around the $240 million mark which confirms the upward trend in the gems and jewellery sector. This has been possible because the exporters are reaching out to buyers abroad instead of waiting for them to come here. If some of the local activity could be streamlined, the potential of the sector could be much better realised.