Sri Lanka’s gem exports are set to decline in 2015 due to Chinese interventionary measures in their domestic market and the moderation of the euro, while the industry is attempting to create value-added products to take the industry forward in the future.

“Now the prices have come down due to the China incident. Chinese people bought a lot of gems from Sri Lanka and the Chinese government didn’t look into that sector in the past. Now they are intervening and putting a lot of taxes and barriers. Not only taxes, they have punished their people,” National Gem and Jewellery Authority Director General M. Wickramasinghe told Mirror Business.

He said that this was due to Chinese citizens using Sri Lankan gems as a means of hiding illicit funds.

“Chinese convert their black money into our gems. Because the Chinese government found this out and intervened, our Chinese market fell by around 50 percent,” Wickramasinghe added.

He noted that the phenomenon has had a spill-over effect on purchases from other countries.

China is the fourth largest export market for the gem industry with revenues of US $ 12.5 million for 2014. A dry up of sales would mean an oversupply in the market, leading to Sri Lankans—usually considered price receivers in most industries globally—lowering prices to increase volumes.

Wickramasinghe added that the low export value does not paint a proper picture in destination markets.

“We’re sending kilos of gems. Gems we sell for US $ 2,000, they add a bit of gold there and sell it for US $ 8,000. We want to send finished jewellery; then we can get a 300 percent increase,” he said.

The sector is facing further pressure from the European markets due to the depreciated euro and an official from the Export Development Board (EDB) said that the European markets are not expected to do well until the first quarter of 2016. According to the Central Bank statistics, gem exports had drawn in Rs.16.77 billion in 2013, while the National Gem and Jewellery Authority figures showed an increase to Rs.18.65 billion in 2014.  

Receipts from the export of finished jewellery products in contrast were just Rs.3 billion in 2014. While Wickramasinghe said that increasing value addition prior to exports is one solution, it would not be easy to implement. 

The Sri Lankan tea industry too is in the same predicament and is unable to do more value addition, as traders in export destinations have invested heavily into value addition processes in their home markets.

Wickramasinghe added that a new online sales system would be implemented within the year to further increase gem and jewellery promotions and exports.
“With this online system, we can sell our gems with a warranty and deliver as well. We’re trying to find a party to make the website. We’ll be looking to bring it up in six months. Because of the online system, new buyers will arrive from other countries,” he added. 
(CW)