Gems & Jewellery Industry Analysis


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An industry analysis carried out on Pakistan's Gems & Jewellery sector. Porter's Diamond model, and others were used for analysis.

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Gems & Jewellery Industry Analysis

  1. 1. Pakistan’s Gem and Jewelry Industry Analysis Farzan Sheikh Rabab Jafar Urooj Usman Sehar Masud
  2. 2. History • Gems and Jewelry industry in Pakistan--as old as the history of Indus civilization • The first commercial jewellery market was set up in Sarafa Bazar in Karachi • First gemstone mine in Pakistan was discovered in 1951, in Haramosh Range in Gilgit • In 1978, Gemstones Corporation of Pakistan (GEMCP) was set up, under the control of Ministry of Petroleum & Natural Resources • In 1970, APGMJA(All Pakistan Gems Merchants and Jewellers Association) was set up • ALL PAKISTAN COMMERCIAL EXPORTERS ASSOCIATION OF ROUGH & UNPOLISHED PRECIOUS AND SEMI PRECIOUS STONES” (APCEA) established in 1988 at Peshawar. • Given Industry Status in/ after2004
  3. 3. Significance • We are the 8th largest consumer of the world. • More than 4 million people attached with gem and jewellery industry • More than 5000 units of Gems and Jewellery employing more than 500,000 people. • Contribution to GDP of gemstones 0.02%
  4. 4. • Global gem stone trade is worth $40 billion, while Pakistan’s share is only 0.31% • During July-dec 2009, Gems of $1.5 million were exported
  5. 5. Factor Conditions • Primarily gold and silver are used. • Gold imported from western states and Gulf countries especially Switzerland and Dubai • 4 official gold importers; ARY , Al-Rahim , Pardesi and Tessori • Bullion market is the main market for local supply • Gold consumption is 100 tonnes while 30 tonnes is imported. Other comes from unofficial channels
  6. 6. • Platinum and Silver are also imported. • Jewellery manufactured is: – 80% in gold, – 19% in silver and copper – Less than 1% in platinum.
  7. 7. Gems
  8. 8. Gems •No formal survey to identify geological resources of gemstones •In 2003, total value of gemstones export was US$4 million •Lack of realization of importance. •Lack of gem cutting and polishing facilities. •Corruption and inefficiencies in transporting. (bribery) •State of the art machinery not used. •Weather conditions extremely harsh (NWFP, J&K) •Inhospitable conditions to work such as snow and high elevation mines •Unavailablity of water •Smuggling on very low prices as people not aware of value •Source of income for IDP’s whose villages destroyed by war on terror/earthquake •Mainly mined through blasting, wastes a lot of gems & reduces size •The government removed duty on diamond and rough gemstones in 2006
  9. 9. Labour • Gems and Jewellery industry attributed as small family oriented industry with skill and traditional mindset. • Skilled/semi-skilled labour force is available at relatively lower rates, which offers a comparative advantage to the country. • Average qualification is Intermediate.
  10. 10. • Steps to improve labour conditions include training and inclusion of women. • Skilled workers (karigars) are paid around Rs.20,000 while unskilled workers (furnace workers) are paid around Rs. 10,000.
  11. 11. Technology • GJTMCs of PGJDC in 5 cities; Karachi, Lahore, Quetta, Peshawar, Gilgit • Introduction of Gem Testing Machinery • Provides services to the retailers
  12. 12. Demand Conditions
  13. 13. Culture •Domestic population/consumer base of more than 180 million •Huge home demand but affected by high gold prices •Eastern culture. Customary at weddings, dowry and as presents on other occasions •Saving a driving factor. •Rise in savings-based demand, fall in jewellery demand •Demand for white gold and platinum restricted to urban areas •Healing powers of gems and birth stones •Local demand of gold is of 21 and 22 karat, globally the demand is of 14 and 18 carat
  14. 14. Demand Trend •Upsurge in gold prices •Changing demand •Changes in product weights •Survey indicates, as much weights reduced by 80%
  15. 15. Recycled Gold 0% 10% 20% 30% 40% 50% 60% 70% 50% or more 75% or more % of recycled gold •Ratio of recycled gold in total has increased from 40% to 70%. •Some substitution towards Silver as base metal
  16. 16. International Demand •International demand for gems •Continuously rising intl. demand for diamond jewellery •International jewellery demand India, China US largest. •India and China emerging. U.S. 31%, India 8.3%, China 8.9%
  17. 17. Exports •Jewellery constitutes 1.3% of Pakistan's exports •FY2010 jewellery exports increased by 35%, $638 million value. •Export target for 2017 is US $1.5 billion •Global jewellery sales could touch $230 billion in 2015 •Country Branding Strategy generating demand & sales at international exhibitions •Major Markets: US, UK, Dubai. •Export Financing an issue
  18. 18. Diamonds Contact Person: Adnan Almas, Gemological Instiute of America
  19. 19. Diamonds • Three grades of diamonds: industrial, near-gems, gems. •Gems quality used for diamond jewellery here (VVS1) •Four C’s of Diamonds: •Cut: Allows maximum light that enters through its top. India global hub for cutting. World’s 80%. Belgium better cutting. •Color: Comes in D (colorless) to Z (light yellow). •Clarity: amount of flaws, or ‘inclusions’ Very Small, VVS •Carat-Weight: Determines size. Unit measure of gems’ weight. 1 carat=0.2 grams. •Unlike gold no standard international prices. •Determined by characteristics, local market. •No certification labs here.
  20. 20. •Higher-end, suitable for stone-studded jewellery • India uses both near-gems and gems •Cutting: stringent import criteria •Shifting use of gold as a base metal to silver. •Platinum almost non-existent. •Too expensive, •Import restrictions, •Skilled labour not easily available
  21. 21. Related and Supporting Industries
  22. 22. Mining • The extraction of raw materials like metal ore and gems are dependant on the mining industry. • Gemstones Corporation of Pakistan looks after the interests of stake holders in gem stone mining and polishing as an official entity. • Around 170,000 metric tons of copper and 300,000 ounces of gold a year yet most of the metal (and gems to an extent) are exported.
  23. 23. Fashion & Media • We have burgeoning fashion industry which is getting international acclaim. There is also product placement in popular shows. • Mostly designer wear, jewellery has huge prospects to grow. • Jewellers were of mixed opinion: – It is the future 5/5 – It has always been important – They’ll have to use us as a means.
  24. 24. Training Institutions • Training institutes established under PGJDC in Karachi, Lahore, Peshawar, Quetta and Islamabad. • Courses such as Gemstone Identification, Soumak, Stone Setting. • There are also one year diplomas in jewelry designing and making.
  25. 25. • Beaconhouse National University has the Department of Jewelry & Accessory Design • It provides a space for highly skilled craftswomen/men, designers and new entrants who aspire to become professional jewelry makers and accessory designers.
  26. 26. Structure • Jewellery manufacturing and trading carried out in more than thirty major cities, 300 smaller cities. • Jewellers operate as single-shop in at least 45,000 villages to meet rural demand. • Karachi main hub provides 60% of the total demand • Important centers include Lahore, Rawalpindi, Hyderabad, Faisalabad and Peshawar for Gems.
  27. 27. • The system first consisted primarily of karigars • They were the main players of the industry and even well known manufacturers were dependant on them. • Technology and mechanization of the industry, their role has been limited and there is a trend towards mass production. • Another reason for reduction of their power would also be their
  28. 28. • Production is divided based on size. Smaller jewelers still acquire from karigars while larger retailers have mechanized, bringing in machinery from Italy. (vertical integration).
  29. 29. Strategy and Rivalry • Indian gold is imported via Dubai • Though we have vast reserves of precious and semi precious stones, most of the gems used come from other countries as it gem cutting are very expensive. • Power generation mainly through generators • Reduction of Wastage. • Tax Evasion
  30. 30. • Workers are also exploited with poor working conditions. • Most new designs are copied from catalogues. • Products are introduced on a continual basis and not a seasonal basis.
  32. 32. All Pakistan Gem Manufacturer and Jewelry Association -APGMJA • Is a registered Trade Organization • Established in October 1970 • Aim was to look after the interests of Gem and Jewelry Merchants, Miners and Exporters in Pakistan • Now has 1000 members & comes under the umbrella of PGJDC
  33. 33. • USAID launched its Pak. Initiative for Strategic Develpoment And Competitiveness (PISDAC) project in 2004 • PIDGC was formed as a result of one of the recommendations to the govt.
  34. 34. Pakistan Gems and Jewelry Development Company -PGJDC • Non for profit, governmental organization • Formed under the Ministry of Industries and Production • Formed in June 2006 • Became operational in April 2007
  35. 35. • Vision: 1. Increase competitiveness • Objectives: 1. Export and production growth 2. Income generation • Action Plan: Improving quality & marketing » Skill development » Technology up gradation  R&D
  36. 36. • Gems & Jewelry Training & Manufacturing Centers (GJTMCs) in 5 cities • Karachi • Lahore • Gilgit • Peshawar • Quetta They offer 12 training programs Imported machinery Paid services: gem testing, carving, f aceting, CAM
  37. 37. • Gem exchange and Gem Bazars in Quetta, Peshawar, Islamabad and karachi
  38. 38. On-going projects • Assaying and hallmarking centers are being built in Karachi and Lahore • Mobile Training Units in remote areas • Mega Gem Bazaars • E-Marketing through PGJDC’s website
  39. 39. • International Fairs – Munich Mineral Show – Dubai International Jewelry Week – Bangkok Gems and Jewelry Fair
  40. 40. • The Company has become a member of International Colored Gemstones Association (ICA) • Affiliated with UET • Women Empowerment – Has trained around 800 women nation-wide
  41. 41. Gold Jewelry and Gemstones Order, 2001: Policy/Duties: 16% Sales Tax will remain applicable all metals, except Gold and Silver. Gold Imports are exempt from normal import tariffs
  42. 42. •STRENGTHS •Availability of raw materials specially gems and semi precious stones. •Skilled labour •Comparative advantage in the studded Jewellery. •Availability of Technical Skill through training Institutes. •Easy Access to International markets. •Recognition in the Global market. WEAKNESSES •Cut throat competition. •High rate of labour costs, utility charges and tax regulations •Not getting benefits from training Institutes. •Not utilization of International Markets. •Having no any affiliation with International Gold Organization •Non availability of Hallmarking and Assaying. •Smuggling •Lukewarm response of Association. •Law & Order situation OPPORTUNITIES •Globalization and free trade. •Competition at international level •Access to new marketing information and skill. •New and unexplored markets. •Easy process of affiliation with International organizations. •Free and transparent trade. •Reduced role of State. •Quality Standards. THREATS •Globalization and free Trade. •Competition with international manufacturing expertise. •Quality standards. •Unmatched customer Demand/ satisfaction •Reduced rate of competencies. •losing of international buyers.
  43. 43. Recommendations • Conscious pursuit of long-term plans and strategy. • Special Economic Zones (SEZ) be promoted • Gems & jewellery units in SEZs & Export Oriented Units (EOUs) can receive precious metal, viz, metal prior to exports or post exports equivalent to value of jewellery exported. • Export financing • Better coordination, trust, with stakeholders & government. • Awareness of marketing, branding advantages. • Hallmarking & Assaying for quality. • Testing/Certification labs for gems & metals. • Curb crime activities • Promote related industries, greater inter-link