Jewellery exports from Pakistan have seen notable growth in the last few years; from $413 million in FY11 to over Rs1.3 billion in FY13. The termination of Indian gold jewellery from US GSP plus provided impetus to Pakistani jewellery exporters; they captured Indias share in the international market.
In FY13, proceeds from jewellery exports represented over 5 percent of the total export proceeds to Pakistan. However, after enjoying their successful ride until last fiscal year, jewellery exports declined sharply in the current fiscal year.
Data released by Pakistan Bureau of Statistics shows that exports fell from $906 million in 4M FY13 to a paltry $142 million during 4M FY14. Some industry sources attribute this fall to the decline in average gold prices. But, if the drop in gold prices was the only reason, it would have produced similar detrimental effects on jewellery exports in FY13 as well, since gold prices have been tapering since the beginning of FY13.
One could also question: why did jewellery export slide in 4M FY14 while gold imports have risen steeply (2,231 kg or 204%) over the same period of last year. A month-on-month analysis would solve this query. Out of the total gold imports of 3,337 kg during the 4M FY14, around 3,249 kg were imported in July while the rest of the three months witnessed negligible imports of just 78 kg.
Haroon Rashid Chand, President, All-Sindh Sarafa Association, points out that it was the time when the industry was slapped with new gold trade scheme titled SRO 760 (I) /2013. The new scheme not only discouraged gold merchants from importing gold but also wreaked havoc on the exports of gold jewellery. The same argument was given by Habib Ur Rehman, Chairman, All Pakistan Gems Merchants and Jewellers Association (APGMJA).
Sources highlight that the new regulations, besides capping the maximum gold imports to 25 kg on revolving basis, have complicated the process of imports. The new scheme makes it binding for the exporters to have the contract not raised from the foreign countrys legal authorities and then the same would need to be duly attested by the relevant Pakistan High Commission.
Industry voices add that among other austerities imposed by the government; the value addition time which was 180 days under the previous scheme has now been chopped to 120 days. Moreover, the value-addition tax has been increased from 4 percent to 8 percent on gold bangles and chains, from 6 percent to 12 percent on other gold jewellery and 9 percent to 13 percent on studded jewellery.
Amid increasing cost of production, these developments have reportedly reduced the competitive advantage of Pakistani jewellery exports in international markets.
While limitations on imports of luxury items and precious metals may indeed be needed to ward-off balance-of-payment crisis, the government needs to sit down with the jewellers and reconsider their policies to bring the shine back in jewellery exports.
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GOLD IMPORTS AND JEWELLERY EXPORTS IN 4MFY14
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July August September October
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Jewellery Exports $(mn) 16 43 59 25
Gold Imports (kgs) 3,249 16 21 41
Gold Imports $(mn) 135 0.7 0.9 1.6
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Source: Pakistan Bureau of Statistics
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