COMMENTARY

Jewellery industry losing lustre

Boonsong Kositchotethana

Once among Thailand's top foreign exchange earners, gems and jewellery are losing their lustre and could become a sunset industry within the next few years if the country does not give it a shot in the arm. Our industry is losing out to countries like China, India and newcomer Vietnam, which have been vigorously pushing their jewel exports by exploiting their low-cost advantage and tapping the world's rising love affair with jewels. On paper, Thailand's gems and jewellery exports seem to look all right, with growth being recorded in the past five years: 14.5% in 2002, 12.3% in 2003, 1.7% in 2004, 21.7% in 2005 and 9.07% during Jan-Nov 2006. But these figures prove deceptive if one were to take a closer look. First, these export figures include gold ingots which, for instance, accounted for nearly 15% of the total gem and jewellery exports in the first 11 months of last year. By taking out the gold ingots, the country's gems and jewellery exports contracted by 0.13% to 110.26 billion baht.

Second, the dramatic increase in the prices of raw materials such as gold, diamonds and gemstones, which are sourced from overseas, have significantly inflated the country's gems and jewellery export figures, giving a false impression of continued growth.

Over the past few years, the gold price has doubled to US$600 per ounce, while that for diamonds and gemstones have grown by 20%.

Meanwhile, the value-added benefits the Thai jewellery industry gets continues to slip, raising doubts among existing operators whether to go on with their trade in the wake of fierce international competition and their inability to strengthen their competitive edge.

What the official statistics do portray more accurately is the declining importance of the gems and jewellery industry as a major exporter.

Having ranked as one of Thailand's top three exports in the last 15 years or so, the position of gems and jewellery dropped from 5th place in 2001 to 8th in 2005. Again, the rankings include the export value of gold ingots which, if excluded, would see the industry's position falling further behind. Statistics also show that the gems and jewellery's contribution to Thailand's exports fell to just 2.7% in Jan-Aug 2005 when the combined export value was 2.83 trillion baht.

Aside from the ferocious competition, the expiry this July of duty-free privileges under the US Generalised System of Preferences (GSP) extended to Thailand, will further hamper the country's gems and jewellery export. The removal of such tax privileges will particularly subject Thai gold jewellery to normal import duties, in the range of 6-13%. Thailand shipped gold jewellery worth over $600 million to the US in the first 10 months of last year. America is the single largest export market for Thai gems and jewellery, accounting for nearly 30% of annual combined export value, far greater than that recorded for the second and third largest buyers, Hong Kong and Israel, at around 11% and 10%, respectively. It is imperative that the private and government sectors work more closely. It is essential for Thailand to closely guard its traditional markets such as the US, Japan and several European countries, and to be more pro-active in penetrating new markets like China, India, the Middle East, Eastern Europe and Russia, whose growing affluence offers significant export opportunities. The Thai industry, which employs one million people, needs to rejuvenate its competitive edge by seriously tackling pending issues: upgrading production technology, design capability, the shortage of skilled manpower, greater provision of state support by lowering costs, and establishing an internationally-recognised brand value.

The industry needs to be more focussed on tapping the high-end market which offers greater value and growth potential, rather than competing with low-cost producers like China and Vietnam in the mass market.

With Thailand's competitiveness ranking in Asia-Pacific slipping to 10th last year from 8th in 2005 and the gloomy economic outlook, we cannot afford to let another major exporter go down the drain. The opportunity is there for us to tap, considering that the value of Thai jewel exports represents only 2% of the annual global gems and jewellery trade.

Boonsong Kositchotethana is Deputy Assignment Editor (Business), Bangkok Post.

Bangkok Post
Wednesday January 31, 2007