Lost in the competitive shuffle of modern manufacturing industries peddling all manner of contemporary wares from hard drives to canned tuna, one of civilisation’s oldest professions continues to thrive in Thailand – the gems and jewellery trade. Thailand has centuries of experience in the industry under its belt and has cultivated an extensive network of artisans and a strong manufacturing base which extends through all phases of the value chain from mining to retail sale. With this solid foundation in place, gems and jewellery production continues to play an important role in the economy, providing steady employment for miners, gem cutters, jewellery designers and merchants as other trades have come and gone.
Originally known for its locally sourced and well-regarded polished coloured stones, particularly rubies and sapphires, the country expanded into a thriving trade in other goods including finished gold and silver jewellery, unwrought or semi-manufactured gold and diamonds as well as smaller participation in costume jewellery, synthetic stones and waste and scrap of precious metals, pearls and semi-precious stones.
As in many manufacturing industries, the Thai jewellery market cannot compete head-to-head with powerhouse such as India or China in terms of sheer quantity of goods produced or exported, but instead specialises in lower-quantity, higher-quality products and service. Because Thai jewellery companies operate primarily as original equipment manufacturers with moderate scales of capacity, Thailand largely serves as a supporting unit in this industry while the larger producers fill out the global market in terms of volume. Over the years the Thai gems and jewellery industry has carefully cultivated its reputation for skilled labour in colour stone quality enhancement, casting, moulding and gem setting, especially in pieces with intricate details, according to the Gem and Jewellery Institute of Thailand (GJIT). This status continues to generate momentum in the local sector in spite of an increasing reliance on imported raw materials due to the fact that labour skill remains one of the most crucial components of jewellery manufacturing, especially in luxury products where craftsmanship is a priority.
Thailand’s gem and jewellery trade continues to be one of the country’s lucrative export products with merchandise shipped to markets across the globe. The industry shipped out BT371bn ($11.2bn) worth of jewellery and accessories in 2015, according to the Ministry of Commerce.
Although the trade was initially built upon the extraction and refinement of domestic materials into finished products, the volume of goods flowing through the country now requires significant imports as well. Due to its resource depletion, Thailand’s domestic supply of rough stones such as rubies, sapphires, emeralds and diamonds are now insufficient for commercial-scale operations, resulting in a steady flow of imported material from other countries. The majority of precious metals used in the manufacturing of jewellery pieces is also imported, accounting for roughly 70% of industry import values on any given year (although this figure may be inflated due to the use of precious metals as an investment commodity rather than a manufacturing input).
In 2014 Thailand’s overall value of gem and jewellery exports decreased by 0.24% to $10.1bn while the import value also declined at a much steeper rate of 48.55% to $9.5bn, according to data from the GJIT. Jewellery was the most important export product on the year with shipments valued at $3.85bn ( accounting for 38.3% of the gems and jewellery sector) followed by unwrought or semi-manufactured gold valued at $2.78bn (27.6% of the sector).
However, if unwrought or semi-manufactured gold is excluded on the basis that the majority of this material is being traded as a commodity for investment purchases rather than a manufactured, valued-added good, the export value would increase from the previous year by 6.89%. The year 2014 marked the first time in four years that the industry recorded an annual trade surplus ($565.1m) which occurred largely as a result of a decrease in the value of imported unwrought gold combined with the increased exportation of value-added products such as jewellery and polished gemstone.
The trend continued into 2015 with the sector’s net export value in the first half of the year increasing from $3.28m to $3.46m, up 5.3% year-on-year.
Due to their reputation for quality, a large portion of the gems and jewellery produced by Thai artisans are shipped out to many of the premier markets around the globe including Switzerland, Hong Kong, India and the US. Hong Kong led all countries in Thai gem and jewellery exports, accounting for roughly one-quarter (24.8%) of the sector total in 2014 valued at $2.5bn. These purchases were primarily in precious stones, as Hong Kong buyers purchased $665m worth of diamonds (36.2% of the total Thai export market), $660m worth of polished diamonds (40.2%), $451m worth of coloured stones (49.2%) and $264m worth of polished precious stones (46.7%). The autonomous region was also a primary destination for unwrought or semi-manufactured gold, which was valued at $674bn on the year, accounting for 24.3% of all Thai exports in the category. The US was the primary purchaser of finished Thai jewellery, purchasing $1.05bn worth of goods in 2014 which accounted for 27.1% of Thai exports.
Singapore was the favoured destination for unwrought or semi-manufactured gold: shipments from Thailand totalled $917bn in 2014, or 33% of total exports in that category.
Keen to sustain this revenue flow into the country, the government and various industry bodies are putting a concerted effort into promoting the sector abroad while supporting the industry at home. The government and the Board of Investment offer significant financial incentives for companies operating in the trade, including duty exemption on the import of raw materials such as various precious metals, diamonds, pearls, gemstones and synthetic gemstones. Jewellery products are also given tax benefits through special trading avenues such as the Bangkok Gems and Jewellery Fair, held biannually in February and September, where import duty for jewellery is exempted from its usual rate of 20%.
The Industrial Estate Authority of Thailand also granted industrial free zone status in 2008 to Gemopolis, a centralised manufacturing and trading centre catering to the sector and located in the commercial Suvarnabhumi zone of Bangkok. Established in 1990, the estate is being developed in three phases incorporating the complete supply-chain of the gem and jewellery industry and currently hosts roughly 140 companies, according to Gemopolis.
With the first phase of development complete, work was begun on the second phase of the project in February 2015 with construction initiated on the new, five-storey free zone phase II building which will house additional mixed-use commercial, services and factory space ranging from 70 to 9000 sq metres. The benefits provided for companies working out of the industrial estate include exemption of corporate income tax and income tax on dividend income for four to seven years for manufacturing activities, exemption of import duty and value-added tax for numerous capital expenditures and finished products, 100% foreign ownership of companies and property, expedited permission to bring in experts and family, and permission to remit foreign currency.
One of the more successful companies based out Gemopolis is Pandora, which is headquartered in Denmark where it designs jewellery manufactured in Thailand. The company employs more than 10,000 people at its Gemopolis facilities, which produce jewellery for distribution to more than 90 countries on six continents through around 9500 points of sale as of 2014. Pandora’s annual revenue for 2015 increased 40.2% compared to 2014 to DKK16.7bn ($2.5bn).
Building on this success, the company is the midst of an expansion campaign to open 200-300 new outlets by 2018, targeting primarily developed markets in Europe, Asia and the Americas which will drive further investment and employment at its Thailand-based manufacturing campus. The company announced in January 2016 its intention to add some 30 concept stores in the world’s largest market, China, in 2016, followed by another 25 stores in each of the next two years.
These will be complemented by expansions in Australia and Japan, in which the company plans to open up to 10 new stores in each country annually until 2018. In order to support this retail outlet growth Pandora plans to invest DKK1.8bn ($266m) in capital expenditures between 2015 and 2019 related to production capacity expansion which would potentially double its manufacturing capacity in Thailand.
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