72% of Thai jewelry only diamond Set

            A recent De Beers research study has confirmed that 72 percent of all manufactured fine jewelry sold to Thai domestic consumers in 1994 comprised items set only with diamonds, while mixed jewelry products – diamond and colored stone – held the rest.

            The figure is 5 percent higher than the 67 percent figure in 1992 in the previous study.

            “The current performance indicates the increase of the diamond component in Thai jewelry market,” said David Keites, London based De Beers’ marketing director for special projects.

            Thailand is a part of the fast growing East Asia market in domestic diamond sales. The growth from 1992 to 1994 accounted for 9 percent in terms of Thai baht or 8 percent in US dollars.

            In 1994, the domestic diamond jewelry sales in Thailand was worth $592 million or 14.8 billion baht. Which was ranked second to Taiwan market where the recorded value was $897 million or 22.43 billion baht.

            Meanwhile, it was $320 million or 8 billion baht worth for domestic sales in China, which is considered to be another new important market. This has put Thailand in a position far ahead of China and other countries – Hong Kong 6.3 billion baht; Indonesia 5.95 billion baht; Singapore 2.53 billion baht; Malaysia 2.43 billion baht; and the Philippines 1.33 billion baht.

            East Asian countries held 33 percent of all domestic diamond jewelry sold in the domestic retail markets. On the other hand, the US market held a 28 percent market share, Japan 23 percent, Europe 11 percent, and the rest 5 percent.

            The diamond sales result in Thailand “is very gratifying since the sharp fall in the stock market early in 1994 which probably caused a decline in the consumption of luxury goods, even though overall private consumption increased”’ said Keites.

            The Thai market increased 13 percent to $600 million or 15 billion baht from 1992, and it tripled against the 1988 figure, where the value was $186 million or 4.65 billion baht.

            According to the research by De Beers, 27 percent of recent married women got diamond wedding rings and only 1 percent got a complete set of diamond jewelry, while 28 percent got gold sets with an average cost of $1,177 or 30,000 baht.

            The average price for all women’s diamond jewelry bought in Thailand in 1994 was $1,354 or 33,850 baht.

 

Thailand pushes for jewelry export growth

            Thailand is pushing for jewelry export growth since the United States restored Generalized System of Preferences (GSP) to Thailand in July 1995 for 15 export categories, one of which was jewelry, said Chantra Purnariksha, deputy director of Export Promotion of the Department of Export Promotion in Bangkok.

            The GSP was revoked by the United States in 1989 as a retaliation for the lack of intellectual property rights protection in Thailand.

            During the first quarter of 1995, Thailand’s total exports – including jewelry – decreased 3.5 percent, and 2.3 percent for the first six months of 1995.

             Due to the nature of the jewelry business, which is seasonal and depends on special holiday occasions, DEP puts an emphasis on the importance of punctuality in delivering the products. DEP has also been trying to expand the gemstone cutting industry in Thailand by locating and looking for new deposits of rough gems worldwide, she said.

            “We have sent missions to Africa and are negotiating with the government in Madagascar to set up an office there. Another plan is to encourage new technology and machinery in the cutting industry.”

 

Jean-Michel Roux new Golay Buchel chief

            Golay Buchel (Thailand) has appointed Jean-Michel Roux as its new general manger effective as of December 1.

            Mr. Roux, previously a manger in the company’s the stone trading division, will be replacing Phillipe Laurent who is returning to Switzerland after three years in Thailand.

            A graduate in management study from Lausanne, Switzerland, Roux is 32 years old, and previously worked at Golay Buchel (Hong Kong).

 

Grantham resigns as CSO marketing liaison director

            Michael Grantham, the Central Selling Organization’s marketing liaison director, retired at the end of October after 40 years of working for De Beers. The man was often called the “lifeline to rough diamonds” by the Thai diamond manufacturing community.

            His former responsibilities and position will be given to Harry Garnett, another CSO executive, who has for many years enjoyed a close relationship with Thailand’s diamond industry. Meanwhile, George Burne, director of De Beers, Will hold and manage the CSO’s marketing liaison department, and report directly to the CSO’s president.

            Grantham developed a close association with the Thai diamond industry in the 1970s before the first diamond cutting factory – General Diamond Cutting Works Co—came into being in 1980.

            Thai diamontaires have widely credited Grantham for his contributions to the improvements in developing the quality and variety of rough diamond supplies from CSO.

            Mr. Grantham said he plans to become a consultant for De Beers after his retirement, and move to France.

 

De beers Increases Price of Larger Rough

            De Beers increased the price of its rough diamonds of two or more carats in size by 5 percent, effective November 28.

            The decision of De Beers’ Central Selling Organization to raise the price corresponds to the continuing strong retail demand for high-grade quality diamonds in Japan and the US market.

            “The move is very much market driven, and we continue to see encouraging demand in Japan and the US,” said the spokesman.

            Most of the diamonds price increase will be passed on to the end consumers via the centers of diamond cutters, the CSO said.

            Meanwhile, Russia has about 25 percent share of the world diamond supplies. Analysts commented that the rising price might be a result of lower Russian sales outside the CSO, but it was rejected by the CSO’s spokesman.

            “This has nothing to do with Russia,” he said.

 

Sri Lanka looks to Japan diamond market

            Sri Lanka is readily preparing to move into the Japanese diamond market as a key exporter in cut and polished gem stones announced a top officer in the industry, reported Reuter.

            “The products [from Sri Lanka] weren’t well known in the Japanese marker till now because it was marketed through Belgium. We are now moving to cut out the middleman and go directly to Japan,” said L.S.G. Tillekeratne, the Export Development Board (EDB) projector who hosted a group of Japanese buyers’ tour in Sri Lanka diamond industry.

            The 20 year old diamond cutting and polishing industry earned $135 million during 1994. Japan was the fourth largest diamond buyer for Sri Lanka next to the United States, and its total value was $5 million in 1994. About 75 percent or $110 million of the total export value was bought by Belgium in 1994. Thailand and England were also the major buyers.

            “We feel quality merchandise can be produced here and we are studying the industry here in order to have a long-range relationship with Sri Lanka,” said Mitsuharu Terayama from the Tokyo diamond Exchange.

            The decisive key factor that would encourage more Japanese investment in the form of joint venture is the political climate, said Mr. Tillekeratne.

            Presently Sri Lanka has around 5,000 diamond cutters and polishers working in 16 factories, most of whom are women, said Chitranganie Mubarak, EDB’s deputy director.

            Ms. Mubarak remarked that “diamond will always be a labor intensive industry, and it can become one of Sri Lanka’s biggest employers if the country can establish itself as a cutting and polishing center.”

            Sri Lanka imports most of the raw material from Belgium. “About 15 to 20 percent of the actual foreign exchange earned is the gross return, in which Sri Lanka makes the money through value added, not manufactured diamonds,” said Ms. Mubarak.

 

US diamond imports and exports rise

            US diamond imports and exports continued to grow through 1995. The imports and exports of cut but not set diamonds for the first eight months of 1995 surpassed the record of the same period last year, reported the American Diamond Industry Association (ADIA)>

            Loose polished diamond imports for the period in 1995 totaled 7,566,000 carats (6.3 percent increase) or $3.466 billion (5.9 percent increase) in value, more than one-half million carats increased or $195 million more in value.

            “The economics of the industry thus far in 1995 are paralleling those of 1994,” said Lloyd Jaffe, Chairman of the ADIA. “The strength of the American economy and the continuing growth of diamond industry jewelry sales are the basis for the ongoing strength of imports.”

            The top three trading partners are Israel, India, and Belgium. It was to Belgium that shipments were down –7.6 percent in carats and 1.8 percent in dollar value.

            Polished stones from Russia held the largest percentage increase at 122.4 percent in total weight and 65.7 percent in dollar value. Russian import value accounted for 1.25 percent of the total American imports.

            The export of loose, polished diamonds accounted for $175 million this year, a 4 percent increase when compared with $168 million from last year. Overall exports were $1.334 billion, an 18.4 percent increase from $1.126 billion last year.

            The top three export markets are Israel, Belgium, and Hong Kong, The shipments to these three nations increased 29.3 percent, 10.1 percent and 18.6 percent respectively.

            Singapore has the largest percentage of export growth – a 117.4 percent increase for the year, which accounts for 3.9 percent of the total of US shipments.

 

 

            Permanent Secretary of the Ministry of Finance M.R. Chatumongkol Sonakul gave a speech on October 18, 1995 for a dinner organized by the Foundation for Gems and Jewelry in which he commented on the Thai gem and jewelry industry. Below is a transcript.

            The subject always changes when I am asked to talk. First it was “Do We Really Support Thai Jewelry,” then I heard from the director general of the Revenue Department that the first subject to address is “Gold Shops”. The last was the role of the Finance Ministry in supporting the jewelry and ornaments industry. I like to answer this one.

            Indeed, the first matter is “how much” support does the government give and is it “real.” Your industry tried to explain about the number of workers and amount of business you do in order to create news.

            This you do to tell everyone how good your industry is to the nation. I think that it’s unavoidable that opinion about your industry from powerful government figures or socially conscious people centers around doubt. They believe that the rich deceive the poor in order to make profit. These people also question as to why the rich want to be extravagant. Many think this way in Thai society.

            In Thailand there are many problems, especially in the business sector or areas that touch on sensitive issues. There is not a lot of chance that you would receive major support from the government when you ask for exemption from the general tax system. The point is that business should try to help itself and show people facts about how much better its virtue of business has become.

            Like me, when I first started working 30 years ago. Ministry thought that this was strange because NEC was the sole supplier, yet they still kept advertising on TV. We all asked why they continued to do so and seemingly waste money. Then, about 2 to 3 years later, there was a huge telephone project. It was more than a 1,000 million baht, and no one had ever even thought about this much money.

            The project was submitted to cabinet for approval at the time. Chompet Prapas was the deputy minister and he said that this project was good-meaning that NEC’s advertisements were working and that the company had created a suitable image in the eyes of the power brokers. But the Revenue Department didn’t know what to do it was to lose 23 million baht. Then the revenue Department advertised, saying that the project had many weak points and further advertisements were run showing just how the Revenue Department was working for the people in a sensitive manner.

            The way I see the gems and jewelry industry is that you are composed of 8 associations. All of you are rich and successful so I think that the industry is a matter for the rich.

            I think that you should all gather yourselves together and try to advertise yourselves to the public, especially in a way that will get to the powerful people that really manage the country. Because they will see and then know how much good you do for the country. It is a matter of poor and middle class people who buy gold, so it is not just a matter of purchasers who have a lot of money to spend.      

            All you can hope for is that tax advantages will come. An example that has happened is with tax charged on interest earned on deposits. This doesn’t relate to poor people but we offer it because we feel that the government can collect more tax from consumption.

            But now I would like to say that you industry should create a general image that is seen to be helping large numbers of poorer people. Don’t forget that more than 100,000 people in Chanthaburi work in you sector, but many have never heard of this. Even if one million know about you, the other 59 million still don’t.

            The next thing I would like to talk about is when I visited loose gem trading bourses in Belgium, the Netherlands and Israel last year.

            You may wonder why nothing has happened since I returned. It may have been because you worked too hard and let me see by myself what was happening in Belgium. There they collect VAT at a zero rate. Loose gems are not exempted when traded at any bourse.

            It’s bad luck for an exemption. It is not good anyway because then no refund and be requested. For any real benefit, loose gems should be zero rated so refunds can be collected. The purpose of this is that then no advantages would be lost. Firstly, everyone can trade in the market, they have to submit tax payments and then everything would be deducted. Traders in a bourse would then be able to deduct all expenses and this is workable, when exported, zero tax applies. When loose gems are bought and set into jewelry and sold in the domestic market the VAT applies.

            When there are gradual refunds, the system is self checking and the government is happier to offer a concession. I liked very much what I saw in Belgium and upon my return I wrote to the Ministry but my report has only just been submitted.

            We should give a zero rate because it’s a golden opportunity for Thailand. Neighboring countries do not have the political stability that would allow for loose gem trading. In India, there is socialism. Foreign money can go in but it is not definitely allowed out again. Who knows what will happen in Hong Kong in the next two years, and in china when Deng dies. Nowhere else can this kind of loose gem trade occur.

            Work in the Revenue Department must be submitted to management committees, no matter what the policy. This work stops all the time at this level because of old way of doing things. If we were in Singapore now, a government can manage by telling this can or cannot be done.

            We could have better management. The thing that we are afraid of is if loose gems have a zero rate in Thailand and it becomes the first time, then there will be a second time. Everybody will ask for a zero rating. It would then become a tax return system and happen all over the country. Those that paid tax would then have to pay more and they would be helping those nonpayer’s. The country cannot survive without a tax system.

            Today, it takes years for any industry to get a tax exemption. In my heart, I would be happy to give out zero ratings but the situation is that if you just ask for an exemption in bourse trading then I don’t think it will be so difficult. I think that it can be fast. The problem will be as to what trade will be real or not real. How can we know that a diamond is worth one million baht or that 1,000 diamonds are worth one million baht? One person has spoken about prices saying that they don’t alter and adding more for a tax to be levied would not work.

            This is a problem, but the way to solve this is to not select your sector as the place to adjust prices into the system. Anyway, evaluating the price has a lot of problems.

            Let’s make a compromise among jewelry sector, the Revenue Department, and the Customs Department. Hire experts with good salaries to evaluate prices and documents for the system. Many people operate like this and that is what I want to see.

            I think that people working in the business unable to inspect. I don’t believe that they can inspect. There must be a plan to follow and the Finance Ministry must be in charge. The industry must present us with a plan or style on how this is workable.

            You must help yourself and everyone must agree and be satisfied with gem price evaluation. The biggest problem you all well know is that the biggest jewelries are bought domestically. VAT is not correct and there is no invoice when pieces are traded.

            Tax invoice can solve a lot of problems. Sellers always find themselves in the position of having a lot of money and no tax invoices for the Revenue Department Nowadays, the department’s system is good and if we chase you 2 or 3 times and get no answer, we follow up with a letter saying that no record of your tax has been located.

            We have little chance of finding out how much the seller is selling for. Numbers of invoices must be in order and well documented and we must be able to check with the buyer. If an institution or some type of body was set up to guarantee these payments or records then the problem would be solved even if no tax invoice was issued.

            So much is hidden from us and therefore we don’t believe you. Then we get back to the ways of old—not a very credible jewelry industry.

            With gold and its problems, I am not in a good position to talk about this as I don’t work in this field. I now have many other areas to work on, but jewelry has a much higher value so the gold problem is not as bad. I believe that the taxes that are applied to gold bars are reasonable and possible to be achieved. But again, in the papers I have written, I concede that I do not understand this sector well.

            I don’t believe that there is any real problem with consumers paying VAT. Not a lot anyway. The problem is that the consumer is not a trade so if goods are returned there is not a system in place to collect refunds. VAT is really only a problem for poor people.