One of Thailand’s oldest and largest gem export firms is evolving from a family business into a public corporation by listing on the Securities Exchange of Thailand and raising capital for rapid expansion. Sawang executives predict that other established family jewelry firms will soon follow this trend.

            Sawang Maneepairoj came to Thailand from China when he was 13, and began working as a gem cutter shortly afterwards. In 1940, when the young immigrant turned 18, he launched his own cutting factory, which he called Bae Seng Mong. Today, it is one of Thailand’s largest gem and jewelry exporters, known as the Sawang Group of Companies.

            The growth came slowly, a step at a time. After a few years, the export market for cut stones became so large the company could no longer keep up with its customers’ demands. The company began buying stones from other factories for resale. Eventually, it dropped its cutting business altogether to specialize in pricing and marketing. In 1986, a jewelry manufacturing arm was added to the company.

            In 1988, its best year yet, Sawang Export Co accounted for 11 percent of all rubies and 8 percent of all sapphires exported from Thailand. Its total market share of these stones amounted to B920 million. Last year, Sawang Export Co and Sawang Jewelry Manufacturers Ltd Reported a net profit of B31.5 million and by 1993 it projects that figure will increase to more than B80 million.

            To accomplish this ambitious goal, Sawang Export Co applied for listing on the Securities Exchange of Thailand to raise capital for three major projects: a joint venture to expand production capacity of a cutting factory in Chantaburi; a joint venture for a factory to produce stamped gold jewelry for the European market; and production of platinum jewelry for the Japan market at its existing Bangkok factory.

            Selling shares signals a significant change in the operations of the Sawang Group, one which its founder was at first reluctant to make. “At first my father did not approve of the idea,” says Paetai Maneepairoj, the third son of the patriarch and the assistant managing director of the business. “But he agreed after we explained to him that we can expand the business while still maintaining control.”

            By passing the rigid examination of the Securities and Exchange of Thailand, the company gains a solid reputation along with increased capital and liquidity for expansion, Mr. Paetai explains.

            In the past, while the company grew steadily in size its profit margin did not rise remarkably. “Our business was growing and we were too busy to worry much about the profit margin,” Mr. Paetai says. “But now things are becoming more competitive. We have to think of the business in terms of investment and profits.”

            The company is adopting a new philosophy to make this transition. “Before, we hired people we already knew well and trained them,” Mr. Paetai says. “Now the business is becoming more specialized and we have to look for professional people outside of our friends and family. We have to have an MBA way of thinking.”

            The first major project on Sawang’s drawing board is to form a joint venture with its main supplier of cut stones in Chantaburi. “Before, we considered setting up a new factory for cutting stones, but now we think we should just expand the existing facility and provide more capital for buying rough material,” Mr. Paetai says.

            The Chantaburi plant supplies Sawang with cut stones—mainly rubies—worth about B100 million per year. By injecting about B100 million into an expansion, Sawang hopes to triple its supplier’s production. “We’re going to study the matter more carefully with Citicorp finance and Securities as our advisor,” Mr. Paetai says. The study should conclude by the end of this year.

            The second project under study is a joint venture with a German firm to produce stamped jewelry for the European market. The German company, which Mr. Paetai prefers not to name, has been buying polished stones from Sawang for more than 15 years. The joint venture would create a jewelry factory in Bangkok modeled after the German company’s facility in Europe.

            Sawang’s existing jewelry factory produces cast jewelry, but the new, joint venture facility would use only the stamped method. “Cast jewelry has a different, heavier look, using a lot of prongs, which is better for the US market,” Mr. Paetai explains. Currently, 60 percent of Sawang’s finished jewelry goes to the US, while the remainder goes to Europe and Australia. The company hopes to expand its exports to the European market with the new, stamped jewelry factory.

            “Stamped jewelry is for simple, sleek designs that Europeans like,” Mr. Paetai says. The stamped technique is already used in Thailand for silver jewelry, but few manufacturers have attempted it with gold. Sawang wants to be one of the first to do it successfully on a large scale.

            “The market is becoming more competitive and, in the long run, whoever can produce with the lowest cost will win,” Mr. Paetai says. “We have to try and gain as much new technology as possible and find a way to blend the local labor with it. Just a machine alone cannot do the job right. If we can find a way to combine the two elements well, I think we will be quite strong.”

            The third project underway for Sawang, a new technique for producing platinum jewelry for Japan, is still in the testing stage.