Gems and Jewelry Industry

In 2004, gems and jewelry industry has ranked one of the top 10 highest value in Thai exported products, creating employment and development of related industries regarding design, production and assembling, production of machinery in gem cutting and packaging. It could be said that gems and jewelry industry is one of the main industries which is important to the national economic development.

In 2004, the Board of Investment has announced its policy that promotes investment for Skill, Technology and Innovation (STI) development to provide a privilege for fashion industry with corporate tax exemption in addition to the regular criteria of 1 year for one case but no more than 8 years in total. Import duty of machinery in all zones is also exempted in 4 cases including 1) having research and development or design expenses of no less than 1-2 % of total sales volume per year, 2) hiring personnel graduating bachelor degree in science or other related fields of technology, development or design of no less than 5-10 % of total employees, 3) having the proportion of Thai personnel training expenses relative to salary and wage expenses no less than 1 %, and 4) having expenses for the competency development of Thai subcontractors of no less than 1 % of total sales volume per year.

In addition, the Gem and Jewelry Institute of Thailand in cooperation with Asian Institute of Technology have succeeded in establishing the standards for color comparison of 7 types of jewelries including emerald, topaz, garnet, tanzanite, and pink sapphire. As jewelry colors are important determinants of pricing, especially in theU.S. and European markets. Such research is a part of execution of gems and jewelry industry development project under the second phaseof industrial restructuring plan (fiscal year 2001-2004) of the Ministry of Industry.

Industrial Structure

Gems and jewelry industry consists of 2 major industries that are thegem cutting and jewelry industries. In 2004, there are more than 850 gems and jewelry factories registered with the Department of Industrial Works, which more than 80 %is small and medium sized factorieshiring 59,000 employees and 1.2 million household-level labors nationwide. Gems and jewelry industry is a labor-intensive industry and needs highly skilled, crafted and expert labors.

Production

In 2004, manufacturing production index of diamond, gem, ornamentand other related items is at 70.41decreased by 5.89 % from the previous year. Shipment indexis at 82.02decreased by 2.65 % from the previous year. At the same time, finished goods inventory indexis at 95.40decreased by 22.58 % from the previous year %.

Production Index of Diamond, Gem, Ornamentand RelatedItems

2003 / 2004 / Changing Rate
Q1 / Q2 / Q3 / Q4 / Q1 / Q2 / Q3 / Q4 / (%)
Production index / 64.29 / 64.25 / 88.23 / 82.50 / 56.35 / 76.51 / 78.38 / 70.41 / -5.89
Shipment index / 77.80 / 73.80 / 93.18 / 92.22 / 64.00 / 82.09 / 99.96 / 82.02 / -2.65
Finished goods inventory index / 137.20 / 116.45 / 124.91 / 114.35 / 100.50 / 91.64 / 94.05 / 95.40 / -22.58

Source:IndustrialEconomicsInformationCenter, Office of Industrial Economics

Remark:Figures in quarter 4/04 are estimated figures.

Marketing

Export

In 2004 (Jan.-Nov.) an export value of gems and jewelry is US$ 2,441.3 million increased by 5.85 % from US$ 2,306.4 million during the same period in the previous year. Synthetic gemsincreased the most by 54.13 %. Other potential exported products are precious metal,artificial jewelry, gem and diamond,etc.

Major export marketsareU.S., Israel, Belgium, Hong Kong and UKwith the largestexport increasein Hong Kong market as of 47.64 %. Important products are diamond, genuine jewelry made of gold and silver, and unformed gold.

Table:Export of Gems and Jewelry

Unit:US$ million

Type / 2003 / 2003
(Jan-Nov) / 2004
(Jan-Nov) / Changing rate
Gems and jewelry / 2,514.8 / 2,306.4 / 2,441.3 / 5.85
1. Gems / 839.5 / 769.0 / 918.8 / 19.48
1.1 Diamond / 638.5 / 586.9 / 699.2 / 19.13
1.2 Gemstone / 188.8 / 171.6 / 209.3 / 21.97
1.3 Pearl / 12.2 / 10.6 / 10.2 / -3.77
2. Genuine jewelry / 1,105.4 / 1,007.2 / 1,174.6 / 16.62
2.1 Silver-made / 386.9 / 353.3 / 420.9 / 19.13
2.2 Gold-made / 703.3 / 640.2 / 738.0 / 15.28
2.3 Made of other precious metals / 15.2 / 13.8 / 15.7 / 13.77
3. Artificial jewelry / 87.5 / 80.2 / 110.1 / 37.28
4. Synthetic gems / 12.0 / 10.9 / 16.8 / 54.13
5. Unformed gold / 402.3 / 386.0 / 139.9 / -63.76
6. Precious metal and other items covered with precious metals / 68.2 / 53.0 / 81.0 / 52.83

Source:Department of Trade Negotiations, Ministry of Commerce in cooperation with the Customs Department

Import

In the first 11 months of 2004 (Jan.-Nov.) Thailandhas imported diamond, gemstone, jewelry, silver bar and gold with the total value of US$ 2,741.4 millionincreased from US$ 2,030.2 million from the same period in the previous year by 35.03 % of total import value. Diamond and gold are imported the most with the value of US$ 1,070.8million and US$ 1,017.6 million, respectively. Based onthe information on import, it is found that most imported products areraw materials.

Majorimport sources of gems and jewelry areAustralia, Israel, Hong Kong, India, China, U.S., Switzerland and Belgium.

Table: Import of Diamond, Gemstone, Jewelry, Silver Bar and Gold

Unit:US$ million

Types / 2003 / 2003
(Jan-Nov) / 2004
(Jan-Nov) / Changing rate
Diamond, gemstone, gems, silver barandgold
-Diamond
-Gold
-Gemstone
-Silver
-Synthetic gems
-Platinum
-Pearl
-Jewelry
-Others / 2,180.6
953.6
698.7
100.1
196.3
26.5
17.9
29.3
148.4
9.9 / 2,030.2
875.2
670.0
92.5
184.3
24.1
16.6
25.4
133.1
9.1 / 2,741.4
1,070.8
1,017.6
127.5
282.2
34.8
18.5
20.3
154.8
14.8 / 35.03
22.35
51.88
37.84
53.12
44.40
11.45
-20.08
16.30
62.64

Source:Department of Trade Negotiations, Ministry of Commerce in cooperation with the Customs Department

Summary and Trend

Overall production of gems and jewelry industry in 2004 slightly contracted as compared to last year. Based on the import and export statistics of 2004, in the first 11 months, ithas found that Thailand’sshare of import value and production expansion is higher than that of export, caused by several factors such as domestic raw material shortage, weaker exchange rate, and higher value of raw material import for producing the finished goods. Besides, export value of unformed-gold also declines by 63.76 %as compared to the same period in the previous year. In addition, there are several factors that might affect import and export values of this type of product including fluctuation of world economy, which might cause consumers to slow down their consumption of luxurious products, rising transportation cost due to higher oil prices in world market, and higher competitiveness from foreign competitors.

In 2005, it is expected that export value would increase from 2004 by 15 %. Markets with a positive trend are the U.S., Europe, Hong Kong and Australia because of bilateral and multilateral free trade agreements. While Thailand’s competitors,India and China, have played more roles in low-end market, particularly India that has a competitive advantageon cheaper labor wages than Thailand, marketing networks, its own brand name, and are famous for small diamond cutting. However, the fashion industrial strategy would support Thailand’s showcase for competition in creating value added for gems, especially silver jewelry and crafts in color gems cutting that has been recognized worldwide.Moreover, an important factor is that Thailand has a technology for unique color gems production. Therefore, Thai producers have to accelerate the system development in procuring lowcost raw materials, value-added research and development, and strong clusters because, at present, there are only clusters and networks of large-sized gems and jewelry industry.