The Gem & Jewelry Sector in Sri Lanka

The Competitive Context of the Sri Lanka Gem & Jewelry Industry

Cad-cam equipment donated by USAID for training at the Gems & Jewellery Institute	Launch of the Lanka Jewels website

Expatriate trainers at The Gem and Jewellery Institute

An age-old industry in Sri Lanka, the gem and jewelry industry remains one of the country’s largest foreign exchange earners and was the country’s third highest export in value terms in 2003. The industry’s potential for value addition, profitability and employment generation is high but remains untapped to a large extent.

In gemstones, Sri Lanka retains a world market position as a producer of fine quality natural gems. Sri Lanka is also believed to possess one of the world’s largest gemstone repositories, with concentrations of gem mining located in the central and southwest regions of the island. However, frequent re-mining together with the absence of a broadly accepted mining policy, unproductive mining methods and little research into mineral deposit reserves have been threatening this resource base for some time. The Sri Lanka Gem & Jewelry industry value chain is comprised of miners, heat treaters, diamond cutters, lapidarists, jewelry manufacturers, brokers and retailers all of whom largely demonstrate insular behavior and function fairly independently of each other. Due to this lack of interdependency, external influences dominate the behavior of stakeholders within the industry.

Sri Lanka’s lapidary industry is divided into two broad categories; the free size stones segment, where there is need for better cutting techniques, and the calibrated segment that grew rapidly in the 1980’s due to special demand created for Sri Lanka topaz. During the 1980’s, Sri Lanka’s diamond industry established itself with overseas investment and has strengthened the overall industry. Value adding activities, such as product certification and branding, have primary been taking place overseas, therefore there has been limited in-country value addition.

Gem & Jewelry exports of Sri Lanka have increased rapidly since 1990, mainly to Japan. However, the recession in Japan decreased export growth in 1997 and the United States emerged as Sri Lanka’s primary export market. Jewelry exports are beginning to grow but remain small in size compared to diamonds and gemstones. Presently, Sri Lanka’s main markets are Japan, Germany, USA, UK, Singapore, Hong Kong and Maldives Islands. Since certain raw materials are sold to off shore interests for initial processing, there are product values not added and related profits not realized in Sri Lanka. The net result is that a significant portion of the financial gains are enjoyed by third parties outside the country and domestic manufacturing stakeholders have little control over the top quality materials generated from the mining sector.

During the recent past, countries in the region such as Thailand, Hong Kong, Singapore, United Arab Emirates and China have moved far ahead of Sri Lanka in the lapidary and jewelry industry making vast improvements in technology and international marketing. Thailand has made special effort to develop their industry by encouraging family business for cutting and polishing stones at cottage level. India too has adopted similar strategies for promoting diamonds and calibrated stones. Both these countries do not have the same broad resource base for natural gemstones as Sri Lanka , but are now far more advanced in the gemstone cutting industry as a result of incentives given to develop cottage level operations in this area.

Most recently, China entered into the lapidary and jewelry industry not because of increased production of gems but due to increased foreign collaborative investment in lapidary and jewelry making owing to China’s high productivity rates, low wages and its interest in joining the WTO.

Gem & Jewelry Industry Statistics

Workforce

The Sri Lanka Gem & Jewellery Association (SLGJA)

The Sri Lanka Gem and Jewellery Association (SLGJA), incorporated under the Companies Act on November 28th, 2003, was formed through the merger of four individual industry trade associations and is now recognized as the main private sector driven apex body of the Sri Lanka gem & jewelry industry. The Gem & Jewelry Cluster, which The Competitiveness Program (TCP) was catalytic in forming, also merged into the SLGJA and now works as a permanent subcommittee on several strategic initiatives.

The SLGJA has over 360 members from around the island and a 35 member Executive Committee.

Key Strategic Initiatives

Achieving competitiveness through the cluster” system requires that industry members formulate and implement a strategy that takes into account the industry’s strengths and weaknesses, as well as threats and opportunities in its competitive environment. Listed below are industry activities currently taking place with support from The Competitiveness Program.

	Establish an apex association representing the entire industry, to lobby for and advocate policy, to control and direct revenue raised from the industry and to help develop and in some instances manage the strategic initiatives deemed necessary to increase Sri Lanka’s competitiveness.
	Establish a world-class, internationally affiliated the Gemstone Testing Laboratory (GTL) for certification and research
	Establish a regionally recognized free-standing Gem & Jewelry Training Institute (GJTI) affiliated to a leading international training institute
	Launch an international sapphire promotion campaign to brand and differentiate the industry in Sri Lanka through a branding program for Ceylon Sapphires. This includes implementing the Design Alliance in partnership with a famous jewelry designer to develop and promote a collection of sapphire jewelry; upgrading the FACETS Gem and Jewelry Show to an international standard and setting up a web portal for the industry.
	Provide specialized banking and financial services to the industry
	Complete the National Gem Deposit Survey to establish the location, quality and extent of gem deposits and provide the basis for sustainable mining of the resource
	Deregulate the industry by effecting policy changes that will help the industry to develop rapidly– including better import export and taxation procedures, better mining and land use guidelines and policy, rationalization of government provided services such as training

The cumulative effect of the implementation of the strategic initiatives will be to gain the related financial rewards along the value chain.

Ongoing Initiatives

Ceylon Sapphire Council (Branding Campaign / Design Alliance)
A collection of Ceylon sapphire jewellery is designed by an international designer produced by a consortium of Sri Lankan manufacturers and branded in high-end markets. Investment is by the Sri Lanka Export Development Board and Industry. Launch is in 2005

The Gemstone Laboratory
Over US$700,000 has been raised through an industry CESS for the establishment of a gemstone laboratory for the certification of gemstones and research and development. The laboratory’s memorandum and articles and business plan have been completed and the industry lobbies the government for release of funds for the lab’s establishment.

The Gem & Jewellery Institute (CAD-CAM Centre)
The Gem & Jewellery Institute was established as a non-profit, private limited company (with representation from industry and all the training institutes in Sri Lanka) to provide high-end training and services (including computer-aided model making for the first time in Sri Lanka). GJI was supported with a grant of US$90,000 from USAID and financing from the EDB (US$50,000) and industry investors (US$23,000). GJI was opened on August 2, 2002.

Web Portal (www.lankajewels.com)
The first ever web portal on the gem and jewelry industry in Sri Lanka for consumers and the trade was launched in April 2003.

Contact Information

Offices:
Sri Lanka Gem & Jewellery Association
28 Haig Road, Colombo 4
Telephone: 94-11-2575655 / 94-11-2597226
Fax: 94-11-2574330 / 94-11-2597250
Email: slgja@sltnet.lk

Contact:
Rumi Bathusha
Chief Administrative Officer
Sri Lanka Gem & Jewellery Association
Website: www.lankajewels.com