Gem and jewellery industry says US $ 1bn export target unachievable due to policy implementation delays
„Says policies proposed by President Gotabaya and endorsed by PM Mahinda not being implemented „Finance Ministry says tax proposals concerning gem and jewellery industry would be implemented at the beginning of new tax year in April
Sri Lanka’s gem and jewellery industry says the US $ 1 billion export target set for the industry will be impossible to achieve, given the nonimplementation of the polices that were approved by President Gotabaya Rajapaksa and endorsed by Prime Minister Mahinda Rajapaksa back in September.
“When you arrive with such a target, you need to have a set of strategies in place to achieve that target. We presented a set of strategies as proposals and several key proposals were approved by President Rajapaksa back in September. However, if they are not implementing those strategies, forget about US $ 1 billion; it is very unlikely that we will be able to sustain what we even have now,” a leading gem and jewellery exporter told Mirror Business, speaking on behalf of the industry.
Last September, the Presidential Secretariat announced the removal of the 15 percent import duty on gold and 14 percent income tax on the profits of gem and jewellery manufacturers, enabling the industry to become globally competitive yet again.
The proposals were also endorsed by Prime Minister Rajapaksa in his budget speech in November, last year.
However, the industry lamented that these proposals are yet to be implemented by the authorities, although different timelines are given when inquiries are made about the implementation.
The Finance Ministry and Central Bank expect US $ 1 billion export earnings from diamond, gem and jewellery exports this year, after such earnings slumped to US $ 211.2 million in 2020.
Responding to industry concerns, Treasury and Finance Ministry Secretary S.R. Attygalle said that the tax proposals concerning the gem and jewellery industry would be implemented at the beginning of the new tax year in April, along with the other tax proposals.
However, Money and Capital Market and State Enterprise Reforms State Minister Ajith Nivard Cabraal last week in Jaffna remarked that the taxes on gold imports might need to be maintained at similar rates to that of India’s, in order to prevent smuggling.
Meanwhile, the government is currently building a Gem and Jewellery Trade Centre in Ratnapura, to rival Bangkok, where most of Sri Lankan gems are currently being traded in.
MP John Seneviratne recently in Parliament stressed that fast-tracking the construction of the Ruwanpura Expressway as well as setting up a onestop shop for acquiring gem mining licences is needed for Ratnapura to become a competitive trading hub.
He pointed out that currently it usually takes three to four months to secure all necessary approvals from various state agencies. According to the Export Development Board, approximately 25 percent of the country’s land is considered to be gem-bearing and most of the commercially important gem varieties are concentrated in areas of Ratnapura, Balangoda and Elahera. However, Seneviratne noted that gem deposits were also found recently in areas such as Moneragala, Matale and Polonaruwa.
In addition, he also proposed to consider the possibility of direct air connectivity between Sri Lanka and Madagascar.
Currently, most of Madagascar’s gems are imported to Sri Lanka for value additions, by way of cutting and polishing, before being re-exported to gem trading hubs such as Bangkok and Hong Kong.
Therefore, Seneviratne pointed out that there’s a big demand for direct air services between the two countries. The re-export of gems and diamonds, which accounts for majority of the industry’s export earnings, has also come under pressure, due to the mandatory dollar conversion rule on export proceeds imposed by the Central Bank, according to industry players.