DIAGNOSTIC STUDY

OF
GEMS & JEWELLERY

Submitted By:

AZHAR ALI DAHAR

Cluster Developing Agent
 CONTENTS:

1.Gems & Jewellery Industry Scenario At National Level.

2.Gems & Jewellery Cluster In Karachi.
3.Basic Features of Gems & Jewellery Cluster.
4.SMEs, Main Actors & Their Interlinkages.
5.SWOT Analysis.
6.Proposed Action Plan.
7.Conclusion.
DIAGNOSTIC STUDY OF GEMS & JEWELLERY INDUSTRY IN
PAKISTAN

GEMS AND JEWELLERY INDUSTRY SCENARIO AT NATIONAL LEVEL.

Gems and Jewellery industry in Pakistan is as old as the history of Indus civilization .
Pakistan is bestowed with availability of raw material and skillful labour which
contributed greatly for the establishment of Gems and Jewellery in Pakistan. Karachi is
the main commercial hub of Gems and Jewellery supplying 60% of total demand to other
parts of the country. Other important centers are Lahore, Rawalpindi, Hyderabad,
Faisalabd and Peshawar specially for Gems.

The global demand of gold is more than 2500 tones and Pakistan’s consumption is
more than 100 tones which makes Pakistan worlds 10th largest market .Gold is usually
imported from Gulf states and western countries. In the Gem sector Pakistan is full of
natural resources. Unmatched quality of Ruby, Emerald, topaz, aqua marine, fluorite ,
lais-lazuli which are mined from the valleys of Gilgit, Hunza, Swat, Azad Kashmir and
Chitral.Due to unavailability of gem cutting and polishing facilities Gems are exported in
a raw form which brings nothing as compared to its real worth.

Gems and Jewellery industry may be attributed as small family oriented industry with
skill and traditional mindset. Overall all marketing linkages are missing and interpersonal
cut throat competition and a narrow vision presents the scenario of under developing
industry in Pakistan.

GEMS AND JEWELLERY CLUSTER IN KARACHI.

Past:

Since independence Karachi remained the hub of commercial activities. Skillful labour
and market access were the chief factors which contributed greatly in the establishment
of this industry in Karachi. The artisans of migrated families from India with traditional
Delhi and Jaipur traditions established small business in Sarafa Bazaar near Kharadar,
thus, became the first commercial market of jewellery in this Cluster. Sadder , Tariq
Road, Liaqatabad, Hyderi, and Clifton are other potential markets in this cluster. Among
all these markets Sadder plays very pivotal role in the Jewellery andGem sector.

Present:

Karachi cluster of Gems and Jewellery may be regarded as advanced and organized as
compared to other areas in Pakistan because of greater market access, consumption and
availability of raw material. Currently there are more than 5000 units of Gems and
Jewellery employing more than five lacs people. Sarafa Bazar, Saddar, and other markets
are very potential market selling mostly items of traditional designs. All the leading
manufacturers and Exporters are based in Saddar market which controls not only the
business in Karachi but of Pakistan. Total Gold consumption in Pakistan is more than
100 tones in which official imports is more than 30 tones, other comes through unofficial
channels. In Pakistan there are four officially importers of Gold namely Al Rahim,
Pardesi, ARY and Tessori. On all import of Gold ,Pakistan levies $1 Custom Duty on
every tolla(11.66 grams) of bullion .On the jewellery Pakistan levies 25% Custom Duty,
15% Sales tax and 5% Income tax.. Most manufacturing is concentrated in small family
workshops employing between two to four people. Jewellery of 22 carats dominates with
95% share of the market.

In the Gems sector Karachi comes after Peshawar which is the main commercial center.
In the Karachi cluster there are more than 500 units dealing with precious and semi
precious stones. As Pakistan’s studded jewellery is very popular that’s why both Gems
and Jewellery Cluster grew side by side in the Karachi.

Future:

Gems and Jewellery cluster has a very promising future . Gems and Jewellery industry in
Pakistan has a great potential because of availability of raw material and skillful labor.
On special events like Weddings and Birthdays people use Gold. Consumption of Gold is
great in rural areas This is a precious item so it also plays its role as in the form of
Savings. Due to Government liberalized policies for gold new avenues are opened for the
Export market which is still in the developmental stage, there is 20- 25 % profit in the
export of these precious items in the international market. The volume of this business is
underestimated because of various regulatory agencies like Income Tax and Customs and
smuggling. Gems and Jewellery Cluster could be dynamic provided necessary steps be
taken for the development of this sector.

Export Promotion Bureau has taken great initiatives to develop and train this sector and
in this regard it has established three training institutes in Karachi, Lahore and Peshawar.
Currently Export Promotion Bureau is working on the idea of establishing Dazzle Park in
Karachi where all modern facilities be provided to the jewellers. It is expected that in the
21st century when the world is going to be globalized , these people will get benefit from
this facility and help themselves to develop their business on modern lines.
BASIC FEATURES OF GEMS AND JEWELLERY CLUSTER

¾ Business with high profits.

¾ Availability of raw material through official and unofficial channels.
¾ Family oriented business with traditional skill
¾ Most entrepreneurs are illiterate and have no access to the new marketing skills.
¾ Cut throat competition.
¾ TRUST among various actors is completely torn out.
¾ Training facilities are not utilized.
¾ Association is stronger but large entrepreneurs dominate it, have no interest on the
Development of Small and Medium Entrepreneurs.
¾ Market linkages are missing.
¾ Want of financial assistance.
¾ Misuse of state’s assistance for the training and development of entrepreneurs.
¾ Attention is only on the local market.
 SMEs, MAIN ACTORS AND THEIR INTERLINKAGES

Following are Public and Private institutions and organizations which can play their
part for the development of SMEs in Pakistan specially in the GEM AND Jewellery
sector.

A) Actors on a National Level

¾ All Pakistan Gem Merchants & Jewellery Association.

¾ All Pakistan Commercial Exporters Of Precious & Semi-precious Stones Of
Pakistan.
¾ Pakistan Gem Manufacturers & Exporters Association.
¾ Members of APGMJA
¾ Raw material Supplier.
¾ Federation Of Pakistan Chamber of Commerce & Industries.
¾ Small & Medium Entrepreneur Development Authority.
¾ Sind Small Industries Corporation.
¾ Small Business Finance Corporation.
¾ Commercial Banks.
¾ Export Promotion Bureau.

ALL PAKISTAN GEM MERCHANTS & JEWELLERY ASSOCIATION:

APGMJA is a registered Trade Organization established in October 1970 with the aim
and objective to look after the best interests of Gem and Jewellery Merchants, Miners,
and Exporters in Pakistan. At present it has more than 1000 members with Head office at
Saddar Karachi. The performance of APGMJA is not quite satisfactory because of
ongoing litigation and rifts among members and Office bearers. Ongoing rifts and
grudges among members have created a mess in the affairs of the association. Because of
grouping and politics, the common manufacturers and merchants are sufferers.Due to not
taking of matters of its members’ problems seriously so many small association emerged
which are not registered in the FPCCI.

ALL PAKISTAN COMMERCIAL EXPORTERS ASSOCIATION OF ROUGH &

UNPOLISHED PRECIOUS & SEMI- PRECIOUS STONES.

This is another association based in Peshawar for the welfare of gem merchants and
exporters of this area. As compared to APGMJA this is organized but its area of influence
in limited only in NWFP province. Their performance for the development of this sector
is quite satisfactory, especially in the field of training and participation in the
international fairs and delegation.
PAKISTAN GEM MANUFACTURERS & EXPORTERS ASSOCIATION.

This is small and inactive association, which is not registered .Its founder, is Ex-
Chairman of APGMJA. Now they have established their own association to address their
problems with the Government. Its role in the policy matters is quite satisfactory. The
members of this Association are the members of APGMJA but due to rifts and grudges
they are doing their job.

MEMBERS OF ALL PAKISTAN GEM MERCHANTS AND JEWELLERY

ASSOCIATION

These are also the members of APGMJA . Recently their membership has been
cancelled. They gathered on this platform when the main Association canceled their
membership. They are basically the Association of Exporters who claim many difficulties
due to litigation and rifts.

RAW MATERIAL SUPPLIER.

These are the agents who provide Gold( Bullion), precious and semi- precious Stones and
other material for the manufacturing of Jewellery. Basically Pakistan imports Gold from
the Dubai or Switzerland. There are officially four Importers of Gold in Pakistan viz,
ARY , Al-Rahim , Pardesi and Tessori. Bullion market is the main market for local
supply. It has been observed that whole market is monopolized by the main parties. Due
to daily changing of international market rates they control local market. Gold is a
precious item, which is recycled again and again. Amount of recycled gold and smuggled
one can easily available to the local manufacturers Exporters use imported gold on zero
percentage and in this way they have edge over the common manufacturer.

FEDERATION OF PAKISTAN CHAMBERS OF COMMERCE INDUSTRY

Since its inception in 1950,the FPCCI has also advocated the collective opinion, concern
and aspiration of the private sector. It is the main trade body, which has a great say in the
policy matters with the Government. FPCCI serves as a bridge between the private sector
and the Government. FPCCI tackles efficiently various problems of Trade , Export,
Development of Industrialization and foreign Investment. All other associations are
registered in this forum.

SMALL & MEDIUM ENTERPRENEUR DEVELOPMENT AUTHORITY

This organization mission statement is to Develop Small and Medium Entrepreneurs in

Pakistan. Since its establishment it has presented a lot of schemes but no one could be
materialized still. Gems and jewellery industry is on its agenda to develop but still it had
not produced fruitful results. This authority provides technical assistance to the SMEs
and assist in the coordination of financial institutions. Even in all such exercise it is to
monitor the performance of that SMEs. Karachi Gem and Jewellery Cluster has not
achieved required assistance from this.

SIND SMALL INDUSTRIES CORPORATION

This is established in 1972 by the Sind Government.This is an official body commited tio
promoting the development of handicrafts and in turn the economic betterment of the
working craftsman.SSIC is not only provides education ans assistance to working
craftsman in the field of designing but also the quality control and working of the
products. Recently State Bank of Pakistan has suspended their financial assistance
because of misuse of loans . SSIC has established various Display Centers and Training
Centers in the interior of Sind but For Gems and Jewellery it has not played any
significant role.

SMALL BUSINESS FINANCE CORPORATION.

Small Business Finance Corporation (SBFC) is a Development Finance Institution(DFI)

established by the Government of Pakistan in 1972, primarily to assist Small and Medium
Entrepreneurs for self employment and setting up cottage industries. The focus of
SBFC’s operations is to cater to the financing and technical assistance needs of Small and
Medium Enterprises. Recently it has merged with the Regional Development Finance
Corporation and renamed as SME bank since January 1, 2002. SME Bank(SBFC)
generally adopts a program Lending approach for its financing activities. According to
this approach, specific sectors with large SME presence have been identified and specific
lending schemes have been designed targeting these sectors.

COMMERCIAL BANKS

In Pakistan there is a good number of commercial Banks who provide financial assistance
to the businessman. History of such assistance showed very negative trends as such loans
were granted to the favorites. Such loans were never returned thus produced no good
results.

EXPORT PROMOTION BUREAU

Export Promotion Bureau is an attached Department in the Ministry of Commerce. Its

function is to facilitate export trade in Pakistan and provide trade information to the
entrepreneurs in Pakistan. In that cause it provides funds and special packages to the
exporters. As Gems & Jewellery is in the developmental category of EPB that’s why EPB
trying its best to help boost this industry in Pakistan. EPB introduces new markets and
technology to the businessman and in this regard it gives subsidies. For the skill
development in Gems & jewellery it has established three institutes in Karachi, Lahore
and Peshawar.
B) INTERNATIONAL ACTORS

¾ World Gold Council

¾ United Nation Industrial Development Organization

World Gold Council

WGC is an international organization based in Italy .The main purpose of WGC is to

create the market for Gold in a potential market. They provide information, skill and
technology in World’s leading markets. Due to great consumption and skilled labour
Pakistan is in the focus of their activities. Initially the response to WGC was slow by gold
traders but now it is jointly working with leading goldsmiths. WGC has also conducted
various design shows in the jewellery and results were positive.

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION:

UNIDO is an specialized agency of United Nations . This organization provides technical

and financial assistance from developed countries. Till this time Pakistan was not on
those countries where they supported Developmental Projects. Some projects are being
run by UNIDO in India. Recently Pakistan has been selected for such type of projects.

INTERLINKAGES AMONG VARIOUS ACTORS

On a national level there are various actors who are supposed to develop SMEs in the
Pakistan. It is a harsh reality that Government has taken great interest in the development
of Large manufacturing Sector but Small and Medium were not encouraged at that level.
Despite that, various actors were established to develop these SMEs but in certain areas
their performance is poor. The main problem of SMEs is unawareness, lack of Finance,
traditional manufacturing, unavailability of modern tools. The role of many state and
private organizations for the development of Small and Medium Sector needs to be
enhanced more.
From time to time Government helped to establish various institutions and policies but all
such measures were not specific that’s why such institutes didn’t perform better as it was
desired. Financial assistance has been provided but many loans were not repaid because
of political support. Consequently Most of the Financial institutes/ Banks put very
difficult conditions for the loan and also applied very high mark up rate. All the
entrepreneurs have also problem with the Government’s regulatory Authority ie Income
Tax and Customs. Government has a again and again tried to make simplify the
procedures for tax collection. In pursuing the liberalized trade Government has offered
various tax relaxation and reduction of duties. In the Gems and Jewellery industry
Government has allowed Zero % import to the exporters who has to Re-Export within
time period.
FPCCI and trade associations are representaives from Trade community. Their role in the
development of SMEs is satisfactory but it can play better role for the development of
SMEs because they know better what these want. For the promotion of trade and industry
EPB gets involved with them. For the skill development, Export Promotion Bureau has
established many institutes like Gems and Jewellery Institute in Karachi and Peshawar.
EPB facilitates trade and Export of the country and in this regard it subsidized many
events for the Exporters. In this way EPB encourages exporters to enter in the world
market and explore some new opportunities.
At the present moment in the Karachi cluster financial support is available but at high
mark-up, due to which many entrepreneurs don’t use this facility. EPB serves as a bridge
between Government and entrepreneurs specially Exporters. It has established various
Training institutes and get membership in International Conventions. It has introduced
many new markets to the new exporters where they could get maximum benefits.
 ASSESMENT ( SWOT ANALYSIS)

Strengths

-Availability of raw materials specially gems and semi precious stones.

-Skilled labour
-Comparative advantage in the studded Jewellery.
-State’s liberalized policies ie Zero percent Import of Gold and export facilitation.
-Availability of Finance, which can be utilized.
-Availability of Technical Skill through training Institutes.
-Large number of Entrepreneurs.
-Wide local market for consumption.
-Information Technology.
-Easy Access to International markets.
-Recognition in the Global market.
-

Weaknesses

-Illiteracy
-Cut throat competition.
-Rudimentary Methods.
-No use of new technology.
-Labour is costly.
-High rate of utility charges and tax regulations
-Not easy entry in the business
-Traditional Designs and no innovations
-Not getting benefits from training Institutes.
-Export is nominal.
-Not utilization of International Markets.
-Having no any affiliation with International Gold Organization
-Non availability of Hallmarking and Assaying.
-Smuggling
-Under invoicing
-Lukewarm response of Association.
-Law & Order situation
Opportunities

-Globalization and free trade.

-Competition at international level
-Access to new marketing information and skill.
-New and unexplored markets.
-Easy process of affiliation with International organizations.
-Free and transparent trade.
-Reduced role of State.
-Quality Standards.

Threats

-Globalization and free Trade.

-Competition with international manufacturing experteese.
-Quality standards.
-Unmatched customer Demand/ satisfaction
-Reduced rate of competencies.
-losing of international buyers.
 Proposed Action Plan:

¾ After Identification of various problems ,now it is very necessary to establish

TRUST among all actors. This trust may be restored when the problems of these
peoples be a addressed at all forums. In this regard the great help is desired from
the association . For the training we have training institutes which have been
closed due to on going rifts and litigation among members and association. These
institutes are short of modern equipment and tools which can be provided through
actives support from UNIDO and Ministry of Science.
¾ As Most of entrepreneurs are illiterate and poor so that it is desired that workshop
be conducted to provide them awareness about finance & marketing skills. Some
good big entrepreneurs have assured CDA to provide his assistance, experience
and technical know how. We have to identify some more positive people who will
support Cluster Development plan.
¾ Export Promotion Bureau, at the present moment is working on the idea of Dazzle
Park. Dazzle park is a place where all facilities be provided to the exporters. For
the cluster development programme we can utilize this facility.
¾ As SME Bank is in the formative phase so at this stage we request them to design
special package for the financial assistance to these entrepreneurs.
¾ All National & International Organizations/Institutions should monitor the
activities in the Cluster and benefit these SMEs from their experiences.

Conclusion:

Gems and Jewellery industry in Karachi is under developing but there is a lot of
potential. This Cluster can be made dynamic with the active support of all actors in this
Cluster. This is high time for all stakeholders in this cluster only there is need of
motivation and dedication.
It is said that “where there is a will, there is a way.”Cluster Development Programme is
an initiative which will lead to Organized Gems & Jewellery Industry in Pakistan.