Pakistan’s Gemstone Industry: A Potential Economic Robust

“Pakistan’s gemstone industry in doldrums,” it has yet to mark its triumph through becoming remedy of current economic soft patch and paving path for indigenous sustainable growth in foreseeable future. Holding the fifth largest gemstone reserves of the world, the country offers diversified precious and semi- precious potential reservoirs in different areas. For instance, the most important are Emerald from the Swat Valley, followed by Ruby and Spinel from the Hunza Valley holds worldwide recognition due to its exceptional quality. Similarly, notable are pink Topaz from Katlang near Mardan city, and Aquamarine from Dassu near Slzardu area. Apart from this, Sapphire, Jade, Quartz, Lapis Lazuli, and some ornamental stones have also been found in various regions of the country.

Statistically, Pakistan’s annual gemstone exports is approximately $3.7 billion. It is a dismaying fact that 80% of revenue generated by this [industry] through exporting raw material. Whereas, annual export capacity of only three gemstones comprised of  800,000 carats of Ruby, 87000 of carats of Emerald and five billion of Peridot. In retrospect, a total annual production reported in the late 1970s was over $1 million. Whereas in the year 1948 only five resource minerals were known to exist in any quantity, today at least 16 minerals, including gem materials. As a result, over the years the industry present descending trajectory of progress path with looming threats of even complete collapse as it could not even find a place in the top 10 gem exporter’s countries of Asian Continent.

“Pakistan holds the fifth largest gemstone reserves of the world. With this staggering potential, it can become the remedy for our economic soft patch. However, the gemstone industry requires preferential treatment vis-à-vis capital investment and structural reforms, in aligned with the principles of global competitive gemstone markets.”

It can be argued that despite its immense potential of strengthening contours of national economic architecture why this industry plugged with enduring crisis. Introspection suggest that there are numerous fundamental imperatives and policy impediments which are thwarting the gemstone industrial flourishment emblems.

  • At government level, it lacks a “centralized mechanism” for entire process of mining and trading. Different ministries associated with reference to the mining, processing and trade of gemstones. Currently, apart from provincial governments, Ministry of Trade and Commerce, Ministry of Industries and Production, Pakistan’s Mineral development Cooperation (PMDC), Pakistan gems and Jewelry Development Company (PGJDC), and private companies are major stakeholders, which draws ambiguous configurations due to divergent interests, non-coherent policies and discoordination fallouts leads to breakdown of plausible gemstone economy.
  • The effective exploration of gemstone reservoir faces setback with institutional framework inadequacies. Pakistan’s gemstone industry is driven by dozens of small-scale mines and artisanal. The major impediment includes poor capital investment, insignificant technical expertise, lack of modern technological equipment’s and experienced labor entire mechanism in disarrays. There is limited technical, economic and legal assistance by the designated authorities regarding the mining, processing and trading mechanisms to the affiliated companies and contractors.
  • With reference to international exports of gemstones, the industry clearly remains below par while having accessibility to the compatible international market. Domestically, heavy taxes are imposed on the exports while it also faces plentiful issues regarding custom clearance.
  • Deficient revenue collection and value addition aspects ensues major obstruction, for example gemstone trade earns low revenue as compare to other global competing actors due to non-coherent trading mechanism. Most often the government and stakeholders fails to strike a fair deal in accordance to the quality of exported gems. Consequently, it ends up with low revenue generation value. Despite having abundance raw reservoirs, the wanting processing set up leads to low value addition of the exports.
  • Currently unsatisfactory laws and regulations for gemstone mining, processing and trade resulting into weak oversight of entire industry. Gemstone companies and contractors tend to operate outer realm of private sector leading to illicit trade and illegal activities, raising grave apprehensions.
  • The gemstone extraction and mining procedure predominately rely on conventional methods of blasting and drilling. The risk-stricken method often results into catastrophic incidents and hazardous health issues for the engaged manpower. Likewise, it also rescinds the gemstone quality.
  • Social normative, cultural and geographic constraints are the core imperatives of stalling growth. For instance, majority of reservoirs founded in the higher altitude geographic regions, the lack of basic infrastructure halts accessibility. Furthermore, majority of discovered sites own by the local feudal lords who in majority of cases remain reluctant for mining or tend to strike commission based deals at their own terms and conditions.
  • The country also falling short to establish gemstone markets in aligned with competitive capacity to the international markets of gemstone. Unfortunately, there is only one market in Peshawar city, largely comprised on ancient furbishing tendencies.
  • Absence of domestic markets and advanced processing mechanisms coerces raw material sales, thus the product sold in international market holds no national recognition because majority of traders sell it with their own brand names after processing. Thus our indigenous gemstone industry remains unexplored and untapped by the leading gemstone industries.
  • Notably, there are no branding and advertising strategies which can promote the local product in local and international markets. As a result, despite its massive scope, there is no foreign direct investment in this sector.
  • Feasible security environment is another grey areas which encumbers the progressive growth of the gemstone industry. Terrorism in the country had mayhem repercussions to and there in an uphill task to recuperate the secure image for foreign direct investment and robust gemstone trading activities. In addition, intervening imperatives such as Covid-19, poor economic growth also made the investors hesitant due to prevailing uncertainties in Gemstone industry.
  • CPEC project has provided economic incentives to all other major industries. However, the government missed out to a vital opportunity vis-à-vis brining substantial gains from this mega project to the gemstone industry of Pakistan. Likewise, prioritization of other industries also complicated the gemstone sector.
  • This sector also have holds deficiency of surveillance and accountability. Minimal attention from the government led to impoverishments and malpractices of nepotism, corruption and bribery.

To address the issues and impediments, the government need to devise multi-pronged inclusive strategy by engaging all the stakeholders to ensure far-fetched objectives of gemstone sector. In account to this following radical steps can be opted:

  • Capital investment is fundamentally imperative to revamp the waning gemstone sector. Followed by extensive technological and logistical assistance, coupled with viable trading contours may strengthen to achieve targeted goals. Provincial and federal level task force committees can be establish to identify the grey areas of policy formulation and respective challenges.
  • Revenue generation value can be increased by replacing conventional mining, cutting and processing techniques with advance technological machinery and gadgets, which will assist to boost the final product production and eventually the raw gemstone trade may decrease.
  • Concerned quarters should ensure the identification of comparative advantage to broaden the horizons of exporting capacity, aligned with comparative trends of the international gemstone market. The federal government can play a key role in fostering liberalized trading policies and encouraging gemstone exports. Notably, engagement with noble International gemstone industry forums will help to pursue the desired targets.
  • The government needs to invest in skill development programs and technology transfer of the gemstone industry. In this regard, the foundation of international standard laboratories, technical training centers at the provincial level would ultimately create skilled Labor for the gemstone industry.
  • The gemstone industry potentially demands structural taxation reforms. In this regard, the federal government can offer competitive fiscal terms. Introducing Tax breaks will allow margin maximization and it also benefits to seek access to the international market. The provincial government should initiate establishment of special economic zones, creating tax incentives for gemstones, or waiving other taxes and duties that will increase the revenue generation of the gemstone industry.
  • To subvert the economic constraint, the mechanism of extending credit to the gemstone industry can be introduced. The loan scheme facilities may help small- and medium-scale gemstone enterprises. Furthermore, the model of “gem banking” can be replicated to make productive investments and weathering market downturns.
  • Establishing process of inter-agency coordination is essentially vital to uplift the prospect of gemstone economy. Furbishing inclusive coordination between custom department and subjective institutions associated with the gemstone production and export such as federal and provincial government ministries may extend efficiency of information sharing in context of weaknesses and consolidate the collective state’s approach to pursue trade policies.
  • Federal and provincial authorities should provide guidance in abiding by relevant certification and/or due diligence requirements. This may be most efficiently accomplished with collaboration with other stakeholders, including civil society and the international community
  • Stringent reformative measures require to address the issues of standardize rates, transparency sustainable exporting procedure, and strengthening accountability process to gain maximum profit.
  • The government need to create a sustainable accessibility to the international market. For that effective branding strategies and offering opportunities for foreign direct investments at easy concession will surely benefit this industry.
  • Somehow the policy makers should devise strategic policies to bring this industry under the CPEC calculus through creating Special Economic zones in different regions.
  • Different successful models of the gemstone industry across the world can be replicated to improve indigenous structure. Seeking advocacy from those countries and training the local experts and professionals will bring strength and prosperity.

To conclude with, the gemstone industry hopes serious consideration for its sustainability and growth from the concerned authorities. Otherwise, it’s on the brink of complete cripple. Thus collective effort is require to boost this significant contour of national economic trajectory.

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About Mushahid Hussain Naqvi 15 Articles
The author is the Digital Editor at The Asian Telegraph and sub-Editor at Melange International Magazine and Research Associate at COPAIR with academic expertise in International Relations.