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The Bangkok fairs are highlights for Australian retailers
The Bangkok fairs are highlights for Australian retailers
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Thailand still important to local industry

Australia is thailand's third-highest jewellery trading partner and Australian imports account for 11.21 per cent of the total industry, but do the statistics show the true picture? COLEBY NICHOLSON uncovers some interesting results.

Thailand's importance to the success of the Australian jewellery industry continues to increase. In 2007, two-way merchandise trade exceeded $12 billion and exports of gems and jewellery to Australia again rose.

According to official figures released at the Bangkok Gems and Jewelry Fair, "exports last year soared 32 percent to $US5.38 billion". Just as impressive was the growth in Australia's trade with Thailand, rising in 2007 by over $US316 million to $US603 million - a staggering 110 percent increase in just one year.

This result makes Australia the third-highest trading partner for gems and jewellery with Thailand and Australian imports account for 11.21 percent of the total Thai industry.

While Thai Gem and Jewelry Traders Association (TGJTA) president Vichai Assarasakorn has acknowledged that much of the sales boom could be attributed to the record gold price, it remains difficult to fathom the stratospheric rise in Australia's jewellery imports from Thailand - especially when one acknowledges that the 2006 figure of $US286 million represented an increase of 415 per cent on 2005 ($US55 million). In essence, official Thai Government figures are indicating an increase from $US55 million in 2005 to $US603 million three years later.

At $US603 million, Australia sits third on the list of Thailand's gem and jewellery trading partners, behind only the USA ($US1027 million) and Hong Kong ($US897 million). This is remarkable given our population and that it was only a few years ago that Australian ranked eighth in a list that included many European countries.

Such a comparative jump makes it inconceivable to attribute this rise to the impact of the gold price on jewellery items, because each country has not recorded equal or similar sales increases. What these figures do not clearly show is the effect of gold bullion trading.

Thailand's Department of Export Promotion maintains extensive statistics on its valuable gems and jewellery industry, which employs over one million people, but the headline figures do not specify the gold bullion trading between the countries. The figures are available but they are not identified, nor is there any mention that gold bullion trading is included as gems and jewellery exports unless one delves deeper. It could easily be argued that gold bullion should not be included because the gold may not have become jewellery, especially when gold is trading at record levels, as it has been.

Chart One (below) shows the total value of the Thai gem and jewellery industry including gold trading. Chart Two then highlights the gold bullion trading in each year, a very different result. Australia imported $US95 million in 2007, up from $US56 million the previous year.

But what is more interesting is the increase in gold bullion sales from Thailand to Australia - these exceed $US500 million. Interestingly, Thailand is not a major gold producing nation, so how does it come about that Thailand exports just as much gold to Australia as Australia does to Thailand?

The answer lies in the current price of gold, which remains close to record levels. Coupled with a sluggish Thai economy, such a high price has encouraged many Thais (noticeably older citizens) to sell family heirlooms and keepsakes such as gold jewellery.

The county's population is 65 million but still the average worker earns just 6,000 baht per month, around $AU210. Resultantly, the Thais are taking advantage of the gold price and selling their jewellery pieces to gold merchants who melt them down. According to one newspaper report, the Commerce Ministry released figures showing Thailand exported 70 tonnes of gold in 2007 - an increase of 50 percent on the previous year. This trend of "cashing-in" gold jewellery has been prevalent for over a year, the report stated, and Chart Two confirms it.

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So while Australia's imports of jewellery from Thailand continues to increase at very impressive levels (69 per cent in 2007) and are now close to $US100 million, it needs to be recognised that official Thai headline figures are dramatically distorted because of the inclusion of gold bullion trading.


Brisk sales at Bangkok Fair

The 41st Bangkok Gem and Jewellery Fair closed in March with the organiser reporting brisk sales and, "an increase in visitors' impression and attention from international buying missions".

With the Thai new government in place, fair co-organiser Thai Gem and Jewelry Traders Association (TGJTA), was keen to ensure that new government officials were prominent invitees.

Viroon Tejapaibol, deputy minister of commerce, presided over the opening ceremony, stating that, "The contribution of the gems and jewellery to the Thai economy is significant. Gems and jewellery exports last year exceeded $US5.3 billion, up 46.72 per cent from the previous year, ranking fifth on Thailand's export lists."

But the Thai industry needs an internal boost especially given the growing competition from China and the slow Thai economy. A large part of the sales increase came about from the higher cost of raw materials.

Vichai Assarasakorn, president Thai Gem and Jewelry Traders Association (TGJTA) wants new initiatives adopted. Vichai is somewhat visionary and certainly pragmatic when it comes to his industry. He, along with fellow TGJTA board members are hard at work lobbying the government to remove the VAT on some goods and establish a "Gold and Gem Bank" system - where local companies can use stock as collateral rather than property.

Because of the increase in gold prices, local manufacturers find themselves needing to borrow more to finace their operation and the product they are buying has its own (high) value, which cannot be used as part of the finance facilities.

"We are seeking an endorsement from the government to remove the 7 per cent VAT imposed on imported raw materials, which has proved to be a heavy financial burden for Thai local small and medium enterprises (SMEs)," Vichai said. "We are also lobbying for government support to establish a facility, dubbed 'Gems Bank', to support lending to local SMEs, which make up 90 per cent of the Thai jewel industry."

In 2007, the gems and jewellery exports dominated 3.5 per cent of Thai's export. "The outlook is positive for Thailand to reach $US6.5 billion at the end of 2008," Tejapaibol deputy minister of commerce said.

Asked whether he believed the VAT and Gems Bank initiatives would be adopted by the new government, Assarasakorn said, "We have a good chance to remove the VAT and have high hopes on Gems Bank." He explained the conundrum: "Unfortunately, small companies are often denied access to capital to run the business even though they have large levels of stock of gold and valuable gems, which are not taken into account by the financial institution financing the business."

Coleby Nicholson attended the 41st Bangkok Gem and Jewellery Fair courtesy of the fair organisers.

Coleby Nicholson

Former Publisher • Jeweller Magazine

Coleby Nicholson launched Jeweller in 1996 and was also publisher and managing editor from 2006 to 2019. He has covered the jewellery industry for more than 20 years and specialises in business-to-business aspects of the industry.


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