Thailand’s jewelry sector glitters

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Prapee Sorakraikitikul, Group Executive Committee-Chairman, Pranda Jewelry plc Jewelry manufacturing and design are a major business in Thailand. The sector is wide open to investors who want to engage in the glittering business, with generous incentives granted by the government. Inside Investor spoke to Pranda Jewelry Public Company Limited, one of the largest jewelry groups in Thailand, who are also active in the Middle East.

Interviewee: Prapee Sorakraikitikul, Group Executive Committee-Chairman, Pranda Jewelry plc 

Q:  Thailand is one of the leading global exporters for gems and jewelry. Could you outline the prospects for the industry in Thailand?

A: The gems and jewelry sector is the fourth largest export business for Thailand, after electronics, automotive, and rubber, and is increasing every year by 10 to 30 per cent. In the nine month period from January to September 2011, the export value was $9.87 billion. Silver jewelry was increasing by around 34 per cent, imitation jewelry by 28 per cent, and gold by 27 per cent. We also export diamonds, and pearl jewelry, rubies and sapphires, and other gemstones. In total, there are between  700 jewelry factories in Thailand exporting their products. Over one million people are employed in the industry. We ourselves have factories in Thailand, Vietnam, Indonesia, Germany and China.

Q: What are the main export markets for Thai jewelry? The government said it is working together with the industry to penetrate new markets including China, India, Russia, and the Middle East (where the UAE is already a major sales market for Thai jewelry). Are you actively looking for new partners in the Middle East in order to expand the business?

A: We are exporting to Switzerland, which is mainly re-export of gold, to Hong Kong as a gateway to the increasing Chinese market, to the US and the EU, mainly Germany, Denmark, and Italy, as well as Australia. India is growing rapidly, at 100 per cent over the past year. In the Middle East, the UAE is indeed our biggest market, followed by Oman. We also export to Pakistan and Egypt, among others. In Dubai, we are operating with a franchise partner who has 6 outlets in places such as Dubai Mall, Mall of the Emirates, the Gold Souk and the Burj Al Arab. We are very happy with the partner, he sometimes realizes really special project such as golden version of the Holy Quran or special jewelry for the royal family. We are open for more franchisees in the GCC, it depends on the individual case, but we are happy to help starting up the business. We are also looking for new trading partners and partnerships in manufacturing. Investors can come and design with us, and we do the gemstone cutting and production. Workmanship is still cheap in Thailand, on the same level as India and China. Investors can also set up a business here, start producing and exporting the jewelry.

Q: Where does Pranda get its raw materials from? Do you have suppliers from the Middle East?

A: We get gold from Switzerland, a major hub for the gold trade. Diamonds are mostly imported from India and Belgium, other gemstones we are getting from Thailand. There are also suppliers from the Middle East, but they are traders.

Q: Despite the high prices of gold and other precious materials, people are still buying jewelry. Do you think this will continue as prices rise further?

A: I believe it is still a good investment, especially gold and diamonds. The prices are rising, but people like to buy jewelry. For example, India and China are the largest markets for gold jewelry, and we don’t see a change in the buying behavior.

Q: What is your advice for foreign investors or companies who want to set up a gems and jewelry business in Thailand? In what specific sectors of the industry do you see opportunities for foreign firms to invest?

A: As I said, in manufacturing and design, also in product development. There are export promotions, two times a year we are holding jewelry exhibitions. Gold, silver, and rough stones are free of VAT, the Asean countries and Japan are not imposing import duties, while the US and EU do, and they have also a quota system. In China, taxation is a problem. One idea for investors would be, for example, to set up design studios where manufacturers can outsource their design work, this would make sense. It also falls under the government’s efforts to promote the creative industry sector.

Q: Thailand has established itself as a competitive production base for gems and jewelry, but is facing increased competition from countries such as Sri Lanka, Myanmar and India. What measures have been taken to maintain Thailand’s strong role in the jewelry world market?

A: These countries are not so much a competition as each country has its own expertise:  Thailand is good at color stone and silver Jewelry. India is good at diamond cutting and gold and diamonds jewelry, while Myanmar and Sri Lanka are mainly exporters of raw materials and experts in stone cutting. Indonesia and Vietnam’s jewelry industries are still young with a cheaper and less experienced workforce and China has the problem of continuously rising labor costs.

Q: Production and design of jewelry relies on skilled workforce and craftsmanship. What is the current situation on the labor market in terms of education and training?

A: We have many schools in Thailand that specialize in design, so the skills level is very high. It is easy to find skilled people in Thailand. We are also training our staff by our own. One problem will be the new minimum wage of 300 baht daily expected in 2012, though it is not decided yet. This will really hurt the jewelry industry and many other industries such as textile, electronics and food production. We will be less competitive than before. Currently, we are paying 250 baht per day for Bangkok workers and 200 baht for the workers in our factory in Korat. Of course we give them pay rises on our own, because we are training them, and their quality of work improves. But now, when somebody was very ambitious and got a pay rise for his performance, he sees somebody new and inexperienced joining the company with a similar starting salary, that is not fair. We also have a lot of other benefits for our workers, such as free accommodation.

Q: What are the current import and re-export provisions for the industry? Do you think they need to be simplified or adapted to boost the international business?

A: Raw material import is free of tax and other duties, and there are no export duties. So I don’t think there is a need for change as the conditions are already favorable for the industry.

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Reading Time: 4 minutes

Jewelry manufacturing and design are a major business in Thailand. The sector is wide open to investors who want to engage in the glittering business, with generous incentives granted by the government. Inside Investor spoke to Pranda Jewelry Public Company Limited, one of the largest jewelry groups in Thailand, who are also active in the Middle East.

Reading Time: 4 minutes

Prapee Sorakraikitikul, Group Executive Committee-Chairman, Pranda Jewelry plc Jewelry manufacturing and design are a major business in Thailand. The sector is wide open to investors who want to engage in the glittering business, with generous incentives granted by the government. Inside Investor spoke to Pranda Jewelry Public Company Limited, one of the largest jewelry groups in Thailand, who are also active in the Middle East.

Interviewee: Prapee Sorakraikitikul, Group Executive Committee-Chairman, Pranda Jewelry plc 

Q:  Thailand is one of the leading global exporters for gems and jewelry. Could you outline the prospects for the industry in Thailand?

A: The gems and jewelry sector is the fourth largest export business for Thailand, after electronics, automotive, and rubber, and is increasing every year by 10 to 30 per cent. In the nine month period from January to September 2011, the export value was $9.87 billion. Silver jewelry was increasing by around 34 per cent, imitation jewelry by 28 per cent, and gold by 27 per cent. We also export diamonds, and pearl jewelry, rubies and sapphires, and other gemstones. In total, there are between  700 jewelry factories in Thailand exporting their products. Over one million people are employed in the industry. We ourselves have factories in Thailand, Vietnam, Indonesia, Germany and China.

Q: What are the main export markets for Thai jewelry? The government said it is working together with the industry to penetrate new markets including China, India, Russia, and the Middle East (where the UAE is already a major sales market for Thai jewelry). Are you actively looking for new partners in the Middle East in order to expand the business?

A: We are exporting to Switzerland, which is mainly re-export of gold, to Hong Kong as a gateway to the increasing Chinese market, to the US and the EU, mainly Germany, Denmark, and Italy, as well as Australia. India is growing rapidly, at 100 per cent over the past year. In the Middle East, the UAE is indeed our biggest market, followed by Oman. We also export to Pakistan and Egypt, among others. In Dubai, we are operating with a franchise partner who has 6 outlets in places such as Dubai Mall, Mall of the Emirates, the Gold Souk and the Burj Al Arab. We are very happy with the partner, he sometimes realizes really special project such as golden version of the Holy Quran or special jewelry for the royal family. We are open for more franchisees in the GCC, it depends on the individual case, but we are happy to help starting up the business. We are also looking for new trading partners and partnerships in manufacturing. Investors can come and design with us, and we do the gemstone cutting and production. Workmanship is still cheap in Thailand, on the same level as India and China. Investors can also set up a business here, start producing and exporting the jewelry.

Q: Where does Pranda get its raw materials from? Do you have suppliers from the Middle East?

A: We get gold from Switzerland, a major hub for the gold trade. Diamonds are mostly imported from India and Belgium, other gemstones we are getting from Thailand. There are also suppliers from the Middle East, but they are traders.

Q: Despite the high prices of gold and other precious materials, people are still buying jewelry. Do you think this will continue as prices rise further?

A: I believe it is still a good investment, especially gold and diamonds. The prices are rising, but people like to buy jewelry. For example, India and China are the largest markets for gold jewelry, and we don’t see a change in the buying behavior.

Q: What is your advice for foreign investors or companies who want to set up a gems and jewelry business in Thailand? In what specific sectors of the industry do you see opportunities for foreign firms to invest?

A: As I said, in manufacturing and design, also in product development. There are export promotions, two times a year we are holding jewelry exhibitions. Gold, silver, and rough stones are free of VAT, the Asean countries and Japan are not imposing import duties, while the US and EU do, and they have also a quota system. In China, taxation is a problem. One idea for investors would be, for example, to set up design studios where manufacturers can outsource their design work, this would make sense. It also falls under the government’s efforts to promote the creative industry sector.

Q: Thailand has established itself as a competitive production base for gems and jewelry, but is facing increased competition from countries such as Sri Lanka, Myanmar and India. What measures have been taken to maintain Thailand’s strong role in the jewelry world market?

A: These countries are not so much a competition as each country has its own expertise:  Thailand is good at color stone and silver Jewelry. India is good at diamond cutting and gold and diamonds jewelry, while Myanmar and Sri Lanka are mainly exporters of raw materials and experts in stone cutting. Indonesia and Vietnam’s jewelry industries are still young with a cheaper and less experienced workforce and China has the problem of continuously rising labor costs.

Q: Production and design of jewelry relies on skilled workforce and craftsmanship. What is the current situation on the labor market in terms of education and training?

A: We have many schools in Thailand that specialize in design, so the skills level is very high. It is easy to find skilled people in Thailand. We are also training our staff by our own. One problem will be the new minimum wage of 300 baht daily expected in 2012, though it is not decided yet. This will really hurt the jewelry industry and many other industries such as textile, electronics and food production. We will be less competitive than before. Currently, we are paying 250 baht per day for Bangkok workers and 200 baht for the workers in our factory in Korat. Of course we give them pay rises on our own, because we are training them, and their quality of work improves. But now, when somebody was very ambitious and got a pay rise for his performance, he sees somebody new and inexperienced joining the company with a similar starting salary, that is not fair. We also have a lot of other benefits for our workers, such as free accommodation.

Q: What are the current import and re-export provisions for the industry? Do you think they need to be simplified or adapted to boost the international business?

A: Raw material import is free of tax and other duties, and there are no export duties. So I don’t think there is a need for change as the conditions are already favorable for the industry.

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