Sunday, 12 June 2016 11:31

Sri Lanka relaxes gold import norms

Amidst considerable concerns of local Jewelers, Sri Lanka takes a major step towards liberalising gold imports by introducing some procedural simplifications and a change in regulations in the coming days.

The removal of gold import restrictions is on the cards and the end result for gold investors is an increase in demand for the yellow metal, the Finance Ministry claimed but local jewelers were of the view that it will lead to price manipulation and mal practices.
Sri Lanka will award 50 licenses to import gold tax free, Finance Minister Ravi Karunayake said adding that the tax free import licenses will be given though the Central Bank. The gold will be used by goldsmiths to produce jewellery.
Local jewellery manufacturers who currently used to purchase gold from commercial banks will have to go after selected individual importers to buy their requirement, a leading member Sri Lanka Gem and Jewellery Association (SLGJA) said adding that they cannot expect fair play from such gold traders.
The Commercial Bank and Bank of Ceylon are the highest gold importers among banks at present but under the 2016 budget proposal, banks have been told to stick to their core business and are unlikely to be given god import licences.
Import of gold on consignment account basis could be done only by a licensed commercial bank or any other limited liability company approved by the Controller of Exchange for that purpose at present.
Jewellery manufacturers used to directly purchase this precious metal from commercial banks and they prefer the present system rather than buying it from importers selected by the government, SLGJA member said adding that they might smuggle it to lucrative markets such as India, one of the world’s largest purchasers of gold creating a substantial profit for the Sri Lankans playing in the field.
Sri Lankan gold traders had been involved in buying the metal overseas and smuggling it into India.
According to National Gem and Jewellery Authority data , Sri Lanka’s current gold needs are totally met by gold imports and the annual gold imports are in the range of over US$ 200 million (over Rs. 28 billion ) and more than six metric tons imported are used for domestic consumption as well as in export manufacture. No clear estimates are found on the domestic retail sector value
The Cabinet Committee on Economic Management (CECM) has directed the Department of Exchange Control will make this declaration and inform the Import and Export Control Department for the implementation of norms relating to gold imports.
The relevant regulations would be published under the import and export control act, the committee report revealed adding that a decision is to be taken on the licence fee of selected gold importers soon.
Criteria for the selection of 50 gold importers would be devised by the Central Bank (CB) and it will issue licences to those importers by the Department of Import and Export Control on the recommendations of the CB.
A special committee appointed by the CB will be tasked with considering applications and granting licences to 50 gold importers amidst growing concern that the move would result in a monopoly in the business.
A gold merchant, who wished to remain anonymous,noted that most jewellers fear these licences would be given to a handful of businessmen with links to powerful politicians in the government while a large number of domestic jewelers will have to wade through choppy waters.
A senior CB official said a special committee will be appointed to select eligible gold importers while a new scheme will be put in place which is unlikely to create an artificial market or monopoly.
However the local jewellery manufacturers said these licenced gold importers can create a shortage of gold at any time in the market pushing gold jewellery manufacturers and gold craftsmen into difficulties, SLGJA member said adding that the island nation’s current gold needs are totally met by gold imports and are used for domestic consumption as well as in export manufacture.
The island now has 100 lapidaries and four diamond cutting factories with 27 production unit having over 100 employees of whom 30 percent were female. Altogether there were 1,480 jewellery businesses registered with the National Gem and Jewellery Authority of which 345 firms were exporters.
Rising domestic incomes and buying by tourists and growing exports indicate Sri Lanka’s jewellery industry has strong growth potential.
Jewellery making in Sri Lanka has been improving with the island now exporting to some of the most discerning consumer markets, like Switzerland, Germany and Japan, an indication of its standards.

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