Thais Try To Combat Slump

November 1998

Gems & Pearls:News

Thais Try To Combat Slump

The gemstone and jewelry business is a global enterprise – the effects of an economic downturn in Thailand will eventually influence business in the United States

As imports, exports and domestic demand shrink, the Thai jewelry industry looks to government aid while promoting its services in hopes of solving its problems. This has resulted in more competitive prices for U.S. buyers of loose gems and diamonds.

The Challenge
This year, imports of goods into Thailand, including rough gems, are expected to fall 20% to 25% from last year. For the colored gemstone trade, a bastion of Thailand's jewelry industry, a shortage of raw material now will mean shortages of cut goods in the near future. There's more bad news: diamond exports have dropped 44% in dollar value from 1997, roughly paralleling the plunge in the value of Thailand's currency, the baht.

During a recent visit to Bangkok, Professional Jeweler investigated the problems the Thais must solve before they can regain their high global supply rates in gemstones and jewelry.

Anemic demand for polished gems and diamonds by Thai consumers – usually big customers for their nation's glittering product – is exacerbated by low demand from regional consuming countries, principally Hong Kong and Japan. As a result, jewelry production is suffering – factories reportedly are working at only 65% capacity.

Thailand is trying to confront the challenges. Prime Minister Chuan Leekpai has reiterated support of the industry through government programs to improve technology and training. In July, a delegation from the Thai Gems and Jewelry Trade Association and the Thai Department of Exports and Promotions mounted an 11-day tour to the world's major gemstone sources to secure supplies and agreements for the industry.

Effect on Americans
There is a silver lining for U.S. consumers of gems and jewelry from Thailand. The baht devaluation resulted in more competitive prices for Thai products, including faceted loose gems and diamonds. Labor and overhead costs pegged to the baht remain stagnant through the crisis, resulting in gem and jewelry prices competitive with giants such as India and China.

Because of the relative health of the U.S. market, Thais – like other luxury goods exporters – are flocking to the U.S. to sell their stocks. This has created a strong buyer's market U.S. retailers can take advantage of in the next year or so.

But be vigilant. Because the gem and jewelry industry has become a player in the global economy, the fortunes of different markets will have effects on jewelers in the U.S. too. Asia's economic woes continue to affect the U.S. economy, contributing to a serious trade imbalance. This imbalance has already cut down on general domestic manufacturing for export to Asia. A full-scale manufacturing downturn in the U.S. could lead to a weakened economy and lower demand for jewelry here also.

– by Robert Weldon, G.G.

Copyright © 1998 by Bond Communications.


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