Gold industry can change the economy of the country if it gets the necessary favors

The tradition of gold ornament craftsmanship in Bangladesh spans a long time. Since ancient times, Bangladeshi goldsmiths have been creating gold ornaments of various designs. The gold ornaments crafted by Bangladeshi goldsmiths are recognized globally for their superior quality. Among the globally renowned goldsmiths, 80 percent are speakers of the Bengali language. Many of the Bengali-speaking goldsmiths engaged in creating gold ornaments in India have migrated from Bangladesh. So far, no alternative has been created to the gold ornaments crafted by Bengali artisans.

Gold ornaments are the most preferred jewelry for women worldwide. The use and demand for gold jewelry have been steadily increasing. It's hard to find any woman anywhere in the world who doesn't prefer gold jewelry. Gold jewelry not only enhances a woman's beauty but also represents a valuable asset. Many people keep gold ornaments for emergencies. The versatile use of gold is evident everywhere in the world. Gold jewelry is universally acclaimed by both men and women. Consequently, the demand for gold jewelry will never diminish in the future. Instead, it will continue to increase day by day.

Bangladeshi artisans are capable of producing high-quality gold ornaments at relatively low costs compared to their counterparts. Just as there is extensive demand for gold ornaments in the domestic market of Bangladesh, there is also the potential to earn substantial amounts of foreign currency through exports to the international market. Bangladesh has already gained a significant foothold in exporting gold ornaments within its limited scope. If taken on a planned basis, the gold industry has the potential to make a significant contribution to the country's economy. However, due to various challenges, this industry is not developing properly. With supportive policies and economic incentives from the government level, the gold jewelry industry can develop fully. Many believe that with comprehensive support, the gold industry could emerge as a top export product in the country, similar to the garment industry.

In light of extensive experience, I can say that obtaining the necessary conducive environment can potentially transform the country's economy through the gold industry. Especially through the export of gold ornaments, it is possible to earn a substantial amount of foreign currency annually, which could be extremely helpful in increasing foreign currency reserves. For a long time, we have been striving to export gold ornaments to the international market, but we have not been able to achieve much success. This is because we lack appropriate and pragmatic policies in the field of gold ornament exports. However, with skilled Bengali artisans migrating from Bangladesh to India, substantial amounts of foreign currency are being earned through the export of gold ornaments to various countries around the world. The reputation of gold ornaments crafted by Indian artisans is renowned worldwide. However, a significant portion of those who craft gold ornaments in India are actually Bengali artisans who have migrated from Bangladesh. As a result, the products made by artisans in our country can easily find a place in the international market.

According to the World Gold Council, the global demand for gold in 2023 was 4,899 metric tons, with jewelry demand accounting for 2,926.6 metric tons. In the 2022-23 fiscal year, India earned $38.08 billion from jewelry exports. By January 2024, India's earnings from gold ornament exports had reached $2.39 billion. In 2023, the global volume of jewelry trade amounted to $353.26 billion. In 2021, Bangladesh earned only $1.23 billion from jewelry exports. Although the National Gold Policy (Revised) was adopted in 2018, it has not been effectively implemented yet.

To compete in the international market for gold ornaments, we first need to streamline the importation of necessary raw materials for this industry. The primary raw material for gold craftsmanship is refined gold. Since Bangladesh does not have any gold mines, we have to import 24-carat gold from abroad. The demand and price of gold in the international market have increased abnormally. As a result, the production expenditure of this industry has increased more than any other time before. If there are tariff exemptions and policy support in the importation of gold, the path to development for this industry could be more open. Gold importation is not done by the government. Banks also do not provide loans for gold importation. In accordance with baggage rules, we rely on a small amount of gold importation. According to the baggage rules, 100 grams of gold can be brought in the form of jewelry. And each piece of jewelry comes in 10 bhori. For these 10 bhori of gold, a duty of 40,000 Taka is required. Therefore, a duty of 4,000 Taka per bhori is incurred. As a result of charging 4,000 Taka per piece, the production cost of gold ornaments significantly increases.

Due to the variation in exchange rates between foreign and local markets, there is a difference of 5,000 Taka in the price of gold ornaments between the international and local markets. This means our expenses are higher by 9,000 Taka compared to the international market when importing gold. Buying at a higher price and selling at a lower price is not a sustainable business practice. No economic principle supports it. As a result, the price of gold ornaments in the local market is increasing. In our country, most consumers have limited purchasing power, so even if they wish, they cannot afford to buy sufficient quantities of gold ornaments. As a result, the demand for gold ornaments in the domestic market has significantly decreased. This business is currently facing some downturns. It's worth noting that gold ornaments are not only used to enhance people's beauty but also serve as a form of investment. Many people preserve gold ornaments as a means of long-term savings during difficult times.

However, relying solely on the provisions of the Baggage Rules to bring in gold cannot fully develop such a significant industry. If the importation of gold is liberalized as raw material for the gold ornament industry, many of its problems could be addressed. In Bangladesh, a 5% value-added tax must be paid to sell gold ornaments in the domestic market. However, neighboring countries like India impose a 3% value-added tax on gold imports. In countries like Pakistan, Nepal, and Sri Lanka, the value addition for selling gold ornaments is much lower than ours. Due to higher value-added tax and other expenses, the price of gold ornaments in our country is significantly higher compared to neighboring countries. We have a class of affluent people in our country who travel to India for various needs. They bring back gold ornaments from India at comparatively lower prices when returning to the country. This obstructs the development of the local industry. The government is also losing significant revenue in this regard. The ornaments produced in our country are lightweight and have small designs. We have been unable to sell such ornaments. Wealthy individuals buy gold ornaments from neighboring countries.

The potential of the gold ornament industry in Bangladesh is very bright. The annual demand for gold in Bangladesh is estimated to be around 200 tons, valued at approximately 42 thousand crore takas. In the fiscal year 2022-2023, 54 tons of gold were imported under the baggage rule. Previously, a passenger could bring up to 20 bhori of gold by paying a tax of 2,000 takas per bhori. In the current fiscal year (2023-2024), a passenger can bring up to 10 bhori of gold. For this, a tax of 4,000 takas per bhori is required.

There is tremendous potential for the diamond industry in Bangladesh. Uncut diamonds are imported and then locally polished and cut to be sold in the market. This requires highly skilled experts. Bangladesh has skilled specialists for the diamond industry who can work proficiently. The demand for diamonds is rapidly increasing in the domestic market of Bangladesh. The biggest obstacle to the development of this industry is the high tariff. In Bangladesh, a 70% tariff is imposed on uncut diamonds, while in India, it's only 5%. The Indian government has provided various forms of assistance for the development of the diamond industry, leading to India becoming the largest player in the global diamond industry. When people from Bangladesh visit India, they bring back finished diamonds from there. With planned initiatives, it is possible to establish a large-scale diamond industry in Bangladesh as well.

On behalf of Bajus, we have repeatedly proposed to the relevant government departments to reduce the rate of value-added tax (VAT) for the jewelry industry, but our proposals have not been given any importance in terms of implementation. If, like India, we had imposed a 3% VAT on bringing gold into Bangladesh, the price of jewelry in the local market would have been more affordable. Consumers would then buy jewelry from the domestic market instead of the international market. Neglecting local consumers, no industry can ever flourish. Any industrial product can be exported. However, it is essential to create demand in the local market first. To create or increase demand in the internal market, two things are very important: improving the quality of the produced goods and bringing the price to a competitive level. Now, even in the local market, any product has to compete with foreign products. If it fails to gain competence in open competition, no product can sustain in the market. However, this is as true for the internal market as it is for the international market.

In Bangladesh, raw gold cannot be obtained. Gold has to be imported from abroad in various forms. A leading industrial conglomerate in the country is establishing a gold refinery project. Through this project, we can obtain the necessary raw materials for the gold jewelry industry. However, to do this, arrangements need to be made to import raw gold from abroad. Because after the refinery is operational, if they do not get raw materials, the production process will be disrupted. Once the refinery project is operational in Bangladesh, it may still be possible to export to foreign countries even after providing the raw material for the domestic market. Permission to import mineral gold will have to be obtained in line with international markets. Then, we can engage with the global market to export gold ornaments and raw gold materials.

Countries like Switzerland, the United States, Australia, and the United Kingdom dominate the international gold market. A significant portion of their national income is earned from the gold industry. These countries can produce and sell gold ornaments at much lower costs compared to Bangladesh. However, we are unable to do so. Gold jewelry is the most widely used ornament in the world. The demand for gold jewelry will never decrease. In the future, the potential of this industry will remain intact. For any industry to develop in this country, there must be a provision for tax holidays for at least 10 years at the initial stage. In our country, the most notable channels for earning foreign currency are garment manufacturing and exporting manpower. Besides these, we haven't been able to create any other promising avenues. I can confidently say that if essential support and cooperation are available, alongside the garment and manpower export sectors, we can establish gold jewelry manufacturing as another alternative avenue for earning foreign currency.

Author: Chairman, Tariff-Tax Standing Committee and Executive member, Bangladesh Jewelry Samity (BAJUS).