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Despite an oldest business sector in Bangladesh, the jewellery sector has not yet developed significantly like others due mainly to a lack of adequate policy support from the government.
As a result, the potential sector has to largely rely on illegal sources to meet the market demand. Some 90 per cent of the precious metal is now entering the country’s market illegally, according to sector insiders and researchers.
Businesses also pointed out that owing to high taxation and complexity in policy in the country, the traders have to import gold through illegal way.
Illegal gold dominates local market
According to Bangladesh Jewellers Association (BAJUS), gold ornaments and bars worth over Tk73,000 crore enter the country illegally every year.
Bangladesh imported gold worth $397 million in 2020. Of them, gold worth $370 million was imported from United Arab Emirates (UAE) while $14.9 million from Singapore, $9.94 million from Malaysia and $2.26 million from Thailand, the association data showed.
Sector insiders said Bangladesh has become an easy and safe route for smuggling gold from the middle-east countries due to its proximity to India, the largest market for the precious metal.
They added that gold is smuggled into the country through Satkhira, Benapole, Kushtia, Jashore, Lalmonirhat, Chapainawabganj, and Rajshahi. More than 100 syndicates remain active at different points on the India-Bangladesh border. International smugglers carry gold bars mainly from Malaysia and Singapore and supply those to the markets of Bangladesh and India.
According to Gold Policy (amended 2021), Bangladesh has a maximum demand for 40 tonnes of gold per annum. Only 10 per cent of the demand is met with old gold. An international research organisation in its survey showed that Bangladesh sold gold ornaments, gold bars and silver ornaments worth $2.85 billion in 2020.
Talking to The Business Post, Chairman of Policy Exchange Bangladesh chairman Dr M Masrur Reaz said 90 per cent of gold metal/bar is being injected into the market in Bangladesh through illegal sources. The rest of 10 per cent is imported through legal channel.
“There is required policy attention for developing a competitive gold sector. Non-conducive tax rate or high corporate tax encourages businesses to find illegal sources,” he added.
The economist also called for stepping up monitoring to stop illegal import and provide proper policy support to make it export-oriented one as India could make the sector highest export earning sector.
BAJUS General Secretary Dilip Kumar Agarwala also requested Bangladesh Financial Intelligence Unit (BFIU) to enhance its surveillance in order to stop smuggling.
Research Director of Centre for Policy Dialogue (CPD) Dr Khondaker Golam Moazzem said an increase in gold import tax might have contributed to the rise in smuggling. Some powerful individuals, businesspeople, and corrupt officials at airports and law enforcers are colluding with smugglers.
Proper policy needs to tap the potential
Businesses said gold has not been legally imported into Bangladesh since its independence due to a lack of proper policies. The sector won’t develop if smuggling continues.
BAJUS President Sayem Sobhan Anvir said Bangladesh is ahead of India in the garments industry globally. “We can overtake India in the jewellery sector too if the government provides us proper policy support and also reform the current tax structure,” he added.
“We request the government to allocate special “land” for the sector’s security and development. Smuggling will come to end if jewellers are exempted from taxes and VAT on gold imports. An amendment to the law is required here,” Anvir also said.
According to baggage rule, each passenger is entitled to duty-free import of gold ornaments not exceeding 100 grams or silver ornaments not exceeding 200 grams (one type of ornament not more than 12 pieces.)
In 2018, the government formulated Gold Policy keeping in mind the potential of gold business, which was revised in 2021 as “Gold Policy 2018 (Amended, 2021). Dr Masrur said the policy is not adequate for the sector. “Several challenges require policy attention for developing a competitive gold sector.”
“Wholesale trading doesn’t require any legal paperwork here. Bangladesh doesn’t have a gold refinery, high wastage while making jewellery, lack of lab facilities, violation of baggage rule, 5 per cent VAT and high corporate tax. These should be addressed,” he added.
A high prospective industry
Now 50 lakh people are directly engaged in 40,000 firms in the jewellery sector of the country.
Bangladesh is on the track to become a $500 billion economy. There is a big domestic market. As the jewellery sector has a value addition of 30-50 per cent while the ready-made garment (RMG) sector has a maximum of 8 per cent, it has huge scope to earn foreign currencies by exporting the item, Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) president Md Jashim Uddin said.
“ To reach the target of becoming a developed country by 2041, Bangladesh has to increase its exports to $300 billion. So, we need to promote the sector for export diversification,” he added.
Dr Moazzem said the market for jewellery products will grow at an average rate of 12.1 per cent each year by 2030. As a result, total sales of gold ornaments, gold bars, and silver in Bangladesh in 2030 will be $21.1 billion.
He said that only gold ornaments worth $2.38 billion (83.5 per cent of the total market share) were sold in Bangladesh in 2020. With a growth of 12.5 per cent per annum, gold jewellery sales will rise to 17.1 billion by 2030.
“Only gold bars worth $428.2 million have been sold in Bangladesh in 2020. This market will grow at a rate of 11 per cent per year between 2022 and 2030. Hence, the sales volume will stand at $3.87 billion in 2030,” he added.
In the world market, the total demand for gold was 4741 tonnes in 2022. India and China are the top two gold jewel consuming countries in the world. There are six Asian countries among top 10 jewellery consuming countries of the world.
There are four South Asian countries among the 100 jewellery exporting countries. India exports gold worth $10.6 billion, followed by Sri Lanka $65.6 million, Pakistan $6.3 million and Nepal $7.6 million.
According to Grandview research, the total market of jewelry industry will be $518.90 billion in 2030.
BAJUS President Anvir said the sector has a big economic potential. Large savers and entrepreneurs should invest more in the sector, considering returns compared to other savings tools.
“If one invests money in the jewellery sector, there is no possibility of loss. For example, the price of gold rose to Tk90,000 from Tk6,000 per bhori 20 years back due to the growing demand. So, all should buy gold and stock to take profit in future,” he also said.
He added that Bashundhara Group plans to establish a gold refinery in the city's Kuril area which requires around Tk3,500 crore investment to boost the sector. It will help meet local demand for finished gold for local consumption and to export of finish gold and jewelry.
Key challenges
Alongside proper policy, a lack of modern technology and skilled artisans are main challenges for the sector. Besides, investment, limited customer base, and limited changes in designs are also problematic signs here. Dr Moazzem said Bangladesh is not in the list of 100 jewellery exporting countries, but it ranked 33rd in terms of gold import. However, a new horizon of jewellery market will be created if the challenges are overcome.
Indian government has set a target of exporting gems and jewellery worth $45.7 billion in the fiscal year 2022-23.
Expert recommendations
Economists suggested that the government and the private sector should jointly work to establish a formal value chain, and BAJUS should closely work with the government agencies concerned to stop illegal gold trade. Big investment is needed in technological, skills, design and other facilities.
Dr Moazzem suggested that the government should extend necessary support for developing an export-oriented sector.
Dr Masrur said that VAT should be reduced to 2 per cent from current 5 per cent, selling without Hallmark on the jewelry must be prohibited, introducing lab facilities to measure the quality of gold should increase, provide training to make new craftsman, and encouraging modern production and jewellery making practice and technology to help reduce wastage of gold during the jewellery making process.
