ISLAMABAD: Pakistan on Wednesday restricted exports in the gems and jewellery sector in an effort to meet the Financial Action Task Force’s (FATF) conditions for removing the country from its grey list.
According to exporters, export of the sector has already fallen below $10 million from $30 million after the government restricted trade activities in a move to curb money laundering and terror financing to comply with conditions set by FATF to exit its grey list.
Exporters are now holding meetings with various ministers to discuss and find a way out before the FATF’s team visit, expected in early September to conduct an “on-site” review to verify steps taken by the country.
In June, the global financial watchdog had hinted at Pakistan’s removal from the grey list after it concluded that Islamabad had complied with its 34-point plan of action. The watchdog had also agreed to send its team for the verification of these steps.
According to sources, strict restrictions have been placed for the export of gems and jewellery as the items are feared to be used as a cover for money laundering and terror financing. This perception is due to a lack of mechanism to check or specify the value of items traded in the sector.
Pakistan was placed on the grey list by the FATF in June 2018 for deficiencies in its system to curb money laundering and terror financing. It was first given a 27-point action plan and later another 7-point plan to comply with the FATF’s standards.
Although office bearers of various trade bodies in the sector are holding meetings in the concerned ministries to resolve issues related to export, they seem reluctant to share the proposed mechanism for removing restrictions with approval from the FATF.
On Wednesday, a delegation of All Pakistan Small Gems Jewellers and Tools Association (APSGJTA) called on Federal Minister of Industries and production Syed Murtaza Mahmud to discuss issues related to the sector’s exports.
As per officials, members of the delegation informed the minister about problems they are facing and requested him to resolve their issues such as taxes, exports and cutting of gemstones.
Informing the minister about the potential of Pakistani jewellery, one of the members who joined the meeting online from Canada said Pakistani gems and jewellery are in high demand among the Pakistani and South Asian diaspora in the foreign country.
The minister assured the delegation to look into their problems and resolve them on a priority basis.
Earlier on June 30, the delegation of Pakistan Gems Jewellery Traders and Exporters Association (PGTEA) had called on Federal Minister for Finance and Revenue Miftah Ismail to discuss the same issue. During the meeting, the delegation was informed that the incumbent government was taking all required measures for enhancing the ease of doing business (EoDB) and providing an export friendly environment to the business community.
According to a study, the sector’s exports have not been encouraging for Pakistan for the last couple of years. Although exports were recorded at $400 million in 2014, they declined gradually and fell to around $30 million in the past few years, the lowest level recorded so far.
Exporters report that exports, mostly of raw material, have fallen to less than $10 million after FATF’s restrictions. In addition to this, a major portion of export of gems and jewelry consists of jewelry in “raw form”. This is an indication of the lack of value addition and limited infrastructure in the sector.
It may be noted that Pakistan has the capacity to earn billions of dollars in foreign exchange if it focuses on exporting value added products of gems and jewelry instead of selling it abroad in raw form. Many countries including China, Afghanistan, USA, Belgium, UK, and India etc. are taking advantage of this situation by importing gems from Pakistan in raw form and using them to make products with their own lapidary techniques.