Opportunities for Thai Gem and Jewelry Products under AFTA

ASEAN Free Trade Area or AFTA is an agreement providing trade privileges to

ASEAN member countries which consist of the original members including Brunei
Darussalam, Indonesia, Malaysia, Philippines, Singapore, and Thailand as well as the new
members including Cambodia, Lao, Myanmar, and Vietnam. The primary mechanism for
promoting trade among the ASEAN members is the Common Effective Preferential Tariff
(CEPT), which is to enact zero tariff rates.

Since January 1, 2010, the six original members have reduced the tariff rates of almost
all goods to 0 percent, except a few sensitive and highly sensitive products. Meanwhile, tariffs
imposed on all imported gem and jewelry products have been consecutively reduced to 0
percent for many years. Only Brunei and Indonesia have lowered tariffs on gem and jewelry
products to 0 percent for the first year.

Thai Gem and Jewelry Export to ASEAN Markets

At present, the export value of Thai gem and jewelry products to the original ASEAN
members accounts for less than 1 percent of the total export value which was worth 2.2 billion
baht in 2009. Most export products were unwrought or semi-manufactured gold exported to
Singapore and Malaysia. The major products exported to Indonesia and Philippines were raw
materials as well. About 70 percent of export products to Indonesia were synthetic stones,
and about 90 percent of export products to Philippines were diamonds and pearls. In the
meantime, almost all products exported to Brunei were gold jewelry.

When considering the export of finished products to the original ASEAN members, it
was found that jewelry was a product with high potential. In particular, gold jewelry was a
major product in the category of ready-made products exported to these markets (except
Philippines and Indonesia in which silver jewelry accounted for 98 percent and 49 percent
respectively of jewelry exported from Thailand).

However, the demands for export to these ASEAN countries under customs duty
privileges in accordance with the AFTA agreement or the issuance of the Certificate of Origin
(Form D) were rather low. That is, they were less than 5 percent of the export value of gem
and jewelry products to these markets. The probable reasons are that the Common Effective
Preferential Tariff or CEPT is not different from the normal tariff rate or the MFN Rate which
does not require Form D, and that Thai entrepreneurs neglect marketing their products
seriously within the region.

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Opportunities for Thai Gem and Jewelry in ASEAN Markets

Amidst economic downturn in the major markets for Thai gem and jewelry products
such as the United States, Europe, and Japan, together with uncertainty in economic recovery,
Thai entrepreneurs should seriously focus on penetrating ASEAN markets, especially Brunei
which has good economic status (Brunei’s per capita income is 50,100 US dollars, ranking the
ninth of the world’s highest per capita income) and import gem and jewelry products for
consumption. Moreover, according to the AFTA agreement, a Common Effective Preferential
Tariff rate of 0 percent has been applied to all gem and jewelry products imported to Brunei
since this year. Meanwhile, the export to Indonesia under the AFTA agreement will gain
more customs duty privileges than that to other original ASEAN members, with the tariff rate
of 0 percent instead of the normal tariff rate of 0-15 percent.

Normal Tariff Rate (MFN Rate) of the Original ASEAN Members’ Major Gem and Jewelry Products

Products Brunei Indonesia Malaysia Philippines Singapore Thailand

Pearls 5 15 0 10 0 0
Diamonds 5 0-5 0 3 0 0
Colored Stones 5 0 0 3 0 0
Synthetic Stones 0-5 5 0 3 0 0
Silver 0 0-5 0 3 0 0
Gold and Platinum 0 0-10 0 3 0 0
Jewelry 5 15 10 10* 0 20**
Imitation Jewelry 5 10-15 0-20 10* 0 20
Source: http://www.worldtariff.com
Remark: *Components subject to the tariff rate of 3 percent
**Components with no tariffs

Thai gem and jewelry products which are suitable for being introduced to ASEAN
markets are high-quality jewelry, including gold jewelry, silver jewelry, and gold-plated
silver jewelry. Jewelry can be either decorated with gemstones or without gemstones, but
importance should be placed on modern designs and production techniques which can
produce large jewelry pieces without using a lot of precious metals such as the electroforming
process. Furthermore, quality assurance, particularly the purity of precious metals in jewelry
pieces, the provision of accurate information relating to gems, as well as after-sales services
are the important factors for building a market base which is stable in the long run. The only
challenge involved with marketing is the appropriate quantity of jewelry pieces for each
design. Since the size of markets with high purchasing power is not very large, custom-made
production is a key market leader strategy. If Thai entrepreneurs are able to maintain the rate
of introducing products in new designs or to adapt product designs to customer needs,

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building the market base in ASEAN will not be difficult. Therefore, it can be said that ASEAN
markets are proper for Thai entrepreneurs owning companies which are not very large or
SMEs, especially those capable of adjusting production to meet market needs.

Expanding the market base to ASEAN countries will enable Thai entrepreneurs not
only to obtain customs duty privileges under the AFTA agreement, but also to be able to
expand the boundary of benefits derived from other free trade agreements that ASEAN
carried on negotiations and have become effective, such as ASEAN-China Free Trade
Agreement, ASEAN-Australia-New Zealand Free Trade Agreement, and ASEAN-South
Korea Free Trade Agreement. Thai entrepreneurs will also be able to expand investments to
ASEAN member countries which have competitive advantage in terms of production costs. In
addition, Thai entrepreneurs should seek for business cooperation or business networking
with ASEAN member countries which have strengths different from Thailand. For instance,
they can cooperate with entrepreneurs in Malaysia who have close business relationships
with the Middle East, or they can collaborate with entrepreneurs in Singapore who have high
marketing capability and trade networks in many ASEAN countries.

Gem and Jewelry Information Center

The Gem and Jewelry Institute of Thailand (Public Organization)
March 2010

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