Madagascar advances in regularising its gem industry

by T. Rusiripala,

Former Chairman National Gem and Jewellery Authority, Director/COO Ceylinco Gem Corp International Ltd

During the last few decades Madagascar became an important buzz-word in the Sri Lankan gem industry vocabulary. During these years gem market of the country has been profusely supplemented with gem stones from Madagascar.

Both countries were engaged in several bilateral discussions at different levels concerning gem industry relations between them. While Sri Lanka failed to make any significant achievement in these matters Madagascar has proceeded to amend export regulations, obtain World Bank assistance to help address the issues of the rapidly developing gem industry and attract a sizable foreign investment portfolio for the country.

It may be worth even at this late stage to focus our attention in a meaningful manner to sail with the wind and pass on some benefits and advantages to the development of our gem industry.

Compared to the long history of Sri Lanka in the gem stone industry, Madagascar counts a very short period. The gem deposits of Madagascar were discovered only over one hundred years ago. Today it has won the recognition as a country rich in natural resources with a wide variety of gemstone deposits of many precious kinds such as sapphires, rubies and alexandrites.

Many other gemstones like tourmalines and quartz are also found in large quantities among its gem resources. In the early 90s large new deposits were discovered in the southern parts of the country. But in the latter part of the decade huge quantities of sapphires were found in a belt in an area known as Illakaka which attracted massive foreign investments as miners from different parts of the world.

Many Sri Lankan dealers are also in the race but due to lack of proper policy backing they have been overtaken by other players from countries providing more facilities to those engaged in the trade.

In May 2003, the World Bank approved a US $32 Million Loan agreement to help Madagascar manage its mineral resources more effectively. Teams of delegations comprising of authorities at various levels in Malagasy government have visited other gem producing countries to study the procedures in those countries in order to improve their own regulations and practices to facilitate and improve trade.

The Malagasy government has very correctly given top priority to the Mining industry to increase the contribution of the mining sector to the development of Madagascar.

They have now formulated regulations to provide clear and easy to follow procedures for buyers from other countries.

Laws have been promulgated with the expectation that the regulations to be implemented from 2005. They expect that the country will attract more buyers from around the world with more confidence to engage in business in Madagascar.

The recommendations were for the government to pass the following measures regarding resident and non-resident buyers:

1) The mining royalty of 2% on purchases made by resident buyers with registered Malagasy companies could be paid as follows, on a case by case basis.

a) As per the current system the holder of a mining permit shall keep a register of sales controlled annually by the Service des Mines and on which he pays the royalty. He issues a laissez-passer model 1 (LP1) to each buyer for each sale.

b) In the case where the buyer does not receive an LP1, he shall keep a register of his purchases and have it controlled regularly by the local Service des Mines, pay the royalty to a Treasury office and receive a laissez-passer model 3 (LP3).

2. Non resident buyers, without registered Malagasy companies, will be authorized to buy and legally export stones on the condition that they meet the following requirements:

a) On their arrival in Madagascar, they should register at the airport or in an office of the Services des Mines and get a temporary buyer's permit which is valid as long as their visa.

b) They will pay the mining royalty of 2% as in article 1. However, they will pay an additional 'Droit Special sur les Transactions Minieres'(DSTM) of 2% of the purchase price for rough stones purchases which compensates for the additional fees paid by the resident companies.

They may export their purchases legally after having paid the royalty and the DSTM to the Treasury. Cut stones purchased and exported by non-resident buyers are not liable to DSTM. (Courtesy TG & JT Association).

Thailand has been following these developments very closely and has taken measures to derive the full benefits from these openings. As a result Thailand's gem and jewellery industry has achieved considerable development and is expected to further increase.

Simultaneously with the regularising of exports in Madagascar, Thailand has relaxed its import concessions providing the traders the opportunity to engage freely in official business and allow a free flow of resources into the country.

India too has made several openings for accommodating the benefits to the industry there.

Unfortunately our policy decisions have not been so considerate. Policy makers have followed a completely different course of action even preventing and restricting the little business that was going on between Madagascar and Sri Lanka before. Those in the industry should lobby the authorities properly to get them to move in the right direction for the sake of the development of the country.