Karachi has simplified the rules and regulations governing the import and export of gold, gemstones and jewellery. Letters of credit (L/Cs) feature in several new measures introduced in May that aim to sustain local suppliers of raw materials while others ensure that jewellery manufacturers have sufficient supply of raw materials to meet export demand.

Documentary credits have been routinely used in Pakistan by the authorities as tools to encourage Pakistani manufacturers to use locally produced rather than imported raw materials. This may benefit Pakistani suppliers but making it comparatively difficult to import raw materials has not helped local manufacturers or export sales of jewellery when there has been insufficient locally produced materials to meet demand.

Easier access to imports

Under the new arrangements, jewellery manufacturers will be better able to access imported raw materials if there is a surge in export demand. Manufacturers with export letters of credit or firm orders for jewellery made from local materials will be allowed for example to import - in advance if necessary - gold and gemstones against exports of gold jewellery made from locally procured gold and gemstones.

Other new measures introduced to stimulate Pakistan's jewellery trade include a relaxation of export procedures for foreign buyers to take gold jewellery and gemstones up to a value of US$10,000 out of Pakistan in person. Simpler procedures have also been introduced for exporters displaying and selling jewellery and gemstones at exhibitions and trade fairs outside Pakistan.

Tinplate policies disturb markets

Interventions by the Pakistani authorities to influence supply and demand have caused turbulence in some markets, particularly when the implications of interventions on L/C trades are not fully taken into account.

Prices of tinplate for example soared earlier this year after the authorities imposed additional duties on imports of tinplate. Due to the higher import duties, tons of imported tinplate from Belgium, France, Germany, Holland, Italy and South Africa subsequently piled up at customs. This in turn caused shortages in the market, which stoked prices.

In May, however, the authorities yielded to pressure to backtrack on its policy of increasing duty on all tinplate trades and conceded that duty on tinplate consignments on which L/Cs were opened up to 15 February 2001 would not now be subject to higher duty payments. Tinplate prices are now expected to normalise.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.