I. Industry History
The Philippine jewelry-making trade has been in existence since the early 16th century. Historical records indicate that jewelry-making dates back to the late Stone Age as evidenced by bracelets, pendants and beads from that era. It is believed that skill in making jewelry has been acquired the early Filipinos from their Asian neighbors like the Chinese.
Traditionally, jewelry-making is a home based industry intended to be a source of livelihood for the family. It has become an industry worthy of government attention and support. Given proper support, the industry can contribute to national economic development by increasing the sector's export receipts and maximizing the country's position as a top producer of gold.
II. Industry Profile
Sub-sectors in the jewelry industry
Two sub-sectors comprise the Philippine Jewelry Industry. These are the fine jewelry sub-sector and the costume jewelry sub-sector. The Philippine fine jewelry industry is engaged in the production of two major product categories, namely:
Precious metal jewelry refers to ornaments made of gold and silver that may or may not be mounted with gemstones. Precious metal jewelry can be in the form of rings, earrings, necklaces, bracelets, brooches, pendants, tie-pins cuff links; and decorative items such as spoons, forks; and office items such as pen and paper holders.
- precious metal jewelry; and
- pearls, precious and semi-precious stones.
Precious metal jewelry made of gold is the major product of the Philippines. Silver jewelry comprise a smaller portion of the business but is steadily increasing.
Pearls, precious stones and semi-precious stones are unworked or worked pearls, cut and polished diamonds and colored gemstones such as emerald, rubies and sapphires in loose form. They vary according to size, color, cut, clarity and luster as in the case of pearls. Precious stones are defined as diamonds, emerald, rubies and sapphires with some addition of pearls. All other gems are considered as semi-precious.
Notwithstanding the availability of raw materials and the capability of local manufacturers to meet local demand, imported jewelry items still abound in the local market. Usually, these jewelry items are made of gold coming from Italy, Thailand, Singapore and Hong Kong.
No official statistics as to the size of the domestic market for jewelry exist. There is also no reliable data on how much of the locally-available jewelry are made domestically or originated from foreign sources. In 1994, De Beers places the Philippine diamond jewelry market at US $62 million. If it is safely assumed that 50% of all jewelry are made with diamonds while the other half are gold and silver set with other stones, then the market size is estimated to be around US$120 million. This can be higher considering that diamond jewelry accounts for only 20-30% of the total jewelry market In this case, the market size for jewelry in the Philippines could be as high as US$ 200 million.
There are six areas in the country where majority of jewelry manufacturing firms are located and these are Benguet, Metro Manila, Cebu, Davao, the Caraga Region, and Bulacan. The jewelry industry in the Philippines is a fragmented one composed of cottage-type small firms with little investments in new technology like modern tools and equipment.
In Bulacan, jewelry making is concentrated in the town of Meycauayan. There are about 2,000 jewelry manufacturers in the province. A local association, the Meycauayan Jewelry Industry Association, Inc. (MJIA), was formed in 1985 to oversee and assume the lead role in the development of the jewelry industry in the province. The MJIA has grown from an original membership of 37 to the current 106.
III. Export Performance and Potential
In 1994, the Philippine exported a total $13 million worth of jewelry products. However, total world demand for jewelry products during the same year was a high $18 billion. Philippine ex[port during the year accounted for only 0.07 percent of total world demand. The comparative advantages of the local jewelry industry, therefore, was not maximized as the local industry performed below capacity in so far as the availability of gold and workers (around 100,000 at that time) is concerned.
Export earnings of the industry increased from $1.74 million in 1984 to $10.9 million in 1996, reflecting an annual growth rate of 30%. The table below shows the industry's historical export performance.
IV. Industry Characteristics
The Philippine jewelry industry is a fragmented industry composed of around 10,000 cottage-type firms. Majority of manufacturers are small, 5 -10 - person operations with minimal investment in modern tools and equipment. Only a few dozen of these firms have more than 50 workers.
Only a few of the firms in the industry are corporations as majority are single proprietorship. Most of the large firms are family-owned. Foreign equity which is considered minimal comes mostly from USA, Italy, and Switzerland.
Most jewelry manufacturing firms are located in Metro Manila, Bulacan, Davao, Cebu, Caraga Region, Benguet Province (Baguio).
Only the few firms who have invested in modern tools and equipment are exporting their products. Regular exporters number around 25.
Board of Investments (BOI) registered exporters account for around 505 of the exports. The leading exporter is Fralpa Manila (formerly Midasco), a Swiss-owned firm.
A. Factor Characteristics
Gold is the major raw material used in the jewelry industry. Other materials used include silver and precious and semiprecious stones. Gold, silver and some semi-precious stones are locally available.
The Philippines has an abundant supply of gold as it is ranked number fourteen in the list of the world's top gold producers with an output of 28.4 tons in 1995. The country is also ranked as Asia's thrid largest gold producer. The gold production performance is expected to increase with the implementation of the Mining Act that allows firms with 100% capitalization to venture into mineral exploration.
Sources of gold for jewelry production include the Central Bank which sells 24 carat gold in grains and thin sheets with selling prices based on the daily LME price plus an estimated 2% to 3% processing fee. Gold is also available from local miners and/or small refiners, although quality of the material coming from these sources cannot be assured.
Silver is common in Baguio while pearls are abundant in Southern Philippines. Precious stones are yet to be discovered in the Philippines while semi-precious stones such as jade and onyx are known to exist although sources are largely undeveloped due to lack of state of the art technology.
With these raw materials in the country, manufacturing of jewelry may be done without importation.
Equipment and Technology
The technology utilized in the jewelry industry is generally labor-intensive since production is manual and volume requirements are low. Most tools are hand operated although a few local jewelers have already acquired casting machines wax injectors which characterize a higher volume of production.
B. Regulations and other government interventions
The Philippine Export Development Plan prepared through the initiative of the Department of Trade and Industry (DTI) included fine jewelry among the original fourteen (14) export winners with the end view of harnessing the industry's full export potential.
Republic Act 8502 otherwise known as the Jewelry Industry Development Act of 1998 features tax and duty relief to jewelry manufacturing including importation of gemstones and raw materials components and equipment.
In line with the government's thrust to promote technology upgrading, metal working equipment were given zero tariff rates. Jewelry firms may also rent the modem equipment found in common service facilities for their own production.
Among the salient features of R.A. 8502 are the following:
- Entitlement to a zero duty on imported raw materials which include precious metals, loose gems, gemstones, jewelry parts, accessories and supplies;
- Exemption from the imposition of excise tax;
- Entitlement to zero duty on imported capital equipment, including spare parts and tools;
- Entitlement to a deduction from taxable income equivalent to one hundred fifty percent (150%) of expenses incurred in training schemes;
- Entitlement to gold and silver sales by the Central Bank of the Philippines;
- Authority to buy silver and gold directly from other sources without specific authority from the Central Bank of the Philippines. However, this shall not include sale of gold and silver from small-scale miners;
- Inclusion of locally-manufactured products in the government's tourist duty free shops; and
- Eligibility to other incentives provided for by other special laws such as:
Other incentive packages are available to investors. Registration with the BOI entitles a firm to have an income tax holiday and partial duty exemption for equipment whose tariff rates have not been lowered to zero.
C. Industry Association
There are three major association in the jewelry industry. These are Guild of Philippine Jewelers, the Philippine Association of Pearl Producers/Exporters, and the Meycauayan Jewelry Industry Association (MJIA).
MJIA was established in 1985 and was registered with the Securities and Exchange Commission on November 20, 1986. From an original membership of 37, the association now has a membership of 106. MJIA was formed with the objective of playing a lead role in the development of the jewelry industry in Bulacan. To date, the MJIA has been an active partner of the government in the development of the industry. MJIA has its office on Meycauayan, Bulacan.
MJIA is composed of the different exponents of the jewelry industry in Bulacan. It includes contractors, manufacturer, gold dealer, semiprecious precious stone dealer, corridoras and dealers of tools and equipment.
D. Industry's competitive advantage
Another advantage is the support of the Philippine government to the industry. This support comes in the following forms:
IV. The Jewelry Industry in Bulacan: A Brief Situationer
- Zero or low tariff rates on metal working equipment;
- Provision of funds for the establishment of training centers cum common service facilities;
- Conduct of training programs by foreign consultants in key regional sites to upgrade the technology of the sector to international standards; and
- Passage of R.A. 8502 otherwise known as the Jewelry Industry Development act of 1998 which removes all taxes and duties presently levied on jewelry products and their raw materials to enable the local industry to get a firmer hold of the local market.
There are about 2,000 registered and unregistered jewelry manufacturers in Bulacan mostly located in the municipality of Meycauayan which is considered as the center of fine jewelry production in the Philippines. Based on trends established in the Jewelry Industry Study for the province conducted by the Department of Trade and Industry (DTI), 97% of the firms are single proprietorship. The oldest firm was established in 1957 while other firms were organized between 1968 and 1973. Almost all of the firms are Filipino-owned. More than half of the firms belong to the micro and cottage category.
Jewelry manufacturers in Bulacan produce every conceivable products provided that there were orders for them. Rings continue to top the list of products manufactured followed by earrings, necklace and ladies terno.
Price depends on the gold contents of the total weight of the item and the type of stone embedded in the piece.
A variety of methods is used in selling jewelry products. Most manufacturers dispose their products using combinations of direct selling, sales outlet and agents. Most manufacturers do not promote their products formally. Among the firms that participated in the industry study, only 23% have their company brochure while a mere 30% have joined fairs and exhibits and fairs.
Almost all of Bulacan jewelry manufacturers dispose their products in the local market. Serving as market for the products are Metro Manila and the neighboring provinces.
Marketing plans include establishing display outlets, increasing market linkages, lay away plan, participation in trade fairs, going into exporting and conducting quality study. Other marketing strategies utilized include selling on "made to order" basis, employing trusted agents, promotion through word of mouth, direct selling and after sales service and keeping trust.
Most of the jewelry firms are operating on job order basis. Jewelry manufacturers produce items that varies in type and design which explains the difference in monthly output of jewelry shops. Rings top the list of items being produced followed by bracelet, earrings, necklace, lady's terno, pendants, antique, bangles and tambourine. To accommodate rush orders, jewelry manufacturers subcontract job orders to other firms if existing capacity cannot handle such orders.
A variety of machines and equipment are used in the production of various types of jewelry. For mass production of jewelry items, casting machines are utilized while basic hand tools are used in manufacturing personalized items.
Traders of raw materials thrive in the Meycauayan area, the municipality being the center of fine jewelry production in the Philippines. Other sources of raw materials include Baguio, Davao and Hong Kong. Purchase of raw materials is done on cash and credit basis.
The monthly cash requirement of jewelry manufacturers depends on factors such as number of workers, existing job orders and fluctuations in the prices of raw materials. Monthly cash requirement may range from P10,000 to P 1,000,000.
Raw materials constitute the biggest cost in the manufacture of jewelry products (60-70%). The rest of the cost goes to labor and overhead.
Worker Compensation and Training
Different modes of compensation are utilized in the Bulacan jewelry industry. Office workers and marketing personnel are paid on a monthly basis with the latter getting commissions from time to time. Production workers such as goldsmiths are paid on a piece work basis. Other workers like those involved in buffing and plating are paid on daily basis.
Workers in the jewelry industry are not covered by employment contracts. As a result, no formal employee-employer relationship exists. According to the Bulacan Jewelry Industry Study, most of the workers treat their workers as members of the family. Non-monetary compensation provided to workers include medical support, food allowance, one cavan of rice every December and bonus equivalent to 10% of production.
Less than half of jewelry manufacturers provide training to their workers. These training include proper customer relation, production efficiency, designing, quality consciousness and skill upgrading on polishing and plating. A number of reasons were cited behind the inability of firms to provide training to their employees: lack of time and funds for training, adequacy of worker skills during the time of hiring and the lack of interest of the workers themselves.
- Organized and active industry association;
- Network of supporters ("huge") domestic and international;
- Has training center (common service facilities);
- Meycauayan is declared as industry cluster for fine jewelry by government;
- Has own industry plan not just of MJIA; it concerns whole industry;
- Fine craftsmanship;
- Availability of a large pool skilled and creative workers (Meycauayan);
- Existence of MMJ/MPCI services; and
- Strong/active local market promotion.
- Export market potential;
- Access to technology improvement Programs;
- Phil, is South East Asia's 3rd largest gold producer;
- Passage of the Jewelry Act of 1998 (RA 8502) still lacks DOF signing;
- MJIMPCI's plan to become a jewelry bank;
- APEC funding for hallmarking and assaying facilities;
- Green aid (Japan) to assist in pollution problem;
- Abundance of raw materials; and
- Tie up with URC BSC major in Jewelry Technology (June 2000).
Philippine Jewelry Center
Provincial Sports Complex
Pandayan, Meycauayan, Bulacan
Mrs. Cecilia R. Ramos (Chairperson)
Tels: +63(44) 721-0178 to 80 or 228-2611
Fax: +64(44) 228-2840
Bulacan Chamber of Commerce and Industry
Ground Floor, Hiyas ng Bulacan Convention Center
Provincial Capitol Compound.
Malolos City, Bulacan, Philippines 3000
Ms. Mara T. Bautista (Executive Director)
Tel No. +63(44) 662-1180
Telefax: +63(44) 791-2574