A Beautiful Way to Rebrand Afghanistan

A BEAUTIFUL WAY TO RE-BRAND AFGHANISTAN

A BEAUTIFUL WAY TO RE-BRAND AFGHANISTAN: Gemstones are known for their three characteristics: beauty, durability, and rarity. Afghanistan is blessed with huge reserves of minerals and gemstones in different parts of its geography.

The USAID’s Assessment of Afghanistan Gemstone Industry Report estimates the occurrences of more than 1,200 minerals, of which more than 140 are attributed to gemstones.

The mining and trading of Afghanistan’s gemstones started more than 7,000 years ago. Some of the fine good examples of the fine Afghan rubies, emeralds, lapis lazuli, and sapphires are found in historic collections worldwide, including the British Crown Jewels, the Royal Crown Jewels in Russia, and the Taj Mahal of India. For their prestige & quality, Afghanistan’s gemstones are always highly demanded around the world.

Countries such as China, India, U.A.E., Thailand, Hong Kong, U.S., UK, Holland, and Switzerland are some of the top buyers. Many gemologists admire the superior natural quality of Afghan gemstones.

It is said that the Afghan Jegdalek ruby can compete with the world-class Burmese rubies and Afghan Panjshir emerald with the world’s famous Colombian emerald. Afghanistan has the best quality of lapis lazuli, the ancient gemstone of the world found in Badakhshan, Afghanistan.

According to studies, Afghanistan is the best place to buy natural tourmaline due to its great quality, low price, and variety of its beautiful colors.

Sapphires are the other well-known gemstones found in different colors in the northeast of Afghanistan. The other beautiful blue color gemstone is called Afghanite. It was named “Afghanite,” where it was first discovered in the lapis lazuli mines in Afghanistan in 1968.

Aquamarine, spinel, jade, kunzite, morganite, tanzanite, granite, and onyx are the other types of gemstones found in Afghanistan.

THE GEMSTONE & JEWELRY INDUSTRY: The gemstones and jewelry industry is one of the most labor-intensive globally – China, India, and the U.S. being the leading jewelry producers. 

For example, in India, the jewelry sector employs 4.5 million skilled and semi-skilled workers. With appropriate investment in the capacity of the sector, Afghanistan has huge potential for employment, particularly for women.

The jewelry industry resembles the characteristics of women-friendly businesses and plays a vital role in the economic empowerment of Afghan Women. The sector also falls under small-scale and artisanal industries, which do not require a large investment in infrastructure.

Jegdalek Ruby, Afghanistan

THE AFGHANISTAN CONTEXT: Unfortunately, Afghanistan’s gemstones sector has not been developed much. To date, gemstones in Afghanistan are extracted using dynamites and outdated manual techniques that hugely compromise the gemstones’ quality, quantity, and price.

The gemstones sector lacks the modern know-how, human capacity, and technology necessary to create opportunities for scaling value addition within the country.

Afghanistan’s poor regulatory and legislative systems have not welcomed growth in the sector either. The intricate processes and paperwork that include getting a mining license, a contract for extraction, permission to process the rough gemstones, and clearance to export have caused the enterprises to choose illegal ways of doing business.

This has also been echoed by the government’s lack of issuing mining contracts for the past three years.

A businessman in the gemstone and jewelry sector says it takes 16 signatures of mid-level management and two of the Minister of Minning and Petroleum to clear gemstone for export purposes. Another major challenge is the high rate of royalty and duty on the export of rough gemstones. 

There is a 15% royalty charged by the MoMP, which is very high compared to the regional average of just 4%. Businesses also have to pay an export duty of 7-12%. 

This means collectively; businesses pay up to 25% tax and royalty to export the gemstones to the international markets. Last but not least, the businesses also pay varying amounts to the destination country as the import duty.

Also, there is no proper pricing mechanism for precious and semi-precious gemstones. There are several reasons for this, including the lack of clear and defined valuation benchmarks for commodities at the MoMP, illegal gemstone trade, and monopoly in the supply of the gemstones. Due to these reasons, gemstone prices differ widely in the domestic and international markets.

Gemstones illegally smuggled to the neighboring countries are much cheaper there compared to the local markets due to their evasion from paying royalties and duties in Afghanistan.

As a result, illegally exported gemstones steal the market for legitimate businesses in the sector.

Another consequence of illegal mining is that the Afghanistan brand is compromised as the rough gemstones are smuggled to the neighboring countries, which is then exported to the rest of the world, with some zero to little value addition, concealing Afghanistan as the source of origin.

THE VALUE ADDITION: The gemstones sector in Afghanistan has long lacked the certification and needed processing facilities over the years. Without reliable certification, international buyers cannot trust the originality of the gemstones, despite the global popularity of gemstones.

The nature of the industry needs reliable certification of gemstones to avoid controversial cases, as no one wants to pay the price of a tourmaline for a piece of glass or crystal.

On the other hand, gemstones located in the remote areas of Afghanistan with high influence by the anti-government groups make it an excellent source of funding for these groups.

For instance, according to the United States Institute of Peace report, the Taliban in the Jegdalek area trade rubies to finance their activities.

THE WAY FORWARD: Below are several measures that the public and private sector players can take to unleash the full potential of sectors for investment.

The public and private sectors must improve the quality of gemstones by improving the four fundamental Cs, a universal measure of assessing the rarity and value of gemstones.

1) Color is the most important factor in the valuation of a gemstone. Afghanistan is blessed with natural beauty and a variety of colored gemstones, ranging in different degrees of pureness. Deploying standard extraction techniques and technologies is essential to get the right combination of quality, quantity, and color range.

2) Clarity of a gemstone is directly proportional to its rarity. This means that clarity refers to a gemstone’s relative freedom from blemishes or inclusions within the gemstone. The fewer blemishes or inclusions, the rarer the gemstone.

Different types of gemstones have different standards of clarity. For example, some gemstones are free of inclusions, like tanzanite. Some gemstones normally contain inclusions like rubies and sapphires, and some gemstones always have inclusions like emeralds and tourmalines.

The use of dynamites increases the inclusions in the gemstones, while proper extraction plays a huge role in the clarity of gemstones.

3) Carat is the unit of measuring the size of a gemstone. One carat is equal to 0.2 grams. The larger the gemstone, the rarer it is, the higher it is priced!

4) The cut of a gemstone refers to its design and shape. Gemstones are cut into a variety of shapes, such as emerald, pear, round, oval, and diamond cut. When all other factors are equal (color, clarity, and carat), a better-cut gemstone will be more valuable.

Afghanistan definitely needs more capacity development in the cutting of the gemstone. Better cut means broader markets!

The private sector should improve its capacity in cutting and polishing the stones. This means they should equip themselves with modern machinery, which is very much affordable. 

The mindset of the traditional way of doing business should change to open the door for expansion, profitability, and a variety of customers. 

The private sector should also train their staff members and build their capacity in cutting and polishing the gemstones. It is the responsibility of the private sector to usher the fine brand of Afghanistan into the jewelry markets of the world.

The private sector must recognize the opportunities they are being provided within the sector. 

To build long-term business relationships with key buyers, gemstones enterprises must adapt professional business communication and marketing approaches, particularly in international markets.

Enough of the traditional way of doing business! It’s time to process local, go global, and compete with quality. For example, Afghan participants in international exhibitions & trade shows should not just focus on clearing stock and making short-term sales.

But instead, focus on making long-term business-to-business relationships and partnerships that didn’t last much longer than a day or two.

The private and government sector should also invest in building the industry in the long term by establishing specific gemstone cutting, polishing, and jewelry-making institutes with different courses.

Thankfully, the government has recently developed a National Export Strategy for the Precious Gemstones and Jewelry, providing an encouraging step towards the exports of gemstones.

Finally, the government should provide meaningful incentives for the private sector to formalize their businesses. This requires simplifying and easing complicated processes of getting licenses, contracts, and export clearance.

Such incentives should boost the private sector to do legal business, create jobs, and be a source of wealth generation for the government in the long run.

It should also help in infiltrating the global market with a regular supply. For instance, a tax holiday or discount for legitimate businesses could be a very good way to inspire illegal businesses to join the formal sector and increase domestic production in the country.

Revamped value chain of gemstones can particularly empower women from villages to the cities. These measures can ultimately help re-brand Afghanistan, develop the sector, and contribute to the country’s economic growth.

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