Let it sparkle: Philippine jewelers fight for survival

MANILA, Philippines - One might ask: At a time when the world’s superpower has raised its debt ceiling and Europe is faced with a debt crisis, is the Philippine jewelry industry still relevant?

Entrepreneurs and leaders of the Philippine export jewelry industry are saying, yes, and now more than ever. The country, which has always prided itself as being one of the most highly mineralized in the world, is producing what amounts to only .02 percent of the fine jewelry supply in a global market valued at $274 billion in 2010. “People don’t realize the potential,” says Mia Faustmann, chief executive officer of 7 Castles, Inc. that exports sterling silver jewelry to Europe and provides fine jewelry products to domestic customers through subcontractor companies.

The Philippines has been trading and exporting gold and precious metals since pre-Hispanic times, and produced jewelry that showcased the people’s deeds, environment and heritage through intricate designs. “Now we’re no longer known,” she says, because the industry is being driven underground. The jewelry sector today consists mostly of small stores and not as much export as Faustmann, former president of the Guild of Philippine Jewellers, Inc., would like. Even as aboveground enterprises stay competitive abroad, they are struggling to keep afloat: “Most of the ones in Metro Manila, especially those who have stores in malls, are doing their best to comply with the regulations and still remain competitive.”

Commenting on how downstream jewelry industries are not being developed, she reveals that after the ore is mined, the minerals are shipped out of the Philippines to be manufactured and sold as jewelry elsewhere. “For the Filipino to fully benefit from our natural resources, the local industry should cover the whole value chain so that all the work is done in the Philippines, down to the finished goods and exporting the items.”

Another concern that rubs salt into the soaring cost of raw materials is what the industry believes to be an excessive tax policy. Jewelry is currently classified as a luxury item and therefore subject to two percent excise tax at the ore stage and another 20 percent excise tax when made into jewelry, apart from the 12 percent value added tax, raising manufacturing costs to nearly unreachable heights. To argue that jewelry is mere indulgence is contentious, given that the objects are now also viewed as an alternative savings instrument for their intrinsic value. Also woven into the thorny excise tax issue is a notion fraught with gender politics: that jewelry is just “luho ng babae.” And there persists the problem of smuggling that makes licensed business owners non-competitive because the underground sector does not pay taxes, SSS benefits for workers, and other fees.

Despite everything, Faustmann states, “We’re still getting quite good response for our exports. We’re still able to compete; we just have to find ways to do it… keep an open mind and think out of the box!”

Jewelry as cornerstone of economy

Aside from export, Faustmann’s group is developing its own in-house brands, including Michelis and Yzabelle, to balance the business. Filipinos are not very experimental but the company, through Michelis, wants to challenge and develop the taste of Filipino jewelry users by offering adventurous pieces.

Jewelry should be made a cornerstone of the national economy, as far as Faustmann is concerned. Other export industries may be big but when the cost of importing the parts for assembly (say, for electronics) is deducted, the actual value for the Philippines is reduced. Business process outsourcing, on the other hand, requires a college degree and those who do not have the benefit of education are still falling through the cracks.

She describes that in their own workshops, some are workers from the provinces who, in all likelihood, would never have made it but are now earning for themselves and their families. To date, 7 Castles Inc. and its subcontractors employ more than half a thousand factory workers in Clark, Marikina, and Antipolo, and continue to provide their skilled artisans (many of whom reached only high school), as much salary as call center employees. Doing the jewelry exports in a factory context makes the business more competitive, according to Faustmann, since enough volume is being created by Philippine fine jewelry exporters that produce world-class goods.

As far as legacy-building is concerned, Faustmann wants to be known for “good, cutting-edge design.” She hopes that Filipinos will be more willing to experiment and to embrace transformative change, from governance and business to everyday lifestyle choices, and yes, that includes daring to own audacious sterling silver jewelry that can be saved for a rainy day.