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Malaysia Gold Jewelry Manufacturing Potential

09/04/2018
With its GDP around 309.85 billion US dollars and an economic growth rate of about 4.8 percent in 2017 (The International Monetary Fund, March 2018), Malaysia is an ASEAN country with economic potential. Moreover, Malaysia has advantages in public utilities and logistic systems, which ranked among the tops of Asia. Regarding its gem and jewelry industry, Malaysia holds competence in gold jewelry manufacturing. Despite not having large manufacturing bases like other gold jewelry producer countries, the nation’s gold jewelry manufacturing industry is capable of fulfilling demand of domestic consumers. The industry has also been able to generate revenue for the country from its exports to countries in the Middle East such as the UAE.

                    
                                                                 Poh Kong
 
Gold Jewelry Industry Development in Malaysia

Malaysia is a small country with current populations of approximately 30 million. Nonetheless, it is a country with racial diversity. The majority of its populations, over 50 percent, are Malay. The group is followed by populations of Chinese and Indian descendants. Furthermore, a demographic comparison shows that over 40 percent are working-age populations (around 11 million). 44.7 percent of the populations are in service sector. Workers in industry sector contribute to 40.2 percent. Employees in agricultural sector make up 15.1 percent. Such workforce structure is different from what it was around 40 years ago. Formerly, most of the workers were in agricultural sector. They worked in forestry, oil palm plantations, and rubber plantations.
 
In 1957, Malaysian government started pushing the country’s industrial development to increase its economic growth instead of relying solely on revenue from agricultural exports. Malaysian gold jewelry manufacturing industry was expanded from domestic production to more systematic small-scale factories. Over 70 percent of the factories were located in Penang. However, the products manufactured back then were unable to create value-added exports as they were purposely produced for domestic consumption to decrease importation of the products.
 
Later in 1991, the government announced a development plan called “Vision 2020”, focusing on making Malaysia become a modern and developed country by 2020. The announcement incited political, social, and cultural adjustments. Apart from embracing more trading, investment and technology transmission, tourism also flourished. As over 60 percent of Malaysia’s populations are Muslim followed by populations of Chinese descents, styles of gold jewelry produced in Malaysia match preferences of and appeal to Chinese and Middle Eastern tourists. Naturally, they bought the products back to their countries. After Malaysian entrepreneurs saw such opportunity, they shifted to gold jewelry manufacturing for export. At present, Malaysia has been able to expand its customer bases in many countries such as the UAE, Singapore, Hong Kong, Bahrain, and the US.
 
Nowadays, Malaysia is one of the world’s gold jewelry producers and exporters with potential due to its domestic factors: the government’s continuous efforts in the country’s industrial development, Malaysian entrepreneurs’ eagerness to upgrade their businesses by integrating new technologies into their manufacturing process and establishing clusters and associations to enhance their power in negotiating and seeking trading opportunities. The factors have contributed to Malaysian gold jewelry manufacturing industry’s growth. The country’s diversified ethnicities and cultures, a combination of Chinese and Islam, have influenced its gold jewelry products. Apart from being produced for domestic consumption, they have become export products with favorable growth in consumer markets in the Middle East and countries with Chinese consumers whose preferences match the styles of Malaysian gold jewelry products.
 
Malaysia Gold Jewelry Production
 
In the past, Malaysia’s gold jewelry production was carried out by using gold raw material from domestic mines. There were around 14 gold deposits in the country, scattering across an area called Golden Belt, covering Pahang, Kelantan, Terengganu, Sabah, and Johor. Gold mining industry created employment for over 900 local workers. Most of the mining operations were jointly invested by foreign companies and uncomplicated technology was applied. However, gold production sector in Malaysia faced limitation of not having gold refining plants in the country. After gold ore was smelted it had to be sent abroad to be refined. Therefore, Malaysian gold mine owners usually established partnership with foreign operators who owned gold refining plants for seamless operation. Then they imported refined gold and supplied it to domestic factories for smelting and jewelry forming. Nevertheless, nowadays gold raw material produced from the country’s deposits has been insufficient since their output has decreased and manufacturers need higher volume of raw materials to manufacture for export. Hence, they have been relying mostly on imported raw material.

                   
 
Each year, Malaysia has to import gold of at least 77 tons, worth approximately 3.1 billion US dollars. The country imported gold from Switzerland, Singapore, Japan, Turkey, Hong Kong, and the US. Generally, each year 40-50 tons of gold is supplied to gold jewelry manufacturing industry, which consists of over 200 factories located in Penang.  Most of them are small factories using skilled workers and machinery. Most of the products are plain gold jewelry. The industry employs around 8,000 workers. Leading gold jewelry exporters include Poh Kong Holding Bhd, Tomei Group, and Habib Jewels Sdn Bhd.
 
In 2016, Malaysia’s gold jewelry production went down by 21 percent compared to the previous year. The country’s use of gold for gold jewelry production dropped to merely 34.4 tons.  Main reason was the country’s declining domestic demand for gold jewelry, resulted from the announcement of Goods and Services Tax (GST) hike to 6 percent since the early 2015.  Malaysian consumers reduced their spending on luxury goods. Additionally, political situation of the country’s trading partners and the global economic crisis also weakened foreign consumers’ demand. Entrepreneurs have also confronted problems of skilled worker shortage as craftsmanship jobs are not popular among Malaysian workers. They prefer service jobs which require less training and provide favorable income. Consequently, number of local workers in the industry has constantly dropped. In order to solve the problem, business operators have been hiring workers from foreign countries such as Myanmar and Vietnam to replace local workers.        
 
Product Distribution from Production Sector to Consumers  
 
Currently, Malaysia has been placing importance on gold jewelry production for exportation. In 2017, the product earned trading value of around 1.30 billion US dollars. Most of the products, including necklaces, bracelets, and brooches, were 22k gold jewelry. Plain gold jewelry is dominantly manufactured. Some patterns may be added on jewelry pieces but gemstones are hardly used. Around 70 percent of the products are exported to the Middle East, the country’s key market, especially the UAE. The market is followed by Europe, Asia, and North America.
 
As for Malaysia’s domestic market, most of gold jewelry products manufactured are traded in Kuala Lumpur since it is the country’s trading and business district where there are many foreign tourists and people with purchasing power. Most of Malaysian consumers still prefer gold jewelry over other jewelry. Apart from self-use or given as presents in festivals, gold jewelry can be used as a kind of investment. Moreover, ethnic diversity of its populations causes preferences in gold jewelry consumption to vary. Thus, Malaysian entrepreneurs have been producing products to meet each group of domestic consumers. Malay consumers, the majority, prefer gold jewelry with flower and leaf motifs or bouquet motifs for brooches, bracelets, and rings. They are not fond of jewelry with animal motifs. Jewelry pieces matched with their traditional attire will be chosen. Chinese Malaysians prefer gold necklaces without paying attention on designs as investment is their purpose. Indian Malaysians prefer gold jewelry with Indian styles, which concentrating on pattern design and using gemstones such as rubies or emeralds.
 
Although, at present, Malaysia is not among leading ASEAN exporters, the country has an advantage of dominating market share in Middle East countries more than other exporters in ASEAN. Consumers of the market possess high purchasing power and gold jewelry consumption is a part of their local cultures. Additionally, despite facing many challenges, Malaysia’s gold jewelry industry is an industry with capacity to generate high value added for the country’s trading. The government has been supporting exporters through its measures, for instance, GST exemption to reduce costs and pushing business operators toward international markets by seeking new export markets. Such efforts will revive Malaysia’s gold jewelry industry and increase its export, helping Malaysia become ASEAN’s leading gold jewelry exporter in the future.
 
 
Gem and Jewelry Information Center
The Gem and Jewelry Institute of Thailand (Public Organization)
April 2017

Attached File _MalaysiaGoldJew_0461.pdf Download


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