Innovations expected in Azerbaijan’s jewelry trade - INTERVIEW

The production, purchase and sale of jewelry is considered to be an area that has a specific weight in Azerbaijan’s economic life. However, last year, amid the pandemic spread in Azerbaijan, this sector also experienced a certain decline.

Report presents an interview with Chairman of the Azerbaijan Jewelers Association Togrul Abbasguliyev about the situation in the jewelry industry in 2021 and future prospects:

- What is the current general situation with jewelry sales?

- There is no revival in the market. The situation that was last year during the pandemic still persists. Mainstream market demand was met by weddings and engagements. These ceremonies aren’t currently being held. As a result, there are no major changes in the market. The fact that shopping centers are also closed has a significant impact on the market situation. There is production and sales, but at a very weak level. Stores outside shopping centers continue to operate, but their share in the overall market is negligible. Entrepreneurs are trying to somehow support the activity, but there is no previous trade turnover. The purchasing power is low.

Last year, commodity prices increased dramatically. It has a large impact on the selling price of the product. While earlier the price of gold was $38-$40, now this amount fluctuates within $55-$60. Last year, the price of gold rose to $65. The closure of the borders also had an impact on the market as tourists also formed a larger market share.

- What kind of jewelry is mostly in demand?

- Although there are no wedding ceremonies, people give each other jewelry made of gold and precious stones for birthdays, mainly diamonds. The silver market in Azerbaijan has never had a large share. Still, silver items are also sold. Here we can name world famous brands of silver. For example, Pandora sells well. This is while in the general market, the raw material price of silver is 80-85 cents.

- What steps have been taken by the state to support the activities of jewelers during the pandemic?

- Last year, at the initiative of the Economy Ministry, a working group was created to develop the jewelry industry. A proposal plan was prepared and presented to the government authorities. This issue is under the control of government agencies. Discounts on taxes and customs duties have already been made. Platinum, gold, jewelry and other products imported to Azerbaijan, processed, sorted, framed and fixed are exempt from excise tax for three years. The sale of gold, silver, coins, ingots as raw materials is also exempt from VAT.

At the same time, it is expected that the import of gold, silver, coins, and ingots as raw materials will be exempted from customs duties and VAT. It will also apply to diamonds. In addition, the import of installations, equipment, machine tools for production was exempted from VAT for three years, and exemption from customs duties is also expected.

After these issues are resolved, the market situation is likely to change. Still, the opening of shopping centers, permission to hold wedding ceremonies are essential.

- Are there any problems with obtaining raw materials for jewelry making?

- There are no difficulties in obtaining raw materials. We are negotiating with AzerGold CJSC. Local producers got an opportunity to buy gold and silver in the form of raw materials from AzerGold. With the entry into force of these benefits, prices will already be different. According to these changes, gold is also exempt from VAT in domestic circulation. This will also have a direct impact. Producers will be able to buy gold from AzerGold without VAT.

- What is the situation with the export of jewelry from Azerbaijan?

- There is no export of finished jewelry in Azerbaijan. Only raw materials are exported. Gold is exported by AzerGold. The association has prepared a strategic action plan. I think that after all this is implemented, the process of forming exports will begin and finished jewelry will appear in the export basket of Azerbaijan. Both Azerbaijani brands and non-branded products of the local industry will be presented here.

The Azerbaijani industry is very high quality and professional. Our industry has great potential. It just takes time to implement plans. After the changes I mentioned take effect, there will be export options. Industrialists will be interested in this, as there will be no duties.

The export of raw materials is likely to continue as well. AzerGold exports exclusively its products, that is, raw gold and silver. Jewelers also have their own potential buyers to whom they can export, and we will create the appropriate conditions to this end.

- What other issues are reflected in the strategic plan?

- We cooperate with the State Agency on Vocational Education. Probably, in the near future we will sign an agreement with them on cooperation in the field of ensuring the demand for craftsmen in the jewelry industry of Azerbaijan. Now the student curriculum is a bit outdated. We will create conditions for the formation of the curriculum in accordance with the requirements of the domestic, modern industry and students’ practical training in Azerbaijan’s jewelry industry. We also plan to organize lessons for our master jewelers, thereby contributing to professional education.

We have created our own portal. In the future, we plan to focus mainly on the promotion of Azerbaijani brands.

We also plan to cooperate with the Entrepreneurship Development Fund to ensure the provision of concessional loans to industrialists. The expected tax and customs duties will be the biggest support for entrepreneurs in this area. Presently, the duty is up to 40-45 percent on imported products. The solution to this issue will provide a very large support to the market.

- What are your plans to stimulate jewelry sales?

We are also establishing cooperation with jewelry associations of the CIS countries. We have signed a cooperation agreement with the jewelry industry of Uzbekistan. We want to hold conferences two to three times a year so that buyers and distributors can establish contacts.

We also had preliminary meetings with AZPROMO (Azerbaijan Export and Investment Promotion Foundation). Perhaps, in the future, jewelry will be demonstrated under the single brand Made in Azerbaijan at foreign exhibitions.

- How many members are there in the Association now?

- We currently have about 30 members. Among them are AzerGold, Italdizain, Levata Group and various Azerbaijani brands. More than 100 market participants have already announced their intention to join us. Due to quarantine restrictions, there are some gaps in the paperwork process. This will probably be done after the restrictions are lifted.