GEORGE TOWN: The Penang Goldsmith Association (PGA) sees the value of Malaysia’s gold jewellery exports dropping by 20% this year from the RM6.82bil last year, which is higher than the 10% drop in sales it had forecast in April.
PGA adviser Joeson Khor told StarBiz that small and medium-sized gold jewellery manufacturers and exporters would have to fork out between RM700,000 and RM1mil in goods and services tax (GST) to import the gold bars used to make the jewellery products.
“A smaller-sized company would need to spend between RM100,000 and RM200,000 to import the gold bars.
“This has impacted the small and medium enterprise gold manufacturers’ capability to export and stay competitive in the market, which will influence the volume and value of gold jewellery products exported.
“About 80% of the gold jewellery products exported from Malaysia come from Penang-based gold jewellery manufacturers and exporters,” Khor said.
Khor said the price of gold was currently hovering around US$1,119 per ounce, which was close to the cost of producing an ounce of gold.
The cost of producing an ounce of gold is now about US$1,070.
“We project the price to fluctuate between US$1,200 and US$1,300 per ounce.
“We don’t think it will drop further because the current gold price is very close to the actual cost of producing an ounce of gold bar,” Khor added.
Currently, only large gold jewellery manufacturers with an RM25mil annual turnover are eligible to register with the Finance Ministry’s jewellery schemes permitting them to import gold bars.
Since April 1, gold jewellery manufacturers have to register for the Approved Jewellers Scheme, Approved Traders Scheme, or Approved Traders and Manufacturers Scheme to import gold bars.
The registration also allows the gold jewellery manufacturer to obtain a bank guarantee for the GST payment for the gold bars imported, and to claim back the 6% input tax payment.
Khor said more than 60% of the 650 PGA members were small and medium-sized companies with an annual turnover of less than RM25mil.
“This means they cannot import them and have to source their gold bars locally at a higher cost. This will affect the production of gold jewellery products for both the overseas and local markets,” Khor said.
Khor added that investors now did not see gold as a safe haven for investment when the economy was down, as the price had plunged too rapidly recently.
“This is reflected in the sales of the domestic gold retailers in the country, which has declined by about 70% since the introduction of the GST in April,” he added.
According to the latest Malaysia External Trade Development Corp report, the value of gold jewellery exported from January to June 2015 was RM3.659bil, a slight increase from RM3.609bil previously.
