Africa-Press – Zimbabwe. Sri Lanka’s renowned gem industry, famous for its top-tier gemstones, is facing rampant exploitation, primarily fueled by Chinese involvement. It is estimated that Chinese nationals have illegally exported gems worth around 30 billion rupees, creating a shadowy parallel gem market. Local authorities are increasingly alarmed, recognizing the severe threat this poses to legitimate businesses and the country’s economy.
In a recent high-profile case, the Colombo High Court seized over SLR 201 million from the bank account of a Chinese businessman linked to a decade-long smuggling operation. This move followed charges of unlicensed gem trading and money laundering. Earlier this year, Sri Lanka Customs officers intercepted a Chinese father-daughter duo at Bandaranaike International Airport with a hidden stash of gemstones valued at over SLR 17 million, including Moonstones, Hessonite Garnets, Star Sapphires, Cats Eyes, and Emeralds, all set to be smuggled out of the country.
Moreover, early this year, Sri Lanka Custom officers took a Chinese national father-daughter at the Bandaranaike International Airport (BIA) as they were found with a stock of gemstones worth over SLR 17 million including Moonstones, Hessonite Garnets, Star Sapphires, Cats Eyes and Emeralds, hidden in their clothes, to be smuggled out of Sri Lanka.
The illicit gem trade process is highly systematic, with Chinese nationals entering Sri Lanka with the pretext of tourism and then purchasing precious gems from illegitimate intermediaries to evade documentation, taxes, and legal channels. As a consequence, Colombo’s formal gem sector incurs huge economic losses. The illicit Chinese involvement in the gem industry scoops out the economic revenue earmarked for the local economy. For an economy, trying to recover from its worst economic crisis experienced recently, such illegal activities translate into to excessive losses in forex and tax revenue. As per an estimate, SLR 38 billion of annual VAT has been lost due to informal and untaxed transactions. Two years ago, the Export Development Board (EDB) Advisory Committee on Gems, Diamonds and Jewellery sector had already pointed towards the dangers of illegal buyers entering gem trading in Sri Lanka.
Such extractive activities have led to two major blows to the economy: at the domestic as well as the international level. First, the parallel economy operates on direct cash payments to flout the VAT tax and regulatory authorities. Moreover, the local communities bear a major brunt as the traditional regulated local traders are skipped in the entire process. Thus, the illicit parallel trade economy leads to unfair competition for the legitimate traders, who are eventually left behind. Thus, exacerbating inequality and deprivation in regions like Ratnapura and Beruwala, which are traditional gem hubs.
Second, the gems market is losing in its Western markets. The European and American buyers are now opting for hubs like Thailand, given tarnished reputation of Colombo. The parallel economy is also characterised by money laundering, through informal financial systems like hawala, which has immense scope of being misused.
The process of extraction sounds no different from how extractive imperialism works. China acts as a local extractive hegemonic power, leaving others bereft of their resources. China has been following this pattern in African nations, too. As per reports, $23 million a year of timber is being smuggled to China from Mozambique. Chinese presence in Congo, South Africa, and Nigeria, to name a few, has led to substantial damages to the economy and ecosystem in the region.
Thus, it’s a crucial global concern, and there is a need to strengthen the discourse against unsustainable extractive practices, which deny fragile and re-emerging economies of their revenues. Moreover, the illegitimate channels of payments are further fuelling concerns about regional conflicts, instability, and criminal networks in the developing regions.
Though there is a need for Sri Lanka (and other nations facing illicit extractions) to put in place policies that support formal documentation and promote legitimate local traders, there is also a need to censure and global condemnation of such extractive activities and acts of regional bullying by Beijing. Chinese excesses in other economies are leading to significant economic ramifications and are antithetical to regional sustainable economic growth. Illicit trade not just leads to unsustainable extraction of resources, it also harms the local industries, exacerbates social inequalities, and denies the indigenous communities economic rights over their resources.
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