The United Arab Emirates (UAE) was the top importer of Lebanese jewelry with about $26.96 million worth of products, or 58 percent of Lebanon’s total jewelry exports in the fourth quarter of 2015.

When renowned divas Beyoncé, Madonna and Jennifer Lopez, prance on international stages draped in bedazzling jewelry, little do people know that a good number of that bling-bling is manufactured by Lebanese craftsmen.

But the tiny Mediterranean country, which has dressed and frosted the world’s most famous celebrities, is currently facing problems that threaten its renowned jewelry and gold sector.

One tour of Beirut’s gold market or souk in the Berbir area is enough to indicate the dire state the sector has reached.

The 100 or so shops now stand empty except for its owners, who complain of low sales and a fast dwindling number of customers.

The handful of women window shopping are a rare sight these days in the once-bustling market. “People don’t buy gold or jewelry pieces like they used to five years ago,” says 48-year old Walid, who owns a goldsmith shop.

“Sales have dropped more than 50 percent [from] previous years, and people now search for larger, but lighter pieces because they don’t wish to pay a higher sum,” he adds, before rushing to welcome his first potential customers of the day.

Manal, not her real name, enters the shop with her mother and fiancé, shopping for wedding rings, a bracelet and a necklace; pieces traditionally bought by the groom for his bride prior to the wedding.
“My fiancé’s financial capabilities do not allow him to afford buying all these items. For that matter, we prefer to buy two relatively light gold wedding bands, while [for] the rest of the items, we will buy something made of Brazilian gold,” Manal, 27, tells Newsweek Middle East.

Brazilian gold is a name given to counterfeit gold. It looks like gold, it shines like gold, but it is not gold. And, if well maintained, Brazilian gold can keep its shine and color for at least two years.

Political instability in Lebanon and an influx of refugees escaping civil war in neighboring Syria have put a strain on Lebanon’s economy and affected people’s earnings.

“We are forced to [spend less] because we have other expenses. We have booked a relatively cheaper wedding hall to hold the wedding ceremony, just to cut on expenses,” she adds.

Another couple, Saeed, 33, and Leila, 24, however, stick to window shopping because they cannot afford to buy gold jewelry, real or fake, for the time being, they say. Their engagement party is set for mid-May, and Saeed barely makes $1000 a month, while a solid gold wedding ring costs around $400.

“We will buy silver wedding rings for the time being. Once my financial status is better, we will buy real gold rings,” he says.

In addition to gold, the polished diamonds industry has also been affected by local and regional conflicts as well as a drop in international prices of precious stones in general.

Virna Chakardemian, the creative director at Yeprem, the company behind Madonna and Queen Bey’s shining bijouterie, expects 2016 “to be a tough year for everyone.”

But perhaps the hardships have been a blessing in disguise.

Chakardemian tells Newsweek Middle East that Yeprem, founded by her father in 1964 and managed by her and her two brothers, has expanded to international markets in an attempt to adapt to the economic turbulence in Lebanon.

Today, Hollywood stars and performing artists such as Lady Gaga, Rihanna and Katie Perry wear Yeprem’s distinguished designs, which adapt to the shape of the body just as the company has adapted to hardship.

Boghos Kurdian, president of the Syndicate for Goldsmiths and Jewelers in Lebanon (SGJL), attributes the deterioration in the industry to “the persisting grave security situation in Lebanon since 2005,” when former Prime Minister Rafix Hariri was assassinated.

He warns that “a large number of gold workshops may be forced to permanently close in the coming five years, should the current situation persist.”

SGJL’s bleak forecast is further supported by a number of worrying factors: an unfavorable start for the international gold market in 2016, a drop in China’s economic—the world’s top gold manufacturer—and experts’ predictions for even lower gold prices in the second half of this year.

The fluctuation in international currencies, especially the U.S. dollar and the Russian and Chinese currencies, have all impacted the price of gold in international trading as well.

“Gold and jewelry are luxuries, which people usually place at a lower level [compared] to food, medication and living costs,” Kurdian tells Newsweek Middle East.

Add to that, capitalists who’ve entered the industry without prior expertise and started mass scale production without thinking of the repercussions.

Those newcomers now threaten the livelihoods of some 200 gold and jewelry workshops employing nearly 8,000 craftsmen and women, according to numbers provided by SGJL.

Raffi Jamgotchian, a 48-year old jeweler, agrees with Kurdian. His workshop in Burj Hammoud’s famous Arax Street, once employed 11 workers back in 1990, a number that has now dropped to merely two employees, including his son. Jamgotchian, who has been in the industry since 1986, says these are some of the worst times he’s ever witnessed in his three decades as a goldsmith.

“We stopped manufacturing gold pieces unless they are preordered. Sometimes we create quantities reaching up to three kilos per month, and there are months that pass without us manufacturing a single gram of gold,” he says.

Statistically, Lebanon only consumes 10 percent of its manufactured jewelry pieces. The remaining 90 percent are exported. According to numbers obtained by Newsweek Middle East from the Lebanese Customs and Ministry of Industry, five years ago, jewelry accounted for 35 percent of the country’s exports recording about $1.5 billion in 2011.

The fourth quarter of 2015 witnessed a slight drop in jewelry exports, excluding diamonds and raw gold and silver bars, to $46.5 million compared to $47.6 million for the same period in 2014.

The United Arab Emirates was the top importer of Lebanese jewelry with about $26.96 million worth of products, or 58 percent of Lebanon’s total jewelry exports in the fourth quarter of 2015.

Arab countries in general were the top importing markets of Lebanese jewelry, with $34.7 million worth of products. The United States came in second with $7.34 million worth of jewelry imports from Lebanon for the same period.

However, the former head of Lebanon’s Industrialists Union, Fadi Abboud tells Newsweek Middle East that official numbers “do not reflect the real picture” of the gold and jewelry industry in Lebanon.

“The statistics are inaccurate especially since jewelry products are not subject to the Value Added Tax or VAT, and thus many traders here rely on carrying suitcases of gold crafts and jewelry pieces with them to sell to customers abroad without having to pass through the Lebanese customs.”

Abboud, who was also the country’s tourism minister between 2009 and 2011, estimates the “suitcase trade” to be anywhere between “$800 million and $1 billion.”

However, accurate estimates remain outside the scope of the Lebanese customs, especially since there’s a large amount of raw precious stones that enter Lebanon in and are later exported as polished items.
Meanwhile, the Lebanese government is “absent,” according to Abboud.

“You cannot exclude jewelry from VAT. Jewelry products are luxury products and they should be taxed,” he adds.

If the government imposed taxes on the sector, the customs would have the context to stop the “active smuggling operations.”

For the time being, the industry faces stagnation at the local level, and barely a good movement regionally compared with the heydays of 2004 and before that.

Kurdian believes that the whole sector needs to be jolted back into activity.

But above all, the country needs to regain its security in a manner that would reassure Arab, especially Gulf Cooperation Council citizens, as well as Europeans to return to Lebanon as tourists to inject life back, not only to the country, but also to its jewelry business.

Those tourists have been somehow absent over the past four years due to the political instability, according to Kurdian.

On his part, Abboud believes the Tourism Ministry should create an annual gold and jewelry major event which would put back the country on the international fairs’ agenda.

“The government should also help goldsmiths and jewelers to revive a central jewelry market,” away from the control of privately-owned real estate companies which are now being monopolized by Beirut’s downtown market.

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