Moaaz Manzoor

The federal government has outlined a comprehensive plan to formalize Pakistan’s largely informal gemstone sector under the National Policy to Realize Pakistan’s Gemstone Potential, identifying informality as one of the principal causes of low exports, weak governance, and significant value leakage.

According to the policy document prepared by the Ministry of Industries and Production, formal channels account for less than 5% of Pakistan’s gemstone trade, reflecting widespread informality and under-invoicing. The document states that pervasive informality has constrained export growth, discouraged investment, weakened access to banking services, and created exposure to anti-money laundering and tax evasion risks.

The policy notes that Pakistan possesses substantial gemstone reserves, yet remains limited to around US$ 5–7 million annually, accounting for only 0.3% of the global trade. A mismatch, in large part, is attributed to the absence of credible systems for registration, traceability, and certification. It highlights that a significant share of gemstone transactions occurs through cash-based, informal arrangements, resulting in under-invoicing, unrecorded exports, and a loss of foreign exchange earnings.

According to the document, weak coordination between federal and provincial authorities has further reinforced informality. Mining falls under provincial jurisdiction, while exports, customs, banking, and foreign exchange regulations are federal responsibilities. In the absence of an effective national coordinating mechanism, businesses face inconsistent procedures and unclear regulatory requirements, encouraging reliance on informal trade routes.

The policy identifies the lack of a national registry of gemstone businesses as a major gap. It notes that a large number of enterprises operating across the gemstone value chain are either unregistered or registered only with trade associations that lack formal recognition at the national and international level. This fragmented registration landscape undermines traceability, weakens compliance, and prevents businesses from accessing formal credit and export facilitation mechanisms.

To address these challenges, the policy proposes the establishment of a national business registry to record miners, cutters, polishers, traders, and exporters involved in the gemstone value chain. Registration will be managed by the proposed statutory authority, and every registered business will be allotted a unique Business Registration Number (BRN) and an identity card. The registry is intended to serve as a foundational tool for traceability, compliance and sector-wide data collection.

The document states that initial registration will be voluntary but will be explicitly linked to incentives, including priority access to export facilitation services, eligibility for government support programmes and improved access to banking services. Over time, the registry will feed data to Pakistan Customs, the State Bank of Pakistan, and the National Warranty Office to enable automated compliance checks and reduce administrative costs.

The policy also highlights the absence of reliable data on the size and performance of the gemstone sector as a direct consequence of informality. It notes that statistics are currently scattered across multiple provincial and federal entities, with no standardized mechanisms for data consolidation or sharing, hindering evidence-based policymaking and long-term planning.

Formalization is described in the document as one of the most immediate and cost-effective levers for unlocking growth in the gemstone sector. By converting informal gemstone flows into bankable and tax-compliant exports, the policy aims to reduce value leakage, improve export realization, and strengthen compliance with international regulatory expectations.

The policy further states that improved formalization will enhance confidence among banks, courier companies, and international buyers, facilitating greater participation in formal trade channels. By strengthening traceability and documentation, the government expects to mitigate reputational risks and create conditions for sustainable growth in exports and employment.

The document emphasizes that formalization efforts will be implemented alongside reforms in certification, valuation, banking access, and market development, with progress overseen through a coordinated implementation framework involving both federal and provincial stakeholders.

Credit: INP-WealthPk