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Starting a jewellery business in Sri Lanka involves understanding the local market, registering the company, etc. This blog delves into essential aspects of setting up a jewellery business in Sri Lanka, focusing on the mandatory requirements of 60% local ownership. This regulation is important for foreign investors aiming to penetrate the thriving market, underscoring its importance in ensuring prosperous business ventures.
Sri Lanka’s jewellery market shines brightly in the global industry. It is celebrated for its exceptional craftsmanship and high-quality precious stones. The country is celebrated not only for its stunning sapphires and other gemstones but also for its rich tradition in jewellery making, which attracts investors and enthusiasts from around the world.
Sri Lanka’s jewellery market presents abundant opportunities for new businesses, driven by a diverse consumer base that includes locals and tourists. Demand is particularly strong for authentic Sri Lanka gemstones. Below are the promising areas for individuals to start a Jewellery business in Sri Lanka:
Gold remains highly popular, symbolizing wealth and status. The market caters to a range of references from traditional to contemporary designs.
Given Sri Lanka’s reputation as the Gem Island, there is substantial opportunity in gemstone jewellery. Sapphires, rubies, and other semi-precious stones are in high demand, offering a niche market for unique and valuable pieces.
While historically less prevalent, there is a growing demand for diamond jewellery, especially among younger consumers. This trend creates potential for businesses focusing on modern designs.
Sri Lanka’s cultural heritage ensures a steady demand for bridal jewellery, which is known for its intricate designs and superior craftsmanship. This segment is lucrative due to the significant investments made during weddings.
As the middle class expands and disposable income rises, demand for customized and designer jewellery increases. Consumers seek personalized prices that reflect their style and identity.
The steps to start a jewellery business in Sri Lanka, the individual needs to follow the following steps:
The individual must conduct thorough market research to understand local demand, competitors’ offerings and target demographics. Develop a solid business plan outlining the unique selling proposition, pricing strategy and financial projections.
Identify a trustworthy Sri Lankan partner to hold the mandatory 60% ownership. The partner should have industry experience and a strong network.
The individual begins by selecting a suitable name for the business and ensuring it complies with Sri Lankan regulations. After choosing the name, the individual submits it for approval to the Registrar of Companies.
Decide on the type of legal structure of the company, such as a private limited company, sole proprietorship, partnership, or public company. Each structure has different implications for ownership, liability, and governance.
Sri Lankan law mandates appointing a resident as company secretary before incorporation.
A local registered address is required to establish a business in Sri Lanka.
Provide detailed information about the proposed shareholders and directors, including personal details, address, and role within the company.
To complete the company incorporation in Sri Lanka, one has to fill out the forms with supporting documents with the Department of Registrar of Companies. These documents typically include the company’s AoA, MoA and other required documents.
Within 30 days of starting a jewellery business in Sri Lanka, a public notice announcing the business incorporation must be published in the daily newspaper or government gazette, which includes the business name, registered address details, etc.
The individual needs to open a corporate bank account. Once the incorporation is completed, the individual must select a corporate bank account in Sri Lanka.
The individual needs to obtain a Tax Identification Number and register a business for Value Added Tax.
The individual needs to pay stamp duty to the Inland Revenue Department and register for the Employees Provident Fund.
Depending on the business’s nature and location, additional licenses may be necessary from the National Gem and Jewellery Authority, a Diamond Lapidary license by NGJA and Sri Lanka Customs,
The business requires Board of Investment approval, and since it operates as a public company, it can secure approval from the Securities and Exchange Commission in Sri Lanka.
The key legal framework that governs foreign investments in Sri Lanka includes the Foreign Exchange Act of 2017 and the Board of Investment of Sri Lanka (BOI) of 1978. These laws provide a legal framework and protection for foreign investors looking to invest in a Jewellery Business in Sri Lanka.
The BOI plays an important role in promoting and facilitating foreign investment in Sri Lanka. It offers various incentives to attract foreign investors and various benefits to attract and retain investments.
While Sri Lanka is generally open to foreign investment, in the jewellery sector, foreign investors must partner with local stakeholders, and 60% of ownership is given to Sri Lankan nationals.
The Ministry of Industry and Commerce of Sri Lanka oversees the overall industrial policy and regulatory framework, ensuring that foreign investments align with national economic goals. However, the company registrar ensures that all businesses comply with local laws, including the 60% local ownership requirements for the jewellery sector.
When selling gold, silver or jewellery in Sri Lanka, it is mandatory to stamp the manufacturer’s mark or warranty mark on the items. This mark must be registered with the National Gem and Jewellery Authority. All jewellery must comply with Sri Lankan gold, silver and platinum standards as outlined in the Gazette Notification dated 17.03.2003. These regulations are crucial for maintaining quality and authenticity in the jewellery market, protecting consumers and manufacturers.
The 60% local ownership rule mandates that foreign investors collaborate with Sri Lankan nationals, who must maintain at least 60% ownership in any new business venture, including the jewellery industry. This regulation limits foreign investors to hold a maximum of 40% ownership, with the majority stake retained by local partners.
The 60% local ownership rule was implemented under Sri Lanka’s overarching economic strategy to promote local entrepreneurship and ensure equitable distribution of benefits from foreign investments among local communities. This policy aims to enforce substantial local ownership, actively involving local entrepreneurs in the jewellery sector; it also aims to keep a larger portion of economic benefits within the country, fostering local economic growth and development.
This rule poses several implications for foreign investors, including:
Starting a jewellery business in Sri Lanka offers substantial rewards, yet foreign investors encounter several challenges in achieving success. Below are some key challenges:
To overcome the challenges in the Jewellery business in the market of Sri Lanka, follow the following roadmap to achieve success:
Starting a jewellery business in Sri Lanka offers immense opportunities. By understanding and directing these factors effectively and leveraging local partnerships, market insights, and quality craftsmanship, foreign investors can successfully establish and grow the business in the Sri Lankan market.
Sri Lanka's jewellery market is diverse, with a significant demand for gold, diamonds, gemstones, custom or designer jewellery, etc.
Foreign investors must partner with local Sri Lankan nationals who hold at least 60% ownership in the business. Also, needs to adhere to local registration, taxation and licensing regulations.
The steps include market research, choosing a local partner, brand name, and business entity, and appointing a company secretary.
Digital marketing can help jewellery businesses reach wider customers, build brand awareness, and engage with potential customers to maintain growth.
The full form of NGJA is the National Gem and Jewellery Authority for licencing and quality standards.
Starting a jewellery business in Sri Lanka involves understanding the local market, registering...
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