Chinese involvement in Sri Lanka’s gemstone industry is causing significant revenue losses to the island nation’s crisis-ridden economy and impacting local businesses, according to an article in The Financial Post.
Chinese nationals have allegedly exported gems worth approximately 30 billion rupees from Sri Lanka, as part of smuggling operations that deprive the country of precious tax revenue and pose a serious threat to legitimate businesses, the article states.
It highlights that recently, the Colombo High Court seized over LKR 201 million from the bank account of a Chinese businessman linked to a decade-long smuggling and money laundering operation.
Sri Lanka Customs officers also caught a Chinese national and his daughter at the Colombo airport carrying gemstones worth over LKR 17 million, including Moonstones, Star Sapphires, and Emeralds, to be smuggled out of Sri Lanka.
The article claims that Chinese nationals enter Sri Lanka with the pretext of tourism and then purchase 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, the article states.
As per an estimate, LKR 38 billion of annual Value Added Tax (VAT) has been lost due to informal and untaxed transactions. The illegal activities harm Sri Lanka’s economy both at the domestic as well as international levels.
The parallel economy operates on direct cash payments to evade the VAT tax and regulatory authorities.
Moreover, the local communities bear a major brunt as the traditional, regulated local traders are deprived of business.
Thus, the illicit parallel trade economy leads to unfair competition for the legitimate traders, who are eventually left behind, exacerbating inequality and deprivation in regions like Ratnapura and Beruwala, which are traditional gem hubs, the article points out.
Second, the gems market is losing in its Western markets. The European and American buyers are now opting for hubs like Thailand, given the tarnished reputation of Colombo. The parallel economy is also characterised by money laundering, through informal financial systems like hawala, which has an immense scope of being misuse.
The article points out that 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 damage to the economy and ecosystem in the region.
The Financial Post has flagged this as “a crucial global concern,” and underlined the need to strengthen the discourse against unsustainable extractive practices, which deny fragile and re-emerging economies of their revenues. These illegitimate channels of payment are also fuelling concerns about regional conflicts, instability, and criminal networks in the developing regions.
Source: IANS
--Agensies
