01 March 2007

BEIRUT: As Lebanon's number one export, jewelry would seem ideally placed to weather the current economic slump. But demand for luxury goods is the first to fall with the onset of political uncertainty, and the 3,000-odd jewelers in the country are feeling the pinch from shrinking local purchasing power, an exodus of white-color workers, and the absence of big-spending Arab tourists.

Bauble sales in Lebanon have dropped 80 percent since the war, says the president of the of the Jewelry Syndicate, Antoine Moughanni. Though the bulk of Lebanese merchandise has always been exported (80 percent), the sector has not been able to recoup summer losses or offset sagging local sales due to shifts in the regional market.

"Most jewelers depend on Arab tourists and Lebanese visiting home from abroad in the summer, but this year these people didn't show up because of the situation," he says.

Conspicuous consumption in GCC countries - where many middle-class traders were wiped out in the stock market last year - is also declining. To make matters worse the global price of gold rose between 10 and 15 percent in 2006 and most Lebanese jewelry retailers did not increase their prices.

"Sales have fallen by 40 percent in the Gulf. Business is quiet there now, and people are not spending because they are worried about the situation across the region, " says Moughanni.

However, he is confident the industry will "boom again" once there is a solution to the government deadlock, since Lebanese exports rival American and European jewelry in quality and Asian merchandise in price.

But six of the 450 members of his syndicate have already closed their locations in Lebanon, and "emigrated" to less volatile countries.

"If the situation continues we will have to start laying people off, and jewelers will be forced to close down and go to Dubai, where there are no customs duties, and you don't need a partner to open a business," Moughanni says, referring to the emirate's free zones.

The owner of Georges Boghossian Jewelers in Achrafieh, Daniel Boghossian, said he'd wait another year for things to stabilize in Lebanon before shutting the two Beirut stores.

"We have moments when people start buying, then some son of a bitch sets off a bomb and we have a month with no work," he tells The Daily Star.

"People are afraid to go out or spend money ... Nothing in the whole economy is moving except construction."

Local sales have plummeted 50 percent since the war, and remaining purchases are limited to goods in the $100-$5,000 range such as wedding rings, necklaces with small stones, and charms.

Boghossian has also decided to forgo annual advertising. "What's the point?" he asks. "There is no one here. Why spend $30,000 for nothing?"

Though all jewelers in Lebanon took a hit in 2006, some have fared better than others. Most of Antoine Hakim Jewelers' customers are Lebanese-residents, so they are less dependent on visiting Arab tourists and the Lebanese diaspora for business, says Robert al-Rahi, manager of Hakim's ABC branch.

Most Lebanese jewelers export some 70 percent of their goods, Rahi explains, while only 30 percent of Antoine Hakim's stock is sold in regional markets.

"We still have local customers, but their budget is lower now. They might have bought a gift for $500 before, but now spend $250," he says. 

By selling only Lebanese and American brands - as opposed to Euro-denominated merchandise - Hakim's prices have remained relatively stable, whereas the cost of European imports has fluctuated along with currency shifts, Rahi says.

Furthermore, he dismisses the threat posed by Dubai, insisting that Lebanon's position in the regional market is secure. 

"I'm optimistic. Our goldsmiths are qualified, there is no tax on jewelry in Lebanon, retail space is cheaper, and salaries are lower. Employees in Dubai get between $4,000 and $5,000 a month, compared to as little as $500 to $1000 in Beirut."