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Home > Diamond News Center > Features > Articles

Ukraine Emerges from Soviet Shadow to Build Jewelry Sector

07.07.08

The organized jewelry industry in the Ukraine is a relatively recent development. Less than two decades ago, in 1991, the jewelry industry of the former member of the Soviet Union could boast of just four state jewelry plants, with one each in Kiev, Kharkov, Lvov and Odessa. There was also a large retail network of state jewelry shops belonging to Yuvelirtorg, as well as state enterprises and cooperatives for jewelry repair. The main centers of jewelry production in Ukraine today are located in Kiev, Kharkov, Kramatorsk in the Donetsk region, Odessa, Vinnitsa and Lvov. Since 2001, jewelry production has been actively developing in Zaporozh'ye and Dnepropetrovsk.

 

The first private jewelry manufacturing company was established in Ukraine at the end of 1991. In 1992-2001, most state jewelry plants were privatized, and more than 400 new privately owned production companies were established. In addition, more than 1,000 private retail companies were set up which owned more than 2,000 jewelry stores. The retail jewelry trade became 100 percent privately owned after 1991, with just the Lvov state jewelry plant remaining state-owned property.

 

In the jewelry retail sector, there are some chains of more than 20 jewelry stores in Kiev, Ivano-Frankovsk, Donetsk, Chernivtsi, Dnepropetrovsk, Odessa and some other cities. Since 2003, Ukraine has seen the development of "jewelry supermarkets" which have a total area of 300 to 1200 sq meters in which different firms rent sales areas and compete with each other. From 20 to 100 operators typically set up shop in these "jewelry supermarkets."

In 1992-2005, domestic demand for jewelry increased, but government legislation set high custom duties on jewelry of 50 percent, prohibited deals for jewelry production using imported raw materials, complicated conditions for company registration, licensing, taxation and other factors. In 2002, excise duty on jewelry was abolished, and in 2005 the rate of customs duty on jewelry products was reduced to 20 percent.

 

In 2005, under the guidance of the Union of Jewelers of Ukraine, private entrepreneurs and small jewelry companies fought to retain the simplified taxation system which the government had planned to abolish for jewelry merchants. As a result of government support for small jewelry business, the volume of jewelry production in Ukraine has increased significantly. In the five-year period from 2001 to 2006, jewelry production in the Ukraine increased to 53.23 million tonnes from 8.25 million tonnes, a rise of 655 percent.

 

In 2005, under the guidance of the Union of Jewelers of Ukraine, private entrepreneurs and small jewelry companies fought to retain the simplified taxation system which the government had planned to abolish for jewelry merchants. As a result of government support for small jewelry business, the volume of jewelry production in Ukraine has increased significantly. In the five-year period from 2001 to 2006, jewelry production in the Ukraine increased to 53.23 million tonnes from 8.25 million tonnes, a rise of 655 percent

From 2001 to 2006, jewelry production and trade in Ukraine grew quickly. The number of jewelry production enterprises increased to 987 from 545 (see chart). By the end of 2006 the number of specialized trade jewelry firms had grown to 3,200.

Source: State Statistics Committee. Ukraine.

 

From 2007, the jewelry market in Ukraine has developed with the expansion of small jewelry companies and private entrepreneurs who have enjoyed state support in the form of a simplified tax system. For example, a private entrepreneur pays a uniform flat-rate tax of 33 euros per month and 50 percent of this sum for every employee. This tax system means the state doesn't require the business to provide special accounting and reporting procedures as long as revenues do not exceed 71,000 euros per month and the number of employees is not more 10 persons.

A small jewelry company also has the right to pay a uniform flat-rate tax, at a maximum rate of the equivalent of 10 percent of sales, and be exempted from pension payments for its employees as long as it does not employ more than 50 members of staff. These rules apply to small companies with maximum revenues of 142,000 euros per year.

 

With the start of active development of the Ukrainian amber fields in the Rovno region in 1994, a new state enterprise for amber treatment and jewelry production was established in Rovno called SOE "Ukrburshtyn." In 1998, a specialized jewelry amber treatment plant was built which processes about 3.5 tonnes of amber per year.

 

As of August 2007, there were more than 4,300 jewelry companies and private entrepreneurs involved in the production and/or sale of jewelry in Ukraine. The main demand in the Ukraine is for jewelry made of 14K gold and 14K and 18K silver as well as jewelry set with gemstones. Information provided by Dmytriy Vidolob, president of the Union of Jewelers of Ukraine, and Nataliya Lukyanyuk, director of the Jewelry Kiev International Exhibition, about the state of the jewelry industry in the Ukraine indicates there are about 1,000 jewelry manufacturers in the Ukraine, with most of them being low-budget enterprises. Jewelry production is growing at 33 percent annually, and 80 percent of jewelry is made of yellow gold and costs up to $200 per item. In addition, there are about 3,500 companies selling jewelry in the Ukraine, and about 5,000 jewelry stores. Most of these are low-budget outlets with two or three counters. Turnover in jewelry sales is developing at around 40 percent annually.

 

As for imports of jewelry, the following table indicates the increasing interest on the part of Ukrainian consumers regarding foreign-made products.

Jewelry imports outpace exports

Ukrainian jewelry imports

 

2005

2006

 

Tonnes

$ million

Tonnes

$ million

Made of gold  

0.56

7.8

1.47

15.1

Made of silver 

6.06

1.8

6.04

3.4

Total        

6.62

9.7

7.51

18.5

Ukrainian jewelry exports

 

2005

2006

 

Tonnes

$ million

Tonnes

$ million

Made of gold  

0.38

5.7

0.32

6.7

Made of silver 

0.96

0.8

1.06

1.0

Total         

1.34

6.5

1.38

7.7

Source: Source: State Statistics Committee. Ukraine.

 

Source: State Statistics Committee. Ukraine

 

This article was printed by kind permission of the International Colored Gemstones Association (ICA).

The article originally appeared in the Spring 2008 edition of the ICA's InColor magazine.

 

 

 

By: Yaroslav Dontsov
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