Sri Lanka, one of the world's most gem-rich nations, is at the centre of a sharpening debate over whether it is reaping a fair return from its prized natural resources, according to industry reports. Foreign buyers — increasingly from China — are acquiring high-value stones close to source, while a large share of value addition reportedly takes place overseas, leaving Sri Lankan miners and local traders with only a fraction of the final retail price.

China's Growing Footprint in Sri Lanka's Gem Trade

Chinese markets in Beijing, Shanghai, Shenzhen, Guangzhou, and Hong Kong have emerged as major destinations for high-value sapphires and coloured gemstones sourced from Sri Lanka. Chinese buyers are particularly drawn to untreated and certified stones — especially premium blue sapphires and rubies — owing to strong consumer demand in the Chinese luxury and jewellery market.

Industry observers note that direct sourcing has become increasingly common, with buyers seeking to reduce costs by purchasing closer to mining areas and production centres. This trend bypasses multiple local intermediary stages, compressing the margins available to domestic stakeholders.

Where the Real Value Is Being Lost

Critics argue the core problem is structural rather than transactional. Trade itself is a legitimate commercial activity, they acknowledge — but the concern is that the majority of downstream processing, including cutting, polishing, branding, certification, and jewellery manufacturing, takes place outside Sri Lanka. Each of these stages generates jobs, technical expertise, tax revenue, and foreign exchange. When this chain is concentrated overseas, the largest profits flow elsewhere.

According to reports citing industry sources, Sri Lanka exports approximately 75 gemstone varieties to international markets, including blue sapphires, padparadscha sapphires, yellow sapphires, pink sapphires, white sapphires, rubies, spinels, garnets, tourmalines, zircon, moonstones, alexandrite, and cat's-eye chrysoberyl. The country's global reputation rests on the quality and untreated nature of its stones — a premium attribute that commands significantly higher prices in finished form.

The Export Numbers and What They Mask

Data published by the Serendib Blue Gem Data Hub, citing Sri Lankan industry sources, placed gem and jewellery exports at approximately $430 million in FY2024. The Sri Lanka Export Development Board confirms the country ships top-quality blue sapphires and around 75 other gemstone varieties to global buyers.

However, industry analysts point out that the headline export figure may significantly understate the economic value of the stones once they are processed and retailed abroad. This gap — between raw or minimally processed export value and final retail value — is precisely where Sri Lanka is arguably losing out.

What Needs to Change

For Sri Lanka to maximise returns on its gemstone wealth, industry observers argue the country needs to invest more aggressively in domestic value addition. This means expanding capabilities in cutting and polishing, building internationally recognised certification infrastructure, developing home-grown jewellery brands, and positioning Sri Lankan-made finished jewellery in premium global markets.

This is not a novel challenge: resource-rich nations across the developing world have long struggled with the 'raw material trap' — exporting natural resources at low margins while importing finished goods at high markups. For Sri Lanka, a country still navigating economic recovery, closing this value chain gap could meaningfully boost foreign exchange earnings and employment. How swiftly Colombo moves on domestic value addition will determine whether the island's gemstone legacy translates into lasting prosperity or continues to enrich buyers elsewhere.