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Developments in and around TAHITI (French Polynesia) Black Pearls

Developments in and around TAHITI (French Polynesia) Black Pearls

wholesale pearlsAs we all know, Tahiti runs a monopoly when it comes to “black pearls”. Ever since it started to produce commercial volumes in the late 1970s, it commanded a global market share (in both weight and value) estimated at between 93 to 95 percent. Tahiti may well be the “Herculean producer of the black pearl”, but it is surely not its pioneer.

The first “black pearls” cultivated in the Pinctada margaritifera oyster date back to the 1920s. The Japanese farmed them for decades in their southern Ryukyu Islands, around Okinawa. But since this black-lip oyster species is available throughout the Indo-Pacific region, many pearl farms were established in places such as the Cook Islands, New Caledonia, Fiji, the Marshall Islands, Indonesia, the Philippines, the Ryukyu Islands, as well as in the Pescadores Islands, located in Taiwan’s Formosa Strait.

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Many of them are now closed, or are just limping along. The most active ones (besides those around Tahiti) are in the Cook Islands and in Fiji. Especially Fiji’s Justin Hunter is worth watching. Well aware that he can never win a numbers game with Tahiti, he wisely puts quality ahead of quantity. But with due respect to all those, their combined output has, and will never pose, any serious threat to Tahiti. During the 1980s and 1990s, Tahitian pearl production went full throttle. Pearls, after Tourism, became Tahiti’s second largest goose to lay the golden eggs. These were the
happy heydays, when all flags were flying.

Here some highlights:
– 1972 (First recorded export) 1.5kg US$3.663.-
– 1983 139kg US$5.0 million
– 1992 1 tonne US$43.5 million
– 1996 5.1 tonnes US$152.4 million
– 2003 to 2008 (annually) 10 to 15 tonnes US$130 million (*)
(*) 2003 to 2008 are very rough estimates (see reason below), whereas figures for 1972 to 1996 are accurate.
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In other words: in 1996, Tahiti got more money from 5 tonnes of pearls, than it is getting today with annual production volumes that have doubled (by certain estimates even tripled). It looks as if Tahiti’s pearl industry is now drowning in its own success.

What happened?
Sadly, the over-ambitious politicians running the Government of French Polynesia, eager in seeking votes for re-election, had issued farming licenses like Santa Claus throws candies to kids around Christmas time. It is estimated that at its peak time during the late 1990s and early in the 2000s, approximately 1,500 independent pearl farms were operational. During these years, many Tahitians got the “I can do it too” virus in their blood, for which
the only effective antibiotic was to give them a pearl farming license. Some of this happened in the absence of knowledge, ability or capital. But Government and banks were happy to assist. Unfortunately, the Government was too lax to implement control of licenses, leases and quotas.

The situation got out of control, resulting in a huge overproduction, with prices going downhill. After thirty years of enjoying a sellers’ market, Tahiti suddenly woke up, realising that the tides had turned. By 2007, the number of active farms had shrunk to approximately 650. By 2008, estimates run at around 550 (with 50 being medium to large in size, and 500 being small ones). But the decline continues. It is very well possible, that the number will drop to below 350 by the end of this year. Practically every pearl farm still operating in French Polynesia is running dark red figures. This is actually quite amazing! Think of it: There is a country that runs a monopoly, producing beautiful gems that enjoy very high popularity all over the world. Yet, every producer is losing money! Something wrong isn’t it!

As the prices for Tahitian pearls tumbled, the export tax (at 200 CFP/gram) became excessive in relation to the value of the pearls themselves. The result was that in recent years, considerable volumes of pearls were apparently smuggled out of the country (hence, no more accurate statistics). In October 2008, the Government abolished this
export tax. But other export procedures remain in place, including a quality control system by x-ray machine.

By abolishing this export tax (rather than reducing it), the Government strangled the much needed funds used for their very successful promotional campaigns. The “GIE Perles de Tahiti” (Martin Coeroli) had done a good job, over many years, very actively promoting Tahiti’s gems. From 2003 to 2008 alone, between 6 and 9 million US$ dollars were spent annually on worldwide propaganda. But with the export tax totally abolished, and no alternative financial sources available, there is no more money for publicity, and the “GIE Perles de Tahiti” has now died. Came 2008/2009, Tahiti’s second largest industry had not only reached the state of “chaos and disarray”, it had become an embarrassment to its Government, with the world watching in disbelief.

What will the future hold for Tahiti and its pearling industry? Basically, Tahiti has now a couple of choices:

  1. One is that the government maintains its “laissez-faire” attitude, under the motto (or rather the excuse of) “we live in a free country and it’s everybody’s game”. The result will be that the industry is left to open market forces, which actually translates into “elimination by nature”. This would be a painful process for many. But over time, it would normalise the situation.
  2. The second scenario is that the government takes advantage of its monopoly situation, acts swiftly and plays its cards well. Even though living in a “free country”, there is nothing wrong with rules and regulations, with order, control and discipline (look e.g. at the Australian pearling industry). If the Government is now willing to act swiftly by providing funds to support prices of latest crops, by implementing farm control and observing strict discipline, by re-introducing a reasonable export tax (say CFP40/gram, so everybody will pay and smuggling will stop), by re-considering the fees for the “négotiants”, by re-activating the GIE Perles de Tahiti with the resulting funds, by re-activating export customs control, by limiting further expansions of production, etc., then there is hope that Tahiti’s pearl industry will once again become a well respected, trustworthy and prosperous one. It seems the Government is actually thinking of a third scenario, introducing a “pearl centre” or “pearl house”, kind of a “centralised buying and selling organisation”, with a “price-control-system”. Our personal opinion, based on decades long experience, makes us conclude that such system will not work, for reasons we don’t need to elaborate here.

No matter what scenario will develop, the fact remains that many farming operations are in the process of collapsing as we speak. This will result in much lower production volumes, with prices re-bouncing quite drastically in the not-too-distant future. No industry that produces at a cost of 100 and sells at 50 is sustainable. Pearl traders, if you want to buy the dollar at fifty cents, better hurry up!

Article source: Andy Müller, Kobe/Japan, as presented at the European Gemological Symposium in Berne, Switzerland on June 5th, 2009

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