Investment opportunities and growth pathways in Sri Lanka’s lapidary sector: financing, policy and future competitiveness

Abstract

Sri Lanka, the “Island of Gems,” has a rich heritage in gem mining, producing renowned sapphires and rubies. The lapidary sector is a sector where the value addition is done by cutting and polishing which is becoming a challenge to modernization and competitiveness. Where other nations such as Thailand and Hong Kong have improved by investing on technology, infrastructure and regulation changes, Sri Lanka gem sector is still behind with its exports being far below that of the international competitors. This loss of income shows the fact that the lapidary potential of the country is not used fully and requires more powerful policies and investments. This paper examines major aspects that determine investments in lapidary industry. Using a qualitative, interpretive approach guided by stakeholder theory, in-depth interviews were conducted with 32 stakeholders in Ratnapura, including lapidary business owners, investors, financial institutions, craftsmen, and government officials. The semi-structured questionnaire was used to gather data, which is grounded on the existing literature and the themes of the research are consistent with the current studies in wind and energy industry and include capital requirements, access to finance, government policies, market trends, skilled labor, and competitiveness. Two academics, two non-sector people and two people in the sector validated the questionnaire and themes. Interviews were conducted between 20th July and 25th August 2025 and analyzed thematically via NVivo. The results suggest essential investment aspects, such as technology implementation, development of skilled labor, the main gem trading center, combining it with the tourism sector in gems in the form of GEM Trails, and investing in sustainable gem treatments and innovation. Specialized financial assistance, including special loan schemes, gem pledging resources, and incentives supported by the government are also necessary. These lessons can assist policymakers and investors to discover the lapidary potential of Sri Lanka and reinforce its role in the international arena.