The removal of US financial and trade sanctions on Myanmar could give the country’s mining industry a boost, with American buyers expected to return to the precious stones market following a period of sluggish trading.
In an executive order signed in early October, US President Barack Obama authorised the lifting of an embargo blocking imports of jade, rubies and jewellery from Myanmar. This has allowed trade in precious stones between the two countries to resume and is likely to increase market confidence among other Western traders.
The ban on gemstone imports was originally imposed by the US in 2008 as part of a series of sanctions aimed at putting pressure on Myanmar’s former military government, with Obama extending the restrictions in 2013 after the original legislation lapsed.
Government officials and gems dealers hope stronger interest from US and other Western traders will prompt a hike in sales, which have fallen over the past two years.
With the sanctions lifted, Myanmar Gems Enterprise (MGE) – the state agency that oversees the precious stones trade – quickly moved to broaden the sector’s client base, inviting traders from 21 countries to attend the Naypyidaw Gems Emporium (NGE) that took place between November 20 and 29.
“After the US economic sanctions were lifted, we invited more Western traders for the first time,” U Min Thu, deputy director of the MGE, told local media in early November. “Normally, we invite traders from mainland China, Hong Kong and Taiwan, and some from Thailand and Singapore.”
Despite the invitations, hopes that Western traders would immediately lift the sector were not fulfilled, with early indications suggesting that event sales reached only around €300m-400m. Just two traders from the US eventually attended the event; poor sales figures were also blamed on the lower quality jade on offer.
Earlier in July, sales at the first NGE of this year generated revenue of around $668.3m, according to official data. This was down on the emporium’s returns in December 2015 of just over $1bn, and well short of the record high of $2.9bn set in July 2014.
While early Western involvement in the new market has been lacklustre, Jeffrey Bilgore, president of the American Gem Trade Association, said it may take some time to put in place fully transparent and appropriate trade links.
“It’s going to be a bit of a process in terms of the supply chain, and that’s something we’re here to look at and help develop,” Bilgore told local media in October.
In another move to encourage US traders, state-organised sales starting from next year will be denominated in dollars rather than in euros, as has been the case for some years.
This transition to the global economy’s preferred trading currency has been facilitated by the removal of restrictions on Myanmar’s financial services institutions, which will in turn allow for freer movement of payments and international transfers.
A key factor in the weaker performance of the gemstone market has been a drop in jade sales to China – Myanmar’s largest overseas buyer of the stone – with the Chinese government cracking down on traders who buy value-added jade without paying tax.
“Chinese buyers have to pay high taxes in China if they buy our value-added products,” Yitnang Ze Lum of the Myanmar Gems and Jewellery Entrepreneurs Association, told local media. “This has a huge impact on the jade market.”
Myanmar’s own commitment to combat corruption and better regulate the mining industry to both maximise revenue and reduce the extraction sector’s environmental impact could further affect gem trading with China.
Myanmar is also looking to boost returns from its gem trade by encouraging more value-added input.
Under a plan drafted by the Yangon Gems and Jewellery Entrepreneurs’ Association, there will be a gradual increase in the ratio of finished products to raw stones in Myanmar’s exports.
The 10-year programme is expected to come into force next year, and the association has proposed that 30% of exports be finished products in the first three years of the strategy, with this rising to 50% within five years. The NES then aims to lift the ratio in two further stages to 75% and 100% by 2027.
Not only would increased activity in the finishing segment generate higher earnings, it would also reduce the trade in smuggled raw stones, according to U Aung Kyaw Win, deputy chairman of the association.
“Unless we have a programme, we will not be able to turn raw materials into finished products,” he told local media in mid-October. “The adoption of a government programme covering jade, gems and precious metals backed by entrepreneurs would help eliminate illicit trade in gems and jade.”
The lack of value-added services means the sector only receives around 10% of the final sale price. The remainder is pocketed by those who cut, polish and sell the final product to wholesalers and retailers in regional neighbours such as Thailand.
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