US sanctions taking toll on Burmese gems industry

Mogok, the historic center of Burma's gems industry, is struggling to cope with the effects of US sanctions targeting the country's military rulers and their cronies, according to industry insiders.

A gem trader in Mogok told The Irrawaddy that at least 50 mine sites in the area have decreased production and several have closed completely since the US Congress approved a law restricting gem imports from Burma last July.

"Work at many gem sites has slowed down because it is becoming more difficult to export the gems now that they are on the sanctions list," the trader said.

He added that many investors are reluctant to spend money to fuel earthmovers and other heavy equipment because they are no longer sure they will be able to sell the gems they find.

Although the sanctions are intended to block imports into the United States, other markets are also becoming less receptive to Burmese gems. According to traders, Thailand's cross-border imports of precious stones from Burma have declined in recent months, and many Thai traders are now offering lower prices for the gems they buy.

Chinese traders have also become relatively scarce in Mogok.

"Even Chinese gem traders are not coming to Burma like they used to," said one Burmese journalist who closely follows developments in the gems industry. "I think if the Chinese don't come, there won't be any gem auctions."

Although the Burmese junta has continued to hold gem auctions in Rangoon, buying by international jewelers has dropped by at least 50 percent, according to jewelers in the city, who say that market prices across the country have also fallen by half.

Official statistics show that Burma exported US $647.53 million worth of gems in the fiscal year 2007-08. However, Burma's gems production decreased from 7.178 million carats in the 2nd quarter of 2007 to 6.491 million carats in the 2nd quarter of 2008, according to The Economist Intelligence Unit.

In Burma, the gems industry is owned by the state, but since the 1990s, the government has allowed private investment through join-venture enterprises. But licenses are only granted to cronies of the ruling generals, including Tay Za, who runs Htoo Trading Co, and Ne Win Tun, of Ruby Dragon Jade & Gems Co Ltd.

In May 2008, former US President George W Bush issued an executive order putting three Burmese state enterprises-the Myanmar Gem Enterprise, Myanmar Timber Enterprise and Myanmar Pearl Enterprise-on a sanctions list.

Two months later, the US Congress approved the Tom Lantos Block Burmese JADE (Junta's Anti-Democratic Efforts) Act, which renewed a 2007 act restricting the import of gems from Burma and tightening sanctions on mining projects.

The law said that over 90 percent of the world's ruby supply originates in Burma, but only 3 percent of the rubies entering the US are designated as being of Burmese origin.

According to Human Rights Watch, gems mined in Burma are first exported to countries such as Thailand or India to be cut and polished, and then exported to other countries around the world.

Prime markets for jewelry made with Burmese rubies are in the US, Europe and Japan. The highest quality and most expensive stones are exported to Switzerland for onward sale to other markets, the group said.