Gemstone mining in Myanmar is separate from mineral mining, both institutionally and legislatively. There is no connection between the gemstone permit system and the general mining permit system. Unlike anywhere else in the world, the two are independent processes. There is also an official distinction between jade and gems, wherein “gems” refers to all gemstones other than jade.
Since 1995 Myanmar has had a separate gemstone law in place, supported by a set of rules and regulations. This law was amended twice, first in 2003 and then in early 2016. However, when the National League for Democracy came to power the second amendment was halted. Instead, work began on a new draft law. The government, led by State Counsellor Daw Aung San Suu Kyi, announced that it would no longer issue permits nor renew licences for jade and gemstone mining until amended legislation was in place. The decision came after international criticism that put a spotlight on the alleged link between gemstone mining and human rights abuses conducted by mining firms connected with powerful members of the former military government. A new law governing the gemstone industry was finally passed by Parliament in December 2018, a year after it had been drafted.
Though the 2017 Gemstone Law faced widespread criticism, it could serve as a starting point for further reforms to address ongoing issues in the industry. Now duly enacted, the new law covers medium, small and artisanal mining, and limits the term of permits to three years, two years and one year, respectively. However, large-scale mining is not covered under the new law – a loophole that critics fear could be misused by vested interests. The law does not specify how to deal with companies that could potentially sidestep size restrictions by applying for a cluster of small- or medium-scale licences next to each other. As defined under the 2017 Gemstone Law, a medium-scale mine covers 2 ha and a small-scale mine covers 1.2 ha. One of the aims of the new law was to revive legitimate jade mining in Kachin State, which borders China, as this is an area where illegal gemstone trading has thrived.
Hpakant-Lonkin in Kachin State is the largest and most well-known jade-producing zone, or tract. Other key, officially designated tracts include Hkamti, Mawlu and Mawhan. The bright emerald green-coloured “imperial jade” is the most prized form of jade. It fetches the highest prices in international markets and is sold predominantly to Chinese buyers. Mogok Valley – 200 km north-east of Mandalay – is renowned for its dark red “pigeon’s blood” rubies and is the best-known gem-producing region of Myanmar. Rubies are also found in Mong Hsu in Shan State and in Namya in Kachin State.
Myanmar’s gemstone industry has evolved in terms of the scale of extraction, and the use of heavy machinery and equipment; however, governance frameworks do not yet reflect these changes. Until the mid-1990s gemstone mining in Myanmar was mostly small scale, but now relatively mid-sized local miners use heavy machinery as well. Jade mining in the Hpakant area, for instance, has effectively become large scale, mechanised and intensive. The new law does not yet fully address this issue, in that smallscale mining operations in places such as Hpakant can operate after paying taxes, while large-scale mining of gems using heavy machinery remains restricted. The new law empowers the Ministry of National Resources and Environmental Conservation (MNREC) to confiscate materials, machines and equipment that have been illegally brought into a gemstone tract. It is hoped the requirements will control the supply of high-quality gems in the local market, draw investment and create new jobs in mining.
The new law empowers the MNREC to form the Central Gemstone Supervisory Committee, which will be made up of gemstone experts, technicians and representatives from the Myanmar Gems and Jewellery Entrepreneurs Association. The committee will advise the government on creating policies for gemstone mining and trade. It will also assist the ministry in tackling the scourge of illegal mining.
Obstacles to Overcome
Illegal mining took place in Myanmar for decades under military rule. According to the Extractive Industries Transparency Initiative, around 60-80% of gemstones mined in Myanmar are undeclared and traded outside the formal system. Global Witness, an international NGO, estimates the annual illicit trade of jade in Myanmar to be $31bn. In a bid to tackle the problem, the renewal of licences for mining jade and gemstones was put on hold by the National League for Democracy-led government for two years from May 2016. The MNREC has also been updating the list of areas where mining can no longer take place on a monthly basis. While these measures will help promote lawful mining, work is still needed to tackle the long-standing problem of illegal mining and trade. According to a number of investigative reports, Myanmar jade continues to be smuggled across the border into China.
Efforts have been made to reform taxes on gems and jewellery. Previously, special commodity tax was levied at the rate of 15% on uncut jade; 10% on other uncut gemstones, excluding diamonds and emeralds; and 5% on polished gemstones and gemstones embedded in jewellery, excluding diamonds and emeralds. These taxes were removed with the introduction of the 2017 Gemstones Law. Sales of gemstones are assessed based on the actual sales price or the sales price as determined by the Myanmar Gems Enterprise, whichever is higher. Tax applicable to the import of gemstones, meanwhile, is assessed based on the landed cost.
Permit holders will now be subjected to a 20% tax in the case of ruby, sapphire, jade and diamond mining, and a 10% tax for any other gemstone. A service fee of 3% will also be imposed on the sale of raw gemstones, calculated on the actual sales price. Gemstones are no longer subject to special commodity tax or commercial tax.
In a bid to curtail the siphoning of revenues, all collected gemstones tax will now be transferred directly to the Internal Revenues Department. This has been something of a step change. Previously, the fiscal regime was widely considered to be outdated and did not provide sufficient incentives to shift gemstone mining from the informal to the formal sector. Rationalisation of the tax regime and its collection is therefore a move in the right direction.
Some stakeholders are hopeful that the gemstone market will bounce back as a result of the new law. For example, a major jade trade expo was held in Mandalay in October 2019, which received an enthusiastic response, with at least 5000 traders attending the exhibition. In addition, more than 2980 jade lots were displayed at the event.
Efforts are also being made to ensure the fair trade of high-quality gems, which are now becoming scarce due to excessive mining. Rubies, sapphires, amber, rough jade and finished jade are the most commonly traded precious stones, and Mandalay is the principal jade and gems market in Myanmar. After the federal government passed the new gemstone law, Mandalay’s regional government formed its own committee to regulate small-scale gemstone miners and traders according to the new legislation.
The new law hopes to clean up the reputation of Myanmar’s gem mining industry, which had been under international criticism for poor safety and labour standards. The reforms have been a point of contention between those wanting to move Myanmar further towards democracy and accountability, and those who wish to maintain the status quo. The new gemstone law is the culmination of a long series of developments, and although there is still much work to be done to ensure full transparency and adherence to international standards in the industry, it appears to have turned a corner thanks to legislative reform.
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