Identifier
Created
Classification
Origin
09CHIANGMAI70
2009-06-03 06:36:00
UNCLASSIFIED
Consulate Chiang Mai
Cable title:
GAO TEAM TOLD THAT MOST BURMESE STONES SMUGGLED
how-toVZCZCXRO9023 PP RUEHCN RUEHDT RUEHGH RUEHHM RUEHVC DE RUEHCHI #0070/01 1540636 ZNR UUUUU ZZH P 030636Z JUN 09 FM AMCONSUL CHIANG MAI TO RUEHC/SECSTATE WASHDC PRIORITY 1047 INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS RUEHOO/CHINA POSTS COLLECTIVE RHEHAAA/NSC WASHINGTON DC RUEHCHI/AMCONSUL CHIANG MAI 1129
UNCLAS SECTION 01 OF 03 CHIANG MAI 000070
SIPDIS
STATE PASS TO TREASURY AND COMMERCE
E.O. 12958: N/A
TAGS: EMIN ETRD ECON PGOV PREL BM CH XA TH
SUBJECT: GAO TEAM TOLD THAT MOST BURMESE STONES SMUGGLED
REF: A. BANGKOK 1296 (GAO LEARNS)
B. BANGKOK 711 (CHANTABURI ARTISANS LAMENT)
C. 08 BANGKOK 3703 (MOST RUBIES SMUGGLED)
D. 08 BANGKOK 3207 (ORIGIN OF THAI RUBY EXPORTS)
E. 08 CHIANG MAI 114 (THAI MARKET TURNS TO AFRICAN RUBIES)
F. 07 BANGKOK 6239 (A BURMESE ROCK)
G. 07 BANGKOK 5927 (THAI GEM INDUSTRY BELIEVES)
CHIANG MAI 00000070 001.2 OF 003
Sensitive but unclassified; please handle accordingly.
-------------------------------
Summary and Comment
-------------------------------
UNCLAS SECTION 01 OF 03 CHIANG MAI 000070
SIPDIS
STATE PASS TO TREASURY AND COMMERCE
E.O. 12958: N/A
TAGS: EMIN ETRD ECON PGOV PREL BM CH XA TH
SUBJECT: GAO TEAM TOLD THAT MOST BURMESE STONES SMUGGLED
REF: A. BANGKOK 1296 (GAO LEARNS)
B. BANGKOK 711 (CHANTABURI ARTISANS LAMENT)
C. 08 BANGKOK 3703 (MOST RUBIES SMUGGLED)
D. 08 BANGKOK 3207 (ORIGIN OF THAI RUBY EXPORTS)
E. 08 CHIANG MAI 114 (THAI MARKET TURNS TO AFRICAN RUBIES)
F. 07 BANGKOK 6239 (A BURMESE ROCK)
G. 07 BANGKOK 5927 (THAI GEM INDUSTRY BELIEVES)
CHIANG MAI 00000070 001.2 OF 003
Sensitive but unclassified; please handle accordingly.
--------------
Summary and Comment
--------------
1. (SBU) Most Thai gem traders do not buy from the Burmese
Government auction; the number of Burmese rubies sold in
Thailand is declining; the highest value Burmese gems are
smuggled out of Burma illegally; small Burmese traders and Thai
cutting/polishing/finishing operations are suffering the most
from the passage of the JADE Act; and Burma sells most of its
jade to China. These were the main points interlocutors made to
Government Accountability Office (GAO) officials visiting
northern Thailand May 20-22 to review the implementation and
impact of the JADE Act. Ref A reported on the team's visit to
Bangkok and Chantaburi.
2. (SBU) Comment: The visit underscored the Thai view that the
JADE Act's impact on Burma's ruling regime is small. A regime
prohibition on the export of gems outside of the GoB auction
system, Thai dealers' inability to match purchase prices for
Burmese gems offered by Chinese and Europeans, and the fact that
gems are not on the top 10 list of goods imported into Thailand
from Burma via the Thai-Burma border province of Tak, are all
factors the Thai cite to support their view. Regardless of
whether the decline in gem exports from Thailand to the U.S. and
Europe is a result of the JADE Act or the global economic
downturn, it seems credible to conclude that small Burmese
traders and the Thai finishing industry are bearing the brunt.
End Summary and Comment.
--------------
Unlikely Burmese Smugglers
--------------
3. (SBU) All interlocutors we met with during the GAO team's
visit -- gem dealers, Thai Government officials, private
businessmen, journalists and a Burmese ruby merchant -- stated
that the vast majority of Burmese rubies imported into Thailand
are smuggled. RTG officials in the Thai-Burma border town of
Mae Sot told us that gems are not among the top 10 items
officially imported from Burma into Tak Province, and Chamber of
Commerce (COC) contacts said that although no hard numbers were
available, they estimated that 90% of gems entering Thailand
from Burma were smuggled through Mae Sot. Some of the traders
operating there come from as far away as Rangoon and Mogok,
according to Chamber members.
4. (SBU) All our contacts emphasized that Thai traders simply
can't compete with the purchase prices for gems offered by
Chinese and European merchants at the Burmese regime's auctions.
Therefore, they stated, Thai dealers buy from smaller traders,
who smuggle gems across the border at great personal risk.
(Note: Gems is one of the commodities the GoB prohibits from
being exported via border trade, according to a list the Tak COC
shared with us.) According to the COC, violation of this
prohibition is punishable by imprisonment.
5. (SBU) A Burmese gem trader vacationing in Thailand
(protect),whose family has been in the business for over 20
years, told the GAO team that the most valuable stones don't
even make it to the GoB's auction. She said that wives of
generals and lower-ranking military officers go directly to
CHIANG MAI 00000070 002.2 OF 003
mining areas like Mogok to purchase stones, which they then
smuggle to Singapore, Indonesia and other countries in Southeast
Asia for resale.
6. (SBU) Initially, the wives pay the dealers half the selling
price. Once they sell the stones and return to Burma, they then
pay the dealers the rest of the money. According to a Burmese
journalist in exile, there are "safe boxes" in Singapore
specifically to support the smuggling of stones by the wives of
Burmese military officers. Meanwhile, stones smuggled across
the Burma-Thai border by smaller traders are lower quality, our
Burmese trader contact said.
--------------
Smugglers, Traders and Routes
--------------
7. (SBU) Those who smuggle gems and jadeite from Burma directly
into Thailand are mainly small traders and middlemen, according
to gem dealers in Mae Sot. Though dealers readily admitted they
purchase Burmese stones, none claimed to have participated in
the GoB auctions. Government and private sector contacts
emphasized the personal nature of the gem trade, and the ease
with which gems can be smuggled across the porous Burma-Thai
border. (Note: The Moei River forms the border between Mae Sot
and Burma's Karen State. In the past, we have observed people
freely crossing in inner tubes. Smuggling small amounts of gems
and finished jadeite via the official checkpoint at the
Friendship Bridge might also be possible.)
8. (SBU) RTG officials in Mae Sot told us that there are no
official statistics on gem imports from Burma. (Note: We
interpret this to mean that no gems or jadeite have entered
Thailand through Tak Province legally.) Both government
contacts and gem dealers emphasized the small size of the Mae
Sot market compared to those in Bangkok and Chantaburi, and that
the quality of stones sold at the border is lower than at the
bigger markets, where traders can expect to receive a higher
price. One dealer estimated that only 10% of rubies sold in Mae
Sot are of Burmese origin, with the rest coming from Africa,
imported through Chantaburi. (Note: Chantaburi is not an
international port, so it is unclear how the rubies would be
imported there.)
--------------
So Who Goes to the Auction?
--------------
9. (SBU) With the vast majority of Thai dealers priced out of
the GoB gem auctions, and most stones entering Thailand from
Burma smuggled, the GAO team inquired about who participates in
the auctions. According to the Tak COC, most auction
participants come from Switzerland, Italy, France, the U.S.,
Japan, Hong Kong, Taiwan and China. According to the Burmese
merchant vacationing in Thailand we spoke with, after the
Saffron Revolution, only Chinese and Taiwanese buyers traveled
to the GoB auctions. COC members told us that at the auction,
small business owners don't get fair market value for their
stones, which explains why they are willing to take the risks
associated with cross-border smuggling.
--------------
What About Jade?
--------------
10. (SBU) According to Mae Sot gem dealers, most of the jade
entering Thailand comes from China. COC contacts told us the
CHIANG MAI 00000070 003.2 OF 003
volume of jade traded along the Sino-Burmese border has gone up
significantly, due to high Chinese demand relative to that in
Thailand, and to the complexity of smuggling unfinished jade,
which is heavy and bulky, into Thailand. Bank of Thailand
contacts spoke of similar trends, though they could not provide
statistics to back up their claims.
--------------
Impact of the JADE Act
--------------
11. (SBU) All our interlocutors agreed that it is difficult to
measure the impact of the JADE Act on the gem trade,
particularly given the current global economic recession. One
dealer estimated that 75% of the decline in gem sales was due to
economic conditions; others put the number much lower. A gem
dealer in Chiang Mai told the GAO team that since last year,
some Americans have asked for certificates of origin when buying
rubies, and alleged that this is due to the JADE Act.
12. (SBU) The Burmese merchant with whom we spoke said that the
ruby market in Mandalay is "dead," and that only Chinese
interest is keeping the jade market there afloat. She added
that gem dealers in Mogok cannot keep their jobs, and many have
turned to driving taxis. COC contacts and gem dealers in Mae
Sot concurred, saying that small-scale traders inside Burma and
the Thai finishing industry are bearing the brunt of the JADE
Act's impact. They opined that right now, the economic
recession is more to blame for the decline in gem sales, but if
countries other than the U.S. implemented legislation like the
JADE Act, the legislation would be more to blame than the
recession.
13. (U) This cable was coordinated with Embassies Bangkok and
Rangoon. The GAO team did not have an opportunity to clear this
message.
MORROW
SIPDIS
STATE PASS TO TREASURY AND COMMERCE
E.O. 12958: N/A
TAGS: EMIN ETRD ECON PGOV PREL BM CH XA TH
SUBJECT: GAO TEAM TOLD THAT MOST BURMESE STONES SMUGGLED
REF: A. BANGKOK 1296 (GAO LEARNS)
B. BANGKOK 711 (CHANTABURI ARTISANS LAMENT)
C. 08 BANGKOK 3703 (MOST RUBIES SMUGGLED)
D. 08 BANGKOK 3207 (ORIGIN OF THAI RUBY EXPORTS)
E. 08 CHIANG MAI 114 (THAI MARKET TURNS TO AFRICAN RUBIES)
F. 07 BANGKOK 6239 (A BURMESE ROCK)
G. 07 BANGKOK 5927 (THAI GEM INDUSTRY BELIEVES)
CHIANG MAI 00000070 001.2 OF 003
Sensitive but unclassified; please handle accordingly.
--------------
Summary and Comment
--------------
1. (SBU) Most Thai gem traders do not buy from the Burmese
Government auction; the number of Burmese rubies sold in
Thailand is declining; the highest value Burmese gems are
smuggled out of Burma illegally; small Burmese traders and Thai
cutting/polishing/finishing operations are suffering the most
from the passage of the JADE Act; and Burma sells most of its
jade to China. These were the main points interlocutors made to
Government Accountability Office (GAO) officials visiting
northern Thailand May 20-22 to review the implementation and
impact of the JADE Act. Ref A reported on the team's visit to
Bangkok and Chantaburi.
2. (SBU) Comment: The visit underscored the Thai view that the
JADE Act's impact on Burma's ruling regime is small. A regime
prohibition on the export of gems outside of the GoB auction
system, Thai dealers' inability to match purchase prices for
Burmese gems offered by Chinese and Europeans, and the fact that
gems are not on the top 10 list of goods imported into Thailand
from Burma via the Thai-Burma border province of Tak, are all
factors the Thai cite to support their view. Regardless of
whether the decline in gem exports from Thailand to the U.S. and
Europe is a result of the JADE Act or the global economic
downturn, it seems credible to conclude that small Burmese
traders and the Thai finishing industry are bearing the brunt.
End Summary and Comment.
--------------
Unlikely Burmese Smugglers
--------------
3. (SBU) All interlocutors we met with during the GAO team's
visit -- gem dealers, Thai Government officials, private
businessmen, journalists and a Burmese ruby merchant -- stated
that the vast majority of Burmese rubies imported into Thailand
are smuggled. RTG officials in the Thai-Burma border town of
Mae Sot told us that gems are not among the top 10 items
officially imported from Burma into Tak Province, and Chamber of
Commerce (COC) contacts said that although no hard numbers were
available, they estimated that 90% of gems entering Thailand
from Burma were smuggled through Mae Sot. Some of the traders
operating there come from as far away as Rangoon and Mogok,
according to Chamber members.
4. (SBU) All our contacts emphasized that Thai traders simply
can't compete with the purchase prices for gems offered by
Chinese and European merchants at the Burmese regime's auctions.
Therefore, they stated, Thai dealers buy from smaller traders,
who smuggle gems across the border at great personal risk.
(Note: Gems is one of the commodities the GoB prohibits from
being exported via border trade, according to a list the Tak COC
shared with us.) According to the COC, violation of this
prohibition is punishable by imprisonment.
5. (SBU) A Burmese gem trader vacationing in Thailand
(protect),whose family has been in the business for over 20
years, told the GAO team that the most valuable stones don't
even make it to the GoB's auction. She said that wives of
generals and lower-ranking military officers go directly to
CHIANG MAI 00000070 002.2 OF 003
mining areas like Mogok to purchase stones, which they then
smuggle to Singapore, Indonesia and other countries in Southeast
Asia for resale.
6. (SBU) Initially, the wives pay the dealers half the selling
price. Once they sell the stones and return to Burma, they then
pay the dealers the rest of the money. According to a Burmese
journalist in exile, there are "safe boxes" in Singapore
specifically to support the smuggling of stones by the wives of
Burmese military officers. Meanwhile, stones smuggled across
the Burma-Thai border by smaller traders are lower quality, our
Burmese trader contact said.
--------------
Smugglers, Traders and Routes
--------------
7. (SBU) Those who smuggle gems and jadeite from Burma directly
into Thailand are mainly small traders and middlemen, according
to gem dealers in Mae Sot. Though dealers readily admitted they
purchase Burmese stones, none claimed to have participated in
the GoB auctions. Government and private sector contacts
emphasized the personal nature of the gem trade, and the ease
with which gems can be smuggled across the porous Burma-Thai
border. (Note: The Moei River forms the border between Mae Sot
and Burma's Karen State. In the past, we have observed people
freely crossing in inner tubes. Smuggling small amounts of gems
and finished jadeite via the official checkpoint at the
Friendship Bridge might also be possible.)
8. (SBU) RTG officials in Mae Sot told us that there are no
official statistics on gem imports from Burma. (Note: We
interpret this to mean that no gems or jadeite have entered
Thailand through Tak Province legally.) Both government
contacts and gem dealers emphasized the small size of the Mae
Sot market compared to those in Bangkok and Chantaburi, and that
the quality of stones sold at the border is lower than at the
bigger markets, where traders can expect to receive a higher
price. One dealer estimated that only 10% of rubies sold in Mae
Sot are of Burmese origin, with the rest coming from Africa,
imported through Chantaburi. (Note: Chantaburi is not an
international port, so it is unclear how the rubies would be
imported there.)
--------------
So Who Goes to the Auction?
--------------
9. (SBU) With the vast majority of Thai dealers priced out of
the GoB gem auctions, and most stones entering Thailand from
Burma smuggled, the GAO team inquired about who participates in
the auctions. According to the Tak COC, most auction
participants come from Switzerland, Italy, France, the U.S.,
Japan, Hong Kong, Taiwan and China. According to the Burmese
merchant vacationing in Thailand we spoke with, after the
Saffron Revolution, only Chinese and Taiwanese buyers traveled
to the GoB auctions. COC members told us that at the auction,
small business owners don't get fair market value for their
stones, which explains why they are willing to take the risks
associated with cross-border smuggling.
--------------
What About Jade?
--------------
10. (SBU) According to Mae Sot gem dealers, most of the jade
entering Thailand comes from China. COC contacts told us the
CHIANG MAI 00000070 003.2 OF 003
volume of jade traded along the Sino-Burmese border has gone up
significantly, due to high Chinese demand relative to that in
Thailand, and to the complexity of smuggling unfinished jade,
which is heavy and bulky, into Thailand. Bank of Thailand
contacts spoke of similar trends, though they could not provide
statistics to back up their claims.
--------------
Impact of the JADE Act
--------------
11. (SBU) All our interlocutors agreed that it is difficult to
measure the impact of the JADE Act on the gem trade,
particularly given the current global economic recession. One
dealer estimated that 75% of the decline in gem sales was due to
economic conditions; others put the number much lower. A gem
dealer in Chiang Mai told the GAO team that since last year,
some Americans have asked for certificates of origin when buying
rubies, and alleged that this is due to the JADE Act.
12. (SBU) The Burmese merchant with whom we spoke said that the
ruby market in Mandalay is "dead," and that only Chinese
interest is keeping the jade market there afloat. She added
that gem dealers in Mogok cannot keep their jobs, and many have
turned to driving taxis. COC contacts and gem dealers in Mae
Sot concurred, saying that small-scale traders inside Burma and
the Thai finishing industry are bearing the brunt of the JADE
Act's impact. They opined that right now, the economic
recession is more to blame for the decline in gem sales, but if
countries other than the U.S. implemented legislation like the
JADE Act, the legislation would be more to blame than the
recession.
13. (U) This cable was coordinated with Embassies Bangkok and
Rangoon. The GAO team did not have an opportunity to clear this
message.
MORROW