Business

Jade Sales Dwindle Amid Conflict and Chinese Anti-Graft Campaign

By Kyaw Hsu Mon 20 March 2015

RANGOON —Jade sales at the country’s biggest gems market in Mandalay have slowed to a near-halt in recent months, industry experts said, likely linked to both Chinese anti-corruption campaigns and stalled production in conflict-affected parts of northern Burma.

Burma’s high-quality jade accounts for billions of dollars in revenue annually, and according to the Ministry of Commerce is the country’s second largest source of revenue after gas and oil. A 2013 study by the US-based Ash Center at Harvard University put the value of Burmese jade sales as high as $8 billion in 2011 alone.

Most of the stones come from Hpakant, in northern Burma’s war-torn Kachin State, where more than 7,000 mines sites have been allotted through government concessions, many to companies with ties to the former military government.

All has not been well in the rich hills of Kachin State, where conflict has raged between the government and the Kachin Independence Army (KIA) since the breakdown of a 17-year ceasefire in mid-2011. Clashes in Hpakant, in particular, have escalated over the past year, causing more than 2,000 local residents to flee as recently as January and bringing mining operations to a standstill.

Many industry experts attribute dwindling sales to the conflict, as less new stones are reaching the market and buyers try to capitalize on the slowdown by offering less for lots. Many sellers, in turn, are holding onto their assets in hopes that the former free-flowing trade will eventually get back on track, according to Aung Thein, a central executive committee member of Mandalay’s Myanmar Gems and Jewelry Entrepreneurs Association.

“Jade production is low at the moment, so what we can do right now is keep the better quality jade lots and just sell small amounts to local traders,” he said. Lots that used to be valued at around 500 million kyats (US$482,000) are now bringing in only about 150 to 200 million kyats, he said, so many sellers are opting to “wait for the good times.”

Aung Thein said he has also observed a steep decline in the number of Chinese buyers visiting the gems market in Mandalay. He said that just a few months back, it was common for more than 10 traders to come to the market every week.

“But now, only four or five traders come here in a month,” he said, “it’s obvious.”

Beyond the slowing supply chain, Aung Thein said that the trade has also taken a hit from China’s ramped-up anti-corruption campaign. Tackling corruption in government has been a major priority in China since President Xi Jinping took office in 2012, and a task force led by Wang Quishan has begun major anti-graft operations targeting various levels of governance and Chinese expatriates.

The campaign has already had a chilling effect on low-level authorities, Aung Thein said, causing both businessmen and local officials in Yunnan to proceed with caution. Chinese jade traders have long been accused of paying enormous bribes to local officials in China to facilitate cross-border smuggling of goods, as raw jade is often transported in bulk across the border, where value-added processing occurs.

Economist and writer Aung Ko Ko predicted that while China’s anti-graft campaign has had an impact on Burma’s jade sales, it will likely not have a long and devastating effect because “the Chinese know about our domestics issues well, they know how to handle the local market.”

Aung Ko Ko added, however, that the changes in China’s management—as well as instability along the border—could start to impact other sectors in Burma, such as real estate and the rice trade.

Tremors of the cooling jade market have also been felt in Naypyidaw, the only place in the country where international jade sales are legal as per the 1996 Myanmar Gemstone Law. An official from the Myanma Gems Enterprise, run by the Ministry of Mines, told The Irrawaddy that high value sales have “almost stopped,” while some small-scale domestic deals are ongoing.

Min Thu, assistant director of the enterprise, which coordinates a major Jade and Gems Emporium, said he usually takes recommendations from traders around this time of year about when to hold the event. This year, he said, the date has not yet been set and the event could be delayed.

“Normally the emporium takes place in mid-June, but this year I’ve expect that it could be a little later,” he said.

Two international emporiums were held last year, the latter raking in a record $3.4 billion, up from about $2.6 billion the previous year. This year’s apparent decline in production and demand, however, has left industry players to wonder whether the trade has reached its peak.

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