Myanmar is widely regarded as the next emerging market, especially within Asia. The lifting of the US economic sanctions on the country and the election of the democratic government last year are among the recent big issues in the country. We interviewed Aung Kyaw Win, vice chairman of Gems & Jewellery Entrepreneurs Association (Yangon Region) and chairman of United GP Holding Co, Ltd to learn more about the impacts of the US policy and the new ruling class on the Myanmar gem and jewellery industry.
HKJM: Hong Kong Jewellery
AKW: Aung Kyaw Win
HKJM: What is the current situation of the Myanmar gem and jewellery industry? What challenges is the industry facing?
AKW: Everyone knows that we have the best rubies and jade in the world; but as a result of the government policies, we cannot grasp the opportunity offered by such a competitive advantage. In 1964, the government started the emporium to sell rough stones at auction prices. They think they can make money easily in this way, which is why they do not want to invest in the value chain.
The new democratic government elected by the people in 2016 already realised that they need to focus on human resources to develop the country. Now the government starts to emphasise value chain development. Currently we are strong in the upstream of the supply chain; in the midstream we are very poor, at the downstream our performance is not so bad. The quality of our jewellery manufacturing is acceptable but it cannot meet with international standards. Our upstream is much more developed because we have a long history in mining.
In view of this reality, Myanmar needs to learn a lot from international markets like Thailand, Hong Kong and Sri Lanka. If you compare Sri Lanka and Myanmar, both countries are rich in natural resources; Myanmar’s natural resources are even richer but Sri Lanka emphasises on the value chain, therefore their exports of finished products and cut stones are much more than Myanmar. It is made possible by the government’s continuous emphasis on the development of value chain in Sri Lanka. Now Myanmar starts to understand this but it takes time for things to change.
The gem and jewellery industries in Thailand and Hong Kong are both very developed in the midstream production because of their government policies. This is why our association is negotiating with the government to push for the development of the value chain.
For instance, the import and export policies are the most important. If the policies are wrong, everything will go in the wrong direction. In Myanmar, exports of finished jewellery and cut stones are under heavy constraints. Only on a few occasions can we export goods officially under the government’s permission. For example, in the case of overseas trade shows, when our association receives an invitation from a foreign trade association, the government will then issue a permit to allow trade. Very often goods are exported unofficially by smuggling. Our people are very hardworking and experienced. The only problem is government policy.
Business must be conducted around the clock according to market regulation. The government is beginning to understand this fact so I believe that free trading and exports of rough stones, cut gems and all types of jewellery will soon be allowed. Now we are waiting for the approval from the president. At the ministry level it is agreed to permit exports with a five-percent tax though the official law has not yet been announced.
We have already submitted the master plan to the government. We have studied the success of Hong Kong, India, Thailand, Sri Lanka and created a compare-and-contrast analysis between them and Myanmar. Based on it we can adopt a similar approach. I have requested to meet the vice president of Myanmar who handles the gem and jewellery industry. Hopefully we can move faster.
If the value chain in the gem and jewellery industry is developed, it could become the country’s most valuable industry in terms of export value. The emporium only benefits a small number of people. If we develop the value chain, it can create more jobs along the midstream and downstream. It could also allow the government to receive tax properly and benefit the people.
HKJM: How many people are working in the industry?
AKW: We don’t have official statistics; but in our association there are about 10,000 companies. Out of them 20 percent are of big and medium-sized, the rest are individuals or small companies with three to five people.
HKJM: What is the impact of the lifting of the US economic sanctions on the industry?
AKW: The United States has already lifted the sanction, but our government’s policy is not open yet. In the past, the government did not want other countries to have access to our natural resources easily so they implemented export bans. Even after the sanction is lifted, people cannot enjoy the opportunity and can only trade for a limited time. This is the major challenge facing our industry. This is why we try to advocate unrestricted exports after tax.
HKJM: How is the domestic jewellery market?
AKW: We are lucky for the domestic markets. We have a population of 55 million and Myanmar people love to wear ruby, sapphire, diamond and gold jewellery. Thanks to the domestic market local jewellers can survive. Until now, import tax for jewellery and gems is very high at about 38 percent. So if foreigners wish to do business officially it could only be in a limited scale. Most of the trading is carried out under table. Business is very limited. That is why we are telling the government that import tax must be reasonable to encourage trade. It is beneficial to our government and our industry.
HKJM: Is ethical standard in mining improving in Myanmar?
AKW: Previously the ethical standard in mining and the awareness in corporate social responsibility in the industry is low. Now, EITI (Extractive Industries Transparency Initiative) is helping the government to conduct business and extract natural resources in a more responsible way. This kind of mindset is now growing in the business sector. NRGI (Natural Resource Governance Institute) is trying to work between the miners, mine owners, the workers and the government, but it takes time.
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