VZCZCXRO1074
OO RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGO #0062/01 0251006
ZNR UUUUU ZZH
O 251006Z JAN 08
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7099
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHBY/AMEMBASSY CANBERRA 0860
RUEHBJ/AMEMBASSY BEIJING 1700
RUEHKA/AMEMBASSY DHAKA 4740
RUEHNE/AMEMBASSY NEW DELHI 4420
RUEHUL/AMEMBASSY SEOUL 7951
RUEHKO/AMEMBASSY TOKYO 5512
RUEHCN/AMCONSUL CHENGDU 1325
RUEHCHI/AMCONSUL CHIANG MAI 1353
RUEHCI/AMCONSUL KOLKATA 0192
RUEAIIA/CIA WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEKJCS/DIA WASHDC
RUEHGV/USMISSION GENEVA 3481
RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUCNDT/USMISSION USUN NEW YORK 1300
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 02 RANGOON 000062 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EAP/MLS; INR/EAP; OES FOR JMIOTKE AND ACOVINGTON; 
EAP FOR JYAMAMOTO; EEB FOR TSAEGER 
PACOM FOR FPA; 
TREASURY FOR OASIA:SCHUN 
 
E.O. 12958: N/A 
TAGS: SENV ECON ETRD PGOV EINV BM
SUBJECT: AUCTIONING OFF BURMA'S RICHES 
 
REF: A. 07 RANGOON 339 
     ¶B. RANGOON 61 
     ¶C. RANGOON 46 
 
RANGOON 00000062  001.2 OF 002 
 
 
¶1.  (SBU)  Summary.  Myanmar Economic Holdings Ltd (MEHL), a 
state-owned enterprise owned by the Ministry of Defense, 
controls Burma's gem and jade industry.  In addition to 
owning all of Burma's mines, MEHL also controls the sale of 
high-quality stones, putting them up for auction at its 
annual gem and jade emporiums.  Auctions are open to both 
local and foreign companies and lots must be purchased with 
Euros.  MEHL hosts four or five emporiums a year, earning an 
average of $300 million in sales.  End Summary. 
 
How the Emporiums Work 
---------------------- 
 
¶2.  (SBU) Each year between November and May, Burma's gem and 
jade mines are in full operation.  Only companies that enter 
into joint ventures with MEHL are able to extract stones from 
the mines; individuals are no longer able to purchase mining 
permits.  While most of the jade is sold at MEHL's emporiums, 
only high-quality gemstones are sent to the emporiums. 
Companies can keep and sell inferior and medium-quality stone 
on the local market (Ref B).  MEHL holds two types of 
emporiums each year: government auctions with stones from 
MEHL mines and private auctions with stones from joint 
venture mines.  The government auctions are held in March and 
September, while the private auctions are held in January and 
July.  If MEHL has an overstock of gems and jade, it will 
also hold an additional mid-fiscal year auction in November. 
 
¶3.  (SBU)  While the emporiums usually last two weeks, the 
GOB places more emphasis on the jade auction.  Customers can 
view precious gem lots for three days, with the auction 
occurring on the fourth day.  Viewing of jade lots lasts 
longer, approximately 13 days, with one day for auction. 
MEHL auctions both gem and jade lots in two ways, either 
through silent auction or open bidding.  MEHL reserves silent 
auction for lower quality ruby and sapphire sales, as well as 
for larger jade lots.  It uses open bidding, which draws more 
attention and customers, to sell high-quality gemstones and 
jade.  MEHL officials believe they can draw a higher price 
for the best stones by pitting customers against each other, 
gem merchants explain. 
 
¶4.  (SBU)  Each year, the gem and jade emporiums attract the 
interest of both local and foreign companies.  In FY06/07, an 
average of 500 companies participated in each auction, 40 
percent of which were foreign companies.  In FY07/08, the 
number of foreign companies and businessmen attending the 
auctions has increased, now averaging around 50 percent.  In 
order for a company to participate in the auction, it must be 
registered with the Ministry of Mines as a legitimate dealer 
and have a local bank account, either with the Myanmar 
Foreign Trade Bank or the Myanmar Investment Bank.  Under 
Burmese law, foreigners are able to purchase gem lots, but 
the financial transaction must clear the bank before they are 
able to take possession of the lots.  According to local gem 
dealers, MEHL often ships the gem lot to the foreigner 
several weeks after the financial transaction clears. 
 
Making a Profit 
--------------- 
 
¶5.  (SBU) The majority of the earnings from the jade and gem 
emporiums go to MEHL.  MEHL collects all revenues from the 
government auctions and the mid-year auction.  It also earns 
 
RANGOON 00000062  002.2 OF 002 
 
 
a percentage of the profits from the private auctions, based 
upon MEHL's joint venture contract with each company.  MEHL's 
revenues from the auctions are tax-free; private companies 
must pay a 7 percent tax to the Internal Revenue Department 
(Ref A). 
 
¶6.  (SBU)  In FY06/07, MEHL reported earnings of more than 
$300 million in profits from the emporiums, up from $200 
million in FY05/06.  Profit estimates for FY07-08 are not yet 
available, although NGOs estimate that the GOB earned 
approximately $125 million from the 16th mid-year emporium in 
November alone.  MEHL recently concluded another jade and gem 
auction on January 19; MEHL will not report the results (Ref 
B). 
 
Comment 
------- 
 
¶7.  (SBU)  By ensuring that state-owned enterprises are 
entrenched in Burma's economy, the regime asserts its control 
over business ventures while reaping profits from all 
economic endeavors (Ref C).  The sale of gems and jade is 
only one way that the regime earns its cash, and the GOB 
predicts that FY07/08 sales may overtake FY06/07 profits of 
$300 million.  Despite all the negative attention that Burma 
has received in recent months, Burmese gems and jade remain 
popular with many foreigners.  It appears that quality, not 
politics, defines interest in gemstones and jade. 
 
VILLAROSA