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DE RUEHCHI #0070/01 1540636
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P 030636Z JUN 09
FM AMCONSUL CHIANG MAI
TO RUEHC/SECSTATE WASHDC PRIORITY 1047
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
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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 
 
------------------------------- 
 
 
 
¶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