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08CHIANGMAI114 THAI MARKET TURNS TO AFRICAN RUBIES AS SMUGGLING

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“162998”,”7/22/2008 9:50″,”08CHIANGMAI114″,”Consulate Chiang Mai”,”UNCLASSIFIED”,”07BANGKOK6239|08RANGOON61″,”VZCZCXRO3067

PP RUEHCN RUEHDT RUEHGH RUEHHM RUEHVC

DE RUEHCHI #0114/01 2040950

ZNR UUUUU ZZH

P 220950Z JUL 08

FM AMCONSUL CHIANG MAI

TO RUEHC/SECSTATE WASHDC PRIORITY 0806

INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS

RUEHOO/CHINA POSTS COLLECTIVE

RHEHAAA/NSC WASHINGTON DC

RUCPDOC/USDOC WASHDC PRIORITY 0008

RUEHCHI/AMCONSUL CHIANG MAI 0873″,”UNCLAS SECTION 01 OF 02 CHIANG MAI 000114

SIPDIS

E.O. 12958: N/A

TAGS: SENV, ECON, ETRD, PGOV, EINV, TH, BM, CH

SUBJECT: THAI MARKET TURNS TO AFRICAN RUBIES AS SMUGGLING OF BURMESE

STONES DECLINES

REF: A. 2008 RANGOON 61: FINANCING THE REGIME WITH JADE, NOT GEMS

B. 2007 BANGKOK 6239: A BURMESE ROCK BECOMES A THAI RUBY

CHIANG MAI 00000114 001.2 OF 002

Sensitive But Unclassified; please handle accordingly.

——-

Summary

——-

1. (SBU) The long and porous border of the Mae Sot area with

Burma, and proximity to the Burmese gem mines, have made this

region historically a center for the smuggling of Burmese gems.

However, imported African rubies now dominate local markets in

Mae Sot. Retailers say Burmese rubies are too expensive

compared to African ones and believe stricter Burmese controls

are directing Burmese production into the Rangoon auctions,

especially in high-end gems. In addition, China\’s appetite for

jade has caused the Thai border trade in jade to all but dry up.

End summary.

—————————–

Mae Sot Gem Market in Decline

—————————–

2. (SBU) Because of its geographically and commercially

strategic location, Mae Sot in Tak Province has played a

historically significant role in the trade of Burmese gems. The

Thai border town is home to about 300 gem traders and retailers,

many of whom work part-time, and a few gem wholesalers,

according to the chairperson of the Mae Sot Gemstones and

Jewelry Club. The two small gem markets in Mae Sot, which are

located in the center of town and at the Thai-Burmese Friendship

Bridge, bustle every morning with brokers buying and selling

smuggled gems and semiprecious stones. Over time, these factors

have built up Mae Sot\’s reputation as a Burmese gem supply hub.

3. (SBU) During recent casual visits to the Mae Sot gem markets

by local Consulate staff, however, traders and retailers

reported that the Mae Sot gem market is in decline because of

the falling competitiveness of Burmese gems, low local demand,

and an increasing control of the market by the official auction

in Rangoon that leads to fewer, and lower quality, raw gems

available to be easily smuggled out of the country.

——————————————— —-

Burmese Rubies Can\’t Compete with African Imports

——————————————— —-

4. (SBU) Despite its proximity to Burma and the mines of Mogok

north of Mandalay and the Mineshu mines in Shan State,

approximately 70 percent of rubies sold in Mae Sot are now

imported from Africa, mainly Madagascar, according to one shop

owner. In the shop stalls, it appeared to the Consulate staff

that over 90 percent of the rubies for sale were from Africa. A

source at the Tak Chamber of Commerce said that the \”vast

majority\” of rubies in Tak now come from Africa. Local

merchants said that the low prices of African rubies are too

competitive for Burmese gems, even when smuggled. Because of

low quality and demand, the price of a one-karat rough, uncut

Burmese ruby in Mae Sot is only about $0.90; but even that low

price cannot compete with African rubies which are marketed to

the tourist crowd as more beautiful and affordable, though less

rare than Burmese rubies. Many retailers admitted to falsely

selling African rubies as Burmese rubies to tourists, who are

willing to pay more for \”Burmese\” ones.

————————–

Low Demand Hurts Retailers

————————–

5. (SBU) Besides declining competitiveness of Burmese gems, Mae

Sot and Chiang Mai merchants complained of low demand for

precious gems. In Mae Sot, retailers said that local demand has

dwindled to a few local traders and tourists. The trade of

valuable smuggled gems from Burma through Mae Sot is a thing of

the past; and local demand survives only because of Mae Sot\’s

historical reputation. In both Mae Sot and Chiang Mai, jewelry

retailers complained of the decline in global demand for

precious gems as luxury goods. With high commodity prices

globally, jewelry merchants believe that consumers are shifting

their preferences to cheaper, custom-made jewelry.

—————————————-

The Dominance of the Rangoon Gem Auction

—————————————-

6. (SBU) Merchants believe that the decline in Burmese stones in

Mae Sot has driven more Bangkok-based gem dealers to buy

directly from the auction in Rangoon. Mae Sot\’s share of the

value of Thailand\’s total Burmese ruby imports is now only 5%,

CHIANG MAI 00000114 002.2 OF 002

according to the Mae Sot Gemstones and Jewelry Club. One

merchant said that the Burmese regime has taken increasing

control of the high-end ruby trade. A Chiang Mai jewelry

producer said that high quality gems are now more difficult to

find in the border towns of Mae Sot and Mae Sai. (Note: Post

plans to visit and report separately on the Mae Sai gem market.)

—————————

China Takes the Jade Market

—————————

7. (SBU) The economic rise of China has also contributed to the

decline of the Mae Sot market. Besides rubies, jade has

traditionally been the other major gem export from Burma. While

Thailand\’s demand for jade is relatively low, Thailand\’s border

towns used to do a moderate trade in jade. Now that has

changed. Chinese bidders have pushed prices so high that Thai

traders in Northern Thailand have all but dropped the jade

trade.

——-

Comment

——-

8. (SBU) While we cannot say for sure what is going on in the

Burmese gem industry, the decline in volume and quality of

Burmese rubies in the markets of Mae Sot is consistent with

local vendors\’ beliefs that the Burmese government has tightened

control over gem mining and transport, leaving less to smuggle

out cheaply. The most dramatic change, however, has been the

influx of African gems. Prices for Burmese stones may be rising

because of greater interest in the Rangoon gem auctions, but so

long as African rubies can be brought in at lower prices, they

will inevitably continue to dominate local markets, at least for

non-high-end stones.

9. (U) This cable was coordinated with Embassies Bangkok and

Rangoon and Consulate General Chengdu.

ANDERSON

Written by thaicables

June 13, 2011 at 2:23 am

One Response

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  1. […] THAI MARKET TURNS TO AFRICAN RUBIES AS SMUGGLING (July 2008) […]


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