Gold smuggling thrives across Myanmar’s borders

The thriving illegal business in gold across Myanmar’s porous borders is likely to continue unchecked until the government legalises trade of the raw material, said traders and industry sources.

Industry bodies have asked the Ministry of Commerce to strike the precious metal from its list of restricted goods, saying this would boost government coffers and help to combat smuggling.

Traders exploit international price differences for the raw material, selling to smugglers who transport the metal out of the country, said U Myo Myint, chair of the Yangon Region Gold Entrepreneurs Association.

Gold enters and leaves Myanmar through Muse on the Chinese border, Myawaddy on the Thai border and Maungdaw on the border with Bangladesh, he said. When the price of gold is high in Yangon, gold is smuggled into the country and when the price is low, it is sold overseas.

Traders confirmed there is profit to be made by selling Myanmar gold to neighbouring countries, where it can often fetch a higher price than in the local market.

“We send gold overseas because it makes more profit. It is transported by various routes including across the Indian border at Tamu [in Sagaing Region]. Smugglers do not have to pay tax, which means they can make a good income,” said one Yangon-based gold trader who asked not to be named.

U Maung Aung, adviser to the Ministry of Commerce, said demand is strongest from India. “India is the country with the most demand for raw gold, as well as for finished products. Gold is also one of India’s main exports, which it sells on to other countries including to the Middle East.”

A senior official from the Myanmar Gold Trading Association confirmed that gold is mostly smuggled to India, where demand is highest, but also to China, Thailand and Bangladesh.

“Which country has the most demand? It fluctuates, but when demand and the value of gold are both high, there is a lot of smuggling. Many of the traders are Indian, and they send gold to India,” he said.

According to the World Gold Council’s Gold Demand Trends report for full-year 2015, India and China are the mainstays of the international consumer market for gold, with China seeking gold bars and coins as a wealth preserver during times of domestic currency weakness.

Indian consumers have been resolute in their demand for gold despite adverse weather conditions and a squeeze on rural incomes, the report said. Recent reports in Indian media suggest that illegal gold enters the country by land from Myanmar into Kolkata, where it is distributed to other cities.

Rules in Myanmar forbid the trade, but are widely broken. Smugglers are therefore able to take advantage of a tax-free environment, pocketing all the proceeds at the expense of Myanmar livelihoods and the wealth of the country, said the senior official at the Myanmar Gold Trading Association.

He did not attempt to estimate the value of the trade, saying only that it is a “large amount”.

Gold sellers agreed that the illegal business is damaging to Myanmar, though warned that if the government tried to tax the commodity, smuggling would likely continue as sellers seek to maximise profits. Most traders are smugglers, said a Yangon-based seller, asking not to be named.

Smuggling is more profitable than production, he said. Gold is sourced from mines across Myanmar and taken across the border according to demand. “They buy wherever they can make the most profits, including in the most remote areas,” the trader said.

The commerce ministry is assessing plans to allow gold to be exported as jewellery or other finished products. U Myo Myint agrees with traders that this would not prevent illegal sales, arguing that buyers in other countries do not necessarily favour Myanmar designs.

An alternative solution may be a gold and metal exchange that would allow local businesspeople to legally trade with the international market. Entrepreneurs have proposed the idea to the Ministry of Commerce but the project has not yet been approved – it would depend on gold being removed from the ministry’s list of restricted items.

U Maung Aung previously told The Myanmar Times that legalising the trade is not a decision for the ministry alone. “We need recommendations from everyone,” he said. “The trade should be legalised if we can also make finished products. Perhaps it will happen in the next government term.”

Secretary of the Myanmar Gold Entrepreneurs Association U Kyaw Win said the proposal is still under discussion, and will need to be considered by the new government.

If the market is approved, local traders will be able to sell to international buyers and the government can begin to profit from the industry through taxation, he said.

“The illegal ways will disappear gradually when the state and private enterprises can cooperate in supervising the sector. If smuggling routes were replaced by legal exchanges, it would help to preserve our natural resources, and introduce some control and balance,” said U Kyaw Win.

“If foreign countries can publish figures about how much gold they buy from Myanmar there would be more transparency and it would be very beneficial.”


Source: Myanmar Times

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