Liberalisation of Gold Market Draws Divergent Response

In an attempt to raise tax and gold mining revenues and promote Myanmar-made gold products internationally, the National League for Democracy government on January 22 announced moves to liberalise the country’s gold market, The Myanmar Times reported last week.

For the first time in Myanmar’s history, exports of locally-produced gold and gold products will be permitted, the Ministry of Commerce (MOC) said. The government will also provide clearer terms for the import of gold products, The Myanmar Times understands.

Gold, which is found in Myanmar, has always been classified as a restricted commodity. Only five large-scale and 350 small-scale gold miners have been permitted to mine for gold as at December 31, 2017, according to the Ministry of Natural Resources and Environmental Conservation.

These include Shwe Min Bone mine in Kalaw, Shan State, Mo Hti Mo Mi in Yamethin, Mandalay, Phayaung Taung mine in Patheingyi, Mandalay and Kyaukpahtoe in Kawlin, Sagaing Region.

Divergent responses

So far, response from the industry has been divided. Some businesses have hailed the move as positive. “Now that the government has unprecedentedly opened the door for the export of gold, we can all do more business and benefit from trade,” said U Win Myint, secretary of Gold Entrepreneur Association, Yangon.

Others are more cautious on the impact exports will have on the local gold market. “Gold prices are constantly changing in the international market. As such, the government must ensure that local administration procedures and all the paperwork involved when exporting is carried out swiftly and efficiently. Any delays may result in price gaps or discrepancies,” said U Myo Myint, managing director of Myanmar Gold Development Public Company Limited.

But U Kyaw Win, secretary of Myanmar Gold Entrepreneurs Association, said an official committee would likely be established to ensure gold prices remain stable. “There are issues that may arise from trading gold such as local price volatility and foreign exchange discrepancies,” he said. In Myanmar, gold prices are pegged to international prices but traded in the local currency .

“However, all these issues can be solved if a monitoring and coordination committee is formed to execute some necessary controls such as specifying the volume of exports permitted over a period of time and managing foreign exchange risks,” he added.

Tax revenues

By opening up the gold market, the government’s aim is to legalise free trading of local gold and maximise tax revenues at a time when global gold prices are on the rise. Buoyed by the weakening US dollar, gold prices closed last Friday at a 17-month high of $1,346 per ounce.

“The price of gold is high now and we have local mining businesses that produce gold. If the export and import of gold can be done safely and legally, Myanmar can also build up its tax revenues from this trade,” said U Khin Maung Lwin, assistant secretary at the MOC.

Currently, local businesses that trade in gold products like jewelry and other accessories must pay a commercial tax of 1 percent on the sales price to the government, according to the recent 2017 Union Tax Law.

As gold was up until recently on the prohibited exports list, customs duties for exports have not been stipulated yet. However, the customs tax on imported gold is 15pc. “For businesses to carry out the export and import of gold, the customs rate and commercial tax rates will need to be changed and made clearer. We propose classifying gold and gold products under one group so the rates are simple and clear,” said U Kyaw Win.

Currently, the Union Tax Law is modified every year. In its announcement last week, the MOC said customs duties, commercial tax and other taxes like the Special Commodities Tax should be expected under the Inland Revenue Department’s laws and procedures.

Export success?

At the end of the day though, success in the gold trade will boil down to demand for Myanmar-produced gold. While international demand for local gold nuggets and bars may rise with further dollar weakness expected, it will also depend on the level of taxes and duties imposed, several business owners told The Myanmar Times. Meanwhile, gold products such as jewelry and other accessories are unlikely to attract global interest for now because foreign designs are still much better.

Production levels will also play a role in determining successful trading of local gold. In Myanmar, gold is still very rudimentarily mined and in many areas workers still pan for gold by hand, making the production process a lengthy one.

In contrast, local demand for gold is high, as Myanmar people view the precious metal as a store of value. Apart from real estate, local investors typically favour gold bars and nuggets as investments.

Whatever the case, “exports have yet to commence so we must wait and see what the impact on the local industry will be. There may not be much change in the market in the end,” said U Win Myint.

“Whether the export business is eventually profitable or not depends on the procedures, level of taxes and ease of doing business,” said U Zaw Aung, owner of Tate Sein Jewelleries.


Source: The Myanmar Times


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