Proposed Gemstone Legislation Risks Leaving Flawed System Intact

The proposed Gemstone Law, currently under discussion in the national legislature, would largely perpetuate many flaws in the governing framework created by the then-military-led government in 1995, according to Natural Resource Governance Institute (NRGI).

In July 2016, the new NLD-led government decided to suspend issuing jade and gemstone licences until relevant laws could be reviewed and an environmental management plan for jade mining areas is put in place. Paul Shortell, associate at the non-profit organisation, told The Myanmar Times that by revisiting the legislation, the administration has a chance to create a framework more beneficial to its citizens and strengthen institutional capacity, tackle illegal activities and trade and address several issues within the sector.

But the proposed law fails to deal with many critical issues and leaves intact much of the flawed system established under the former military regime.

In its press statement, the NRGI named four key problems which the proposed version does not address – multiple conflicts of interests, opaque licensing procedures and too many licences, high taxation rates but low rates of revenue collection, and a lack of transparency.

“Unlike most state-owned gemstone enterprises, the Myanmar Gemstone Enterprise’s [MGE’s] commercial responsibilities are not clearly separated from its regulatory responsibilities.

“The Myanmar Gem and Jewellery Authority [MGJEA], Myanmar’s industry association, exercises an unusual degree of influence via its participation in the Central Gemstone Supervisory Committee, which determines gemstones’ value and advises the Ministry on regulatory matters, and in administering and managing certain revenues from the Jade and Gems Emporium,” the statement said.

The non-profit organisation also highlighted the approval of an unusually high number of mining permits up to the licensing ban has eroded state oversight of mining operations. There were more than 20,000 licences approved by early 2016.

“Opaque licensing procedures and current license terms do not encourage companies to operate at a high standard [with] necessary investments in mine safety, environmental protection, or community development,” the statement argued.

Last July, the government ordered a ban on renewing mining permits for jade and gems when they expired until the by-laws to the new Gemstones Law had been passed.

Apart from weak institutions and licences, Myanmar taxes the gemstone sector at significantly steeper rates than other countries.

“There is evidence that this has encouraged smuggling and underreporting while limiting the growth of downstream activities, including gemstone cutting, polishing and retail.

“The country’s valuation process, which determines the tax owed by mining companies based on their production, remains vulnerable to clientelism,” the organisation said, adding that Myanmar’s government lags behind others in making key components of the legal framework available to the public.

On top of that, accountability is further constrained by limited disclosures of payments, licence terms, and beneficial ownership, as well as by existing restrictions on independent monitoring of mining operations.

According to Mr Shortell, the underlying problem in the government’s reform efforts in the jade and gemstone sector is the lack of coherence in their approach. The formation of the sector’s national strategy is neither linked nor coordinated with the legal reform.

“The Ministry of Natural Resources and Environmental Conservation has recently convened a supporting committee — including government, company, and civil society representatives — to inform new approaches to the jade and gemstone sector. Although the mandate of this body has yet to be finalised, ideally it could lead the creation of a national jade and gemstone policy.

“In most countries, the development of a national strategy would precede reform of the relevant law. Discussion in the parliament of the Myanmar Gemstone Law does not appear to be coordinated with the work of the Ministry’s supporting committee or the ongoing process of national reconciliation.

“Premature revision of the legal framework could undermine multi-stakeholder dialogue regarding the future direction of the sector and negotiations over natural resource management in ethnic areas,” Mr Shortell told The Myanmar Times.

He also said that the NLD’s temporary moratorium on jade and gemstone licensing provides an opening to re-assess how the sector’s development may better serve local and national interest.

“Weak policies have allowed jade and gemstone mining to proceed without adequate oversight while preventing government and citizens from realising the potential benefits of Myanmar’s resource wealth,” he said.

Another issue in the NLD’s efforts in reorganising the sector is that the country separates laws, regulations and contracts for jade and gemstones from those for other minerals.

“Countries generally choose to govern gemstones together with other minerals under a single mining law, as this reduces legal ambiguity, improves efficiency and coordination among government institutions, and supports the even enforcement of rules.

“Since the passage of the 1995 Myanmar Gemstone Law [which is separate from the 1994 Myanmar Mining Law] by the former military regime to today, gemstone companies and relevant government institutions have been held to lower standards than those involved with other minerals.

“This legal and institutional isolation of gemstones from the broader mining sector has allowed political and business elites to monopolise the benefits of gemstone extraction for much of the next two decades,” the NRGI associate said.

In their press release, the organisation explained that Myanmar’s gemstone trade has produced enormous profits but the population has not benefitted.

“Over two decades these profits have been siphoned off by elites, while citizens have realised few of the benefits of this resource wealth in terms of government revenue, local employment, and domestic value addition,” it argued.

 

Source: The Myanmar Times

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