BKKPOST:Aug21 Uncertain future for gem traders (fwd)
Cliff Sloane
Gem traders who have seen their Cambodian ventures crash are
seeking their fortune in the North near the Burmese border. But
their future is uncertain because of conflict stemming from
unclear tax policies, as well as the usual risks of the trade.
SOMBAT RAKSAKUL reports.
"THIS is where my new-found treasure lies," said Sompong
Pholachand in Mae Sai District, a busy frontier town along Mae Sai
River, where he is settled.
Sompong, 46, started his new venture in Chiang Rai province
from zero after his gem business in Trat province went down the
drain.
With just 150 baht, Sompong launched his gem mining business
along the Thai-Burma border.
The closure of the Thai-Cambodian border last year in
compliance with United Nations' sanctions against the Khmer Rouge
changed Sompong's life dramatically.
The trader once owned three luxury cars, including a new BMW
and hundreds of rai of orchards in Chanthaburi province.
Today, he earns little from the gem trade and from burning
gemstones in Mae Sai. His family lives in a small, crowded, rented
room.
"Everything in life is uncertain and transient. I just had no
luck with gem mining in Pailin," he said.
Sompong, resigning himself to fate, said the gem business
could make one rich or poor overnight.
"More than 10,000 gem traders and miners in Chanthaburi and
Trat have met the same fate."
What caused the traders' downfall and exodus, he said, were
the border closure and lack of raw gemstones.
Sompong said two years of large-scale high-tech exploitation
of gem mines in Pailin province had an adverse impact on the
environment. One of the world's biggest ruby sources was wiped
out.
Just as the gem resource declined in Cambodia, a new ruby
source was found in Burma's Shan state, 590 km north of Rangoon.
The discovery gave rise to a gold rush.
Gems traders made a mass exodus to the northern provinces a
thousand kilometres away. Their new settlements ranged from Mae
Sot, Tak province, to Mae Sai, Chiang Rai province.
The gem source in Mong Hsu should be good for more than 50
years, according to Thawatchai Arnampong.
The former MP from Chanthaburi, who also took part in the
gems rush, said about 20 per cent of the ruby stones found were
valuable.
The precious raw materials in Mong Hsu also attracted opium
warlord Khun Sa, who is cleaning up his drug image by making it
appear that his income is from the gem trade.
He opened a workshop at his Ho Mong headquarters opposite Mae
Hong Son province, employing about 100 workers to cut raw
gemstones and make jewellery.
Khun Sa is also selling valuable raw materials to Thai
merchants.
Most raw gemstones are sold through Tachilek on the Burmese
side and Mae Sai by "soldiers of the ant army".
The ruby trade was very profitable to Khun Sa. His ruby
products found their way to markets abroad with the help of Thai
middlemen.
Mae Sai's gem market enjoys some advantages because of its
proximity to the Burmese border. However, the gem trade in the
district is on a small scale because of a lack of skilled workers.
Newcomers can easily start their businesses in the country's
northernmost town.
It does not take them long to learn the art of gem burning
and cutting. To boost their profits, they choose raw materials
accurately and buy cheap raw gemstones from traffickers.
Some traders venture across the border for cheap raw
gemstones in Tachilek. The products are later sold at much higher
prices in Mae Sai market, making at least tenfold profits after
processing.
Thailand's rivals in gem trade are India, Sri Lanka and
China.
Thailand has the edge in gem-cutting skill and in the
technique of raw gemstone burning, which has been passed on from
generation to generation.
Apart from regular incomes, some gem traders make a lot of
money from burning gemstones. Of the total 10,000 people in the
gem traders' community, only about 100 know the art of burning
gemstones.
Sompong said his main income came from burning raw gemstones.
"Thais are peerless in the art of burning raw gemstones and
gem-cutting," he said.
Gem traders from the eastern provinces have made the Mae Sai
market a noisy business area. The insignificant streetside shops
are now the centre of business.
Building construction has become a highly competitive
venture. An apartment now costs 2,500 to 3,000 baht a month to
rent.
Mae Sai, with abundant raw gemstones and skilled workers, has
become the country's gem trade centre. In fact, it could some day
rise to the international level.
High-budget businessmen including bankers and jewellery
traders from Chiang Rai and Chanthaburi are planning to invest 200
million baht to build a jewellery centre on 20-rai near the Mae
Sai border checkpoint, according to Thawatchai.
The centre, two kilometres from the border checkpoint, will
have cutting and polishing facilities manned by skilled labour to
improve the jewellery's quality.
Right now gemstones have to be sent from Mae Sai to be cut
and polished in Chanthaburi, hundreds of kilometres away, and then
returned for sale in Mae Sai.
Thawatchai said that with an influx of gem traders, Mae Sai
could some day rank among the world's biggest jewellery markets.
Because of the project, Chiang Rai, he said, would draw gem
and jewellery investors from Europe, North America, Hong Kong,
Malaysia and, especially, Japan.
When they came, Chiang Rai Deputy Governor Peera Manatas said,
there would be job opportunities for local people. About 150-300
million baht circulates in the Mae Sai ruby market daily.
The region is enjoying a reasonable increase in jobs and new
investments. However, foreign investors are deeply concerned about
Thailand's substandard tax system.
"The Mae Sai Customs office's value-added tax on gemstones
is unreasonably high," said Thawatchai Arnampong, recently elected
as chairman of the Mae Sai Jewellery Traders' Club.
"The Government should waive VAT on gems and jewellery to
attract provincial investment as well as to give the industry --
the country's second largest export -- a shot in the arm,"
Thawatchai said.
According to the Gems and Jewellery Traders' Association in
Bangkok, the country's gems exports this year are projected at 52
billion baht, 20 per cent more than last year.
But the trade is risky. The success of the business depends on
speculation and the global market. Unrealistic regulations could
ruin the prosperous and yet fragile Mae Sai gem market. The tax
collection and promotion policies are not clear. The authorities
have exploited the situation to their advantage.
Recent conflict nearly turned into rioting just four days
before the establishment of the gem traders' club.
Customs officers were trapped in the middle of hundreds of
traders while trying to confiscate two valuable ruby bags from a
Burmese trafficker. One of the ruby bags worth about 500,000 baht
was stolen.
Hostile feelings toward corrupt Customs officers could at
times get out of control.
"The substandard tax collection and occasions to make easy
money from the gem market in Mae Sai could lead some authorities
into irregular practices," a gem trader said.
"Some authorities confiscate our gemstones, demand bribes or
replace top-quality gemstones with lower-grade ones," said another
trader.
"The Customs officers were bolder in their corrupt practices
when we first arrived. But when our group got bigger and better
organised, we started resisting their corrupt practices," Sompong
said.
A Joint Public/Private Consultative Committee met late last
month to thrash out the tax problem.
Five Customs officers including a chief were transferred
following complaints against them. Thawatchai, who chaired the
club, said he had no role in the transfer.