Myanmar’s flawed new gemstone law set to restart gemstone permits in tainted sector

The law’s passage is a key step in the process of restarting gemstone permitting after a two-year moratorium. Upon taking office, the National League for Democracy (NLD) suspended the issuing of new or extension of existing gemstone licenses pending a governance review intended to clean up the sector. Illegal mining, smuggling, deadly violence and landslides, and environmental destructive practices have continued unabated.

“Myanmar’s NLD-led civilian government has squandered a crucial opportunity to genuinely reform the jade sector and prevent the country’s military-linked elite, cronies, hidden Chinese business interests and United Wa State Army-linked companies from pilfering the country’s precious resource wealth to the detriment of its people and environment,” said Paul Donowitz, Campaign Leader for Myanmar at Global Witness. A 2015 report by Global Witness, Jade: Myanmar’s Big State Secret, revealed how the multi-billion dollar jade sector is controlled by a hidden network of companies linked to the military, ethnic armed groups, drug dealers, cronies and shadowy Chinese business interests.

“The new law was developed totally separately from a gemstone policy currently in its final stages and ignores the recommendations of an environmental management plan commissioned by the Ministry for Natural Resources and Environmental Conservation (MONREC),” Donowitz added. “Once the policy is adopted, the government should ensure the law’s coherence.” In a related and worrying development, recent insider information from sources close to the drafting process indicates that the draft gemstone policy is being watered down due to industry pressure to remove key issues like beneficial ownership, which is critical to reforming the opaque sector.

One of the key issues that the 2018 gemstone law should have addressed is licensing criteria. Without strong criteria companies with histories of illegal activities and irresponsible mining practices will be able to obtain new licenses. Furthermore, the law does not address serious conflicts of interest within the military-dominated Myanmar Gems Enterprise, which both regulates the gemstone industry and controls lucrative commercial stakes through joint venture agreements with companies. The law also does not tackle corruption risks in the valuation process.  

Moreover, the law contradicts or fails to incorporate many of the transparency provisions in the early drafts of a gemstone policy being developed as part of a multi-stakeholder initiative over the past year. For example, the draft gemstone policy requires mining permit holders to disclose their company’s beneficial owners, while the new law is silent on this crucial issue. Gemstone companies will be required to disclose their beneficial ownership by 2020 to comply with Myanmar’s obligations under the Extractive Industry Transparency Initiative (EITI), so it makes little sense to not include this provision in the law.

“The drafters of the law appear to have succumbed to pressure from big business to open up jade permitting again as quickly as possible,” Donowitz added. “While there is no doubt that the jade sector has significant impacts on jobs and the economy, a bad law will do little to deal with the underlying problems of corruption and unsustainable practices and the industry will continue to benefit a corrupt set of bad actors at the expense of the population.”

The government should maintain the current permitting suspension until the new gemstone policy is adopted, push back against industry attempts to water down the draft policy, and once the policy is adopted, only then should the government amend the gemstone law to align with the policy and recommendations from the environmental management plan. Once amended, new rules and directives should be issued and only then should the government consider lifting the suspension.