Gemstone smugglers shine in Vietnam

By Elizabeth Pisani
876 words
26 March 1997
Asia Times
(c) 1997 Chamber World Network International Ltd


Sidle into a jewelry shop in Vietnam with a shifty look on your face and chances are you will not be asked what you want to buy, but rather what you have to sell.

Smugglers have become the heroes of the day in the eyes of many of the country’s jewelers, simply because they are the only people with gemstones to offer.

The legal trade in gems has been sucked under by a bureaucratic morass remarkable even by Vietnam’s Byzantine standards, and most jewelers are obliged to put their faith in people walking in off the street with a fistful of gems whose provenance they are careful not to question.

"Of course we buy from passersby. We have to. Usually it is the only way to get good gemstones," said Doan Thanh Thoai, investment and marketing manager of state-owned Saigon Jewelry Company.

Miners, traders and jewelers have been waiting for the government to follow up on a ruling issued last October that seeks to shake up the industry by creating a giant corporation that will be involved in everything from mining to sales of diamond necklaces. The government has set itself a mid-January deadline to clarify the ruling, which industry sources say is at best vague and at worst downright wrongheaded.

All the clarification in the world would not help the industry unless the government changes its attitude fundamentally, many said.

Ruby deposits were first discovered in Vietnam in 1987, bringing dollar signs to official eyes. High taxes and effective monopoly control of high-value stones were instituted in the hope of bringing those dollars into state coffers. The net effect has been just the opposite.

"When it is a free market there is no incentive to smuggle," said Marc Sauveur, business development manager of Gemrusa-Kothari gem trader’s Ho Chi Minh City office. "But with all the taxes and restrictions here, it is not possible to make a profit legally."

The graveyard of failed joint ventures in the industry bears him out. The most recent failure, Viet-Thai Gems Company, a Thai joint venture that has been mining rubies in Yen Bai province, is reported to have lost its investment licence for failing to pay taxes.

From the start, the company has been dogged by distrust as the venture partners accused each other of skimming off the best stones.

"I have been to all the mines in Vietnam, but they never have anything good to show," Thoai said. "You have to go out the back, to someone’s house." Gemrusa’s Sauveur estimates that Vietnam is losing $1 million a day in stones that find their way out of the country illegally. "The government doesn’t believe it is that much. But Bangkok traders know what they are getting from Vietnam and know what it is worth."

Unlike many commodities, no one doubts the quality of Vietnam’s best rubies. "It is so rare to find top quality. In the gem world people think Burma is a quality, not a country. And in Vietnam we have Burma-quality rubies," said geologist Nguyen Van Ngoc, deputy general director of the ill-fated Viet-Thai Gems.

But gemologists are few and far between in Vietnam’s infant industry and tales of state companies selling off priceless stones cheap or swapping them for worthless synthetics abound. In fact, there are so many synthetics in the local market now that many jewelry makers prefer to import their stones.

Industry experts are united in their praise for the quality of Vietnamese workmanship and, as the cost of skilled labor is higher in neighboring Thailand and other traditional gem-cutting centers, they see a real potential in training up a work force to cut, polish and set gems. The government professes itself keen to encourage such value-added work, but current regulations, such as a 30 percent tax on imports of stones for setting, do not reflect these aspirations.

Gem traders complain that jewelers are unwilling to commit themselves to the market or to pay up front for stones ordered from abroad. "Saigon Jewelry says, ‘you bring us some high quality stones and if we like them we’ll buy them’," said one trader. "They must know that a million dollar stone is not like a vacuum cleaner – you can’t just send it back to the factory if you don’t like it."

With all the headaches, why do foreign traders bother at all? The thrill, some confess privately, is in the hope of rediscovering truly great gems known to have been in circulation in southern Vietnam before communist victory brought an end to the Saigon government.

"Some of those stones would have been stolen, some confiscated. We don’t really know where it is, who has what," one Antwerp-based trader said.

The government is clearly not prepared to show its hand for now. An international gem conference scheduled for May attracted the attention of De Beers, Christie’s, Southeby’s and other heavyweights keen to know what Vietnam has to offer. The Vietnamese authorities canceled it at the last moment, giving no explanation.

Copyright 1996 Asia Times.
(c) 1996 Chamber World Network International Ltd.

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