Booming Chinese Demand For Jade Fuels Armed Conflict And Entrenched Corruption In Myanmar

From the garden deck of his office, Yup Zau Hkawng looks over one of the greener cities in Asia. Myitkyina is the capital of Myanmar’s Kachin State, its wide boulevards lined with trees. The sleepy town boasts a bustling downtown market painted vivid green, just a few blocks from the modest but charming central library, also green.

But the green that Myitkyina is most famous for is jade. Myanmar produces perhaps as much as 90% of the world’s finest jade, mined mainly near Myitkyina. Jade is more valuable by weight than gold, and what’s mined in Myanmar is worth more than $30 billion a year, according to a new report by London-based Global Witness.

So you’d expect to see even more greenery in Myitkyina–as in greenbacks. “Look around Myitkyina and all Kachin State, and you don’t see much development,” says Yup. “Kachin people have the jade, but others grab all the profits.”

Yup is the founder and chairman of Jadeland, one of Myanmar’s oldest and most prominent jade-mining firms. In the 1990s Jadeland commanded a workforce of 15,000. “I was the biggest,” says Yup, a contention that is backed by many experts on Myanmar’s jade trade.

Then his emerald universe turned upside down. China was always the ultimate destination for jade, widely valued by Chinese but much less by the rest of the world. In the early years after China opened up, jade moved overland on dusty back roads to Thailand. Chinese middlemen typically bought jade in Chiang Mai, transported stones to Hong Kong, then over the border to Guangzhou’s massive jade market and onward across the country.


But the jade trade ramped up tremendously in the 1990s in concert with China’s rising affluence. As prices soared and production followed suit, fighting intensified between the government and Kachin rebels. Myanmar’s military pushed back the Kachin Independence Army, or KIA, to extend its control over much of the lucrative Hpakant jade fields. Mines previously in local hands passed to generals, then to their relatives and government cronies.

Deals with Chinese companies financed modern equipment, and digging scaled up. So, too, did landslides and drug addiction among poor miners–many work, and die, scavenging for slivers of jade in dirt dumped by mining machines. In January at least 20 people were killed in one slide. Bribes are commonly paid to both the military and the KIA to operate in and move jade through contested territory, according to people FORBES ASIA spoke with and evidence outlined in Global Witness’ 128-page report, released today. Land grabs by cronies holding concessions have displaced thousands of people, it contends. Instead of financing greater development, the region’s mining wealth keeps most of the local population living in poverty and fear, the report concludes.

Foreigners are barred from visiting the mining area–my initial effort to reach the mines 20 years ago ended in house arrest the second I stepped off a train in Kachin, a beautiful region of northernmost Myanmar close to both the Indian and Chinese borders. The mines, and most of Kachin, were then off-limits to foreign visitors, but I had come with special permission granted by the ministries of tourism and trains and the police. Yet my valid documents didn’t sway the local warlord. After I endured several rounds of interrogations by underlings, he appeared in a maroon outfit, with a cowboy hat and gun belt, and locked me up with my photographer until we agreed to leave his Dodge City.

Nowadays Myitkyina–which is just 110 kilometers from the mines but some ten hours away because of abysmal roads–is more welcoming. And jade is more out in the open; there’s a new market on the outskirts of town. But it’s far smaller than the sprawling markets in the border towns in China, where collectors can pay millions for prized pieces. Smugglers make regular runs there, carrying tons of Myanmar’s precious jade, paying off the army and rebels at a string of checkpoints. Experts and local journalists familiar with the black market routes describe meticulous routines where trucks loaded with boulders are driven by full-time smugglers, then delivered to the hotels of traders after slipping through the border. Markets in border town Ruili are brazen, sprawling jade emporiums.

The vast majority of the jade is shipped out illegally to China. Whatever doesn’t go directly to China is either sold at official gem sales or the big market in Mandalay, 355 kilometers south of the mines. In Mandalay stones are cut on homemade saws and polished by squadrons of young men, many in their early teens. Swarms of sellers offer fistfuls of glistening pebbles, bracelets and necklaces to rows of stern buyers, all Chinese. Otherwise, the mood seems festive, a complete turnaround from a few years ago, when jade remained in the shadows. I was pushed to a table where a group of chortling men smoked around a table piled with bundles of cash and posed for pictures with a gorgeous green chunk of jade they asserted was worth $500,000.

The action is markedly more subdued at Myitkyina’s new jade and gems market. Piles of amber, and precious polished rubies and sapphire, are sold alongside trinkets of jade and low-value raw stones in a complex run by the Myanmar Gems & Jewellery Entrepreneurs Association, which is headquartered in a huge green building that towers over fields outside of town like a rustic Emerald Palace.

Yitnang Ze Lum, the executive director, talks enthusiastically about training to provide more opportunities for Kachin’s enormous underutilized workforce; the largely impoverished state boasts 1.7 million people. Invariably, though, discussion returns to jade and how locals have been largely cut out. “Jade is definitely the biggest source of wealth, and there’s a big potential for the state. The problem is, even for the local people like in Hpakant there is only small opportunity–maybe to run some small business.”

The jade wealth of Myanmar is plundered in numerous ways, beginning with the granting of concessions, a process that lacks public scrutiny and reeks of corruption. The military controls the mining area and doles out concessions to cronies. The government claims a 20% tax on everything unearthed at the mines and another 10% duty at the official auction, after which stones may be exported. But widespread evidence indicates that this rarely happens, as smuggling out the jade evades these taxes. Global Witness says it’s aware of at least four army companies involved in jade mining. The most important is Union of Myanmar Economic Holdings, which is under U.S. sanctions. The company says it follows the rules laid down by the Ministry of Mines and that its jade mining is not regulated by the military.

All sorts of other tricks also steal the system blind. Many mines do register the stones, but at ridiculously low prices, then sell them to their shell companies, which export and resell the stones at the real value without paying additional taxes. As much as 80% of Myanmar’s jade slips into the shadows in this manner, according to Global Witness. “This is robbery on a national scale,” says Juman Kubba, an analyst with the organization, who was part of the team that spent more than a year compiling the report “Jade: Myanmar’s ‘Big State Secret.’ ” “ Not only is the country losing this revenue, but it’s going to all the worst people, criminals.”

Few Kachin businessmen can hope to compete on their home turf. Yup, 56, is among a handful still in the jade trade, but his workforce has shrunk to 150, with only seven backhoes working eight plots. He estimates his jade production at $1.5 million annually, and he has shifted Jadeland into other areas: agriculture, construction, telecom. He has done well enough to send five of his six children overseas to study.

These days he spends much of his time advocating for Kachin to get more autonomy and a much greater share of the jade bounty–the concessions and jobs that largely flow elsewhere and the tax revenue that mainly goes uncollected. He describes how Kachin people, himself included, have been marginalized from mining and seen their land pillaged. A hometown hero to many, he has also been involved in peace talks to end the decades-long war between the government and the KIA, among the largest of Myanmar’s numerous rebel forces. Like Africa’s blood diamonds, jade fuels the fighting, since both sides profit hugely from its trade. Many call it black jade since it moves illicitly.

Yup grew up dirt-poor in the Hukawng Valley, an area of Kachin best known for its tiger sanctuary and extreme isolation. His father died when he was 5; by the time he was a teen there was no more money for school. Instead, he moved in with relatives in Hpakant, epicenter of the world’s jade mining industry, and started digging his way out of poverty from the ground up and below.

It’s a common story in a place distant in drastic ways from Yangon, Myanmar’s former capital and still the real seat of power. Kachin people are mostly Christian in a country guided by its vast Buddhist majority. Kachin warriors were battling for the state’s independence even before the British left Burma in 1948. Many know of the famed Burma Road’s role in World War II; locals revel in how Kachins fought heroic guerilla battles against the Japanese with British and American special forces; sustaining astonishing causalities, they were among the most decorated soldiers in the war.

Such history makes it easy to understand the intensity of the jade issue, and the jockeying for money and power from the mines, especially as Myanmar holds elections Nov. 8 amid more talk of federalism and state’s rights. Last month the nationwide peace talks with an array of rebel groups fell apart as the Kachin side dropped out, partly due to the continuing issue of control over the state’s natural resources. “There is so much anger,” notes Kubba of Global Witness. “The Kachin people feel robbed.”

Jade is so integral to Myitkyina that you sometimes spot nuggets of jade embedded in rock walls, as at Yup’s house. And you feel the immense civic pride in places such as the Hotel Madira. Pictures in the hallways and even over buffet tables in the dining room aren’t lush landscapes but panoramas of big rigs cutting dirt trails into huge earthen pits. “It’s our culture,” says Yup. “We have been mining since anyone can remember.”

Under the law, all jade production must be tallied with the government and sold through official auctions, held at the new capital of Naypyidaw. But, says one trader in Yangon, “If you go to the auction, it’s like a farce. There’s plenty of jade but hardly anything of big value. All the best pieces go straight to China.” The gap between what is officially registered and what floods the markets is so vast that even Myanmar officials often express outrage–off the record. Official jade exports totaled around $1.3 billion from 2011-14, but a report from Harvard University’s Ash Center pegged actual jade sales at $8 billion in 2011 alone.

That was the only reputable yardstick in the past, but the new report from Global Witness–which monitors corruption, armed conflict and environmental problems in connection with natural resources–offers astonishing numbers and identifies some of the shadowy figures in the industry. The advocacy group estimates that the jade trade was worth as much as $31 billion last year, nearly all untaxed. In comparison, Myanmar’s gross domestic product was just $64.3 billion last year but would’ve been much larger if the illegal jade trade was counted.

So who exactly commands Myanmar’s jade wealth? Unsurprisingly, the report lists senior government officials and ranking current and former members of the military, along with figures such as alleged drug dealer Wei Hsueh-Kang; the U.S. State Department offers a $2 million reward for his apprehension. Also listed is tycoon Tay Za, a crony of the former junta who is under U.S. sanctions. In an interview with FORBES ASIA last year, he complained about the sanctions and made his case for lifting them. Says one longtime analyst in the country: “If you look at who is making money on jade, you simply need to look at the rich list in Myanmar. Then it’s easier to just scratch off the names of those not trading in jade, since practically all of them are.” Adds another: “Jade is this country’s cash cow, a money fountain. Everybody is into jade.”

Yup, who was once on the U.S. sanctions list because he was connected to the industry, says the mines have also become a national money laundry. Anyone with enough connections and enough cash, especially for bribes, can grab a mining concession, and he suggests that big syndicates that include drug lords from the opium trade have shifted their “black money” into mining.

The lawlessness of the industry leads to rampant social problems. As in any gold rush, thousands of Myanmar workers flock to the mines seeking their fortune. Most wind up working as virtual slaves on around-the-clock shifts. Local journalists have filmed enormous tent cities of freelance scavengers who camp out near mining sites. They swarm trucks dumping mountains of rubble, seeking leftover glints of green, but sometimes are buried alive. Heroin use is widespread, say people who have visited Hpakant. Workers pay $5 to $10 for a shot that sustains them through another dangerous day’s dig. Sex is provided by legions of prostitutes offering themselves for a similar sum; HIV rates are horrendous.

The mining isn’t much different than other resource grabs in Myanmar, such as timber, but the sums are far larger, and Yup suggests that the stakes are getting even bigger. With a possible change in the government after the elections, and perhaps more accountability, he notes a frenzy of mining activity. “The Chinese are moving in huge equipment,” he says, showing off pictures of large diggers that look new. “Probably two-thirds of the high-end machines in the world are at the mines. Each machine can cost up to $2 million, and one company has 300 of these units,” he adds. “Long ago what would take us three years to mine, they are now doing in one to one-and-a-half months.”

And Myitkyina keeps missing out on the wealth all around it. Yup has been working on peace talks and regional representation. But he isn’t that hopeful. Jade just shines too green. “If there isn’t a system put in place that offers more for the Kachin people, the fighting will never end,” he promises.

Source: Forbes

NB: The best way to find information on this website is to key in your search terms into the Search Box in the top right corner of this web page. E.g. of search terms would be “property research report”, ”condominium law”, "Dagon City", “MOGE”, “yangon stock exchange”,"MECTEL", "hydropower", etc.

To learn about the business opportunities in Myanmar click here

To evaluate the various segments of the market that you could possibly enter base on your competencies you can do a Custom Market Entry Strategy Research. You can see a sample report at page "Actual Sample of Client Report”. Click here to go to page.

Do you know that IE Singapore is giving up to SGD 20,000 support for Singapore company to venture into Myanmar? To learn more click here