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Home , Bhamo, Hpakant, Kachin State, Myitkyina

MYANMAR

Myanmar’s old guard runs a empire Intensively mined jade is one of Myanmar’s most lucrative industries. The military, its crony tycoons and , where most of it ends up, benefit the most.

BY ANDREW R.C. MARSHALL AND MIN ZAYAR OO

SPECIAL REPORT 1 MYANMAR JADE BENEFITS CHINA

HPAKANT, MYANMAR, SEPT 29, 2013

in Tun picked all night through tee- tering heaps of rubble to find the Tpalm-sized lump of jade he now holds in his hand. He hopes it will make him a fortune. It’s happened before. “Last year I found a stone worth 50 mil- lion kyat,” he said, trekking past the craters and slag heaps of this notorious jade-min- ing region in northwest Myanmar. That’s about $50,000 – and it was more than enough money for Tin Tun, 38, to buy land and build a house in his home village. But rare finds by small-time prospectors like Tin Tun pale next to the staggering wealth extracted on an industrial scale by Myanmar’s military, the tycoons it helped enrich, and companies linked to the coun- try where most jade ends up: China. CASHING IN: Tin Tun, a 38-year-old prospector, sells the jade he found after searching all night Almost half of all jade sales are “unof- through mining rubble. REUTERS/MINZAYAR ficial” - that is, spirited over the border into China with little or no formal taxation. This represents billions of dollars in lost Practically nothing is going and unity may depend upon claiming more revenues that could be spent on rebuilding to the government. revenue from raw materials. a nation shattered by nearly half a century There are few reliable estimates on total of military dictatorship. David Dapice jade sales that include unofficial exports. Official statistics confirm these missing Co-author of Harvard University’s Ash Center The Harvard Ash Center, which advises billions. Myanmar produced more than 43 report on Mynamar Myanmar’s quasi-civilian government, has million kg of jade in fiscal year 2011/12 possibly the best numbers available. (April/March). Even valued at a conserva- After sending researchers to the area tive $100 per kg, it was worth $4.3 billion. or groups. In a rare visit to the heart of this year, the Harvard Ash Center pub- But official exports of jade that year stood Myanmar’s secretive jade-mining industry lished a report in July that put sales of at only $34 million. in , Reuters found an anarchic re- Burmese jade at about $8 billion in 2011. Official Chinese statistics only deepen gion where soldiers and ethnic rebels clash, That’s more than double the country’s rev- the mystery. China doesn’t publicly report and where mainland Chinese traders rub enue from natural gas and nearly a sixth of how much jade it imports from Myanmar. shoulders with heroin-fueled “handpickers” its 2011 GDP. But jade is included in official imports of who are routinely buried alive while scav- “Practically nothing is going to the gov- precious stones and metals, which in 2012 enging for stones. ernment,” David Dapice, the report’s co- were worth $293 million - a figure still too Myint Aung, Myanmar’s Minister of author, told Reuters. “What you need is a small to explain where billions of dollars of Mines, did not reply to written questions modern system of public finance in which Myanmar jade has gone. from Reuters about the jade industry’s the government collects some part of the Such squandered wealth symbolizes a missing millions and social costs. rents from mining this stuff.” wider challenge in Myanmar, an impov- Since a reformist government took office HIDING STONES erished country whose natural resources in March 2011, Myanmar has pinned its - including oil, timber and precious met- economic hopes on the resumption of for- Chinese have prized jade for its beauty and als - have long fueled armed conflicts eign aid and investment. Some economists symbolism for millennia. Many believe while enriching only powerful individuals argue, however, that Myanmar’s prosperity wearing jade jewelry brings good fortune,

SPECIAL REPORT 2 MYANMAR JADE BENEFITS CHINA

prosperity and longevity. It is also viewed as an investment, a major factor driving China’s appetite for Burmese jade. “Gold is valuable, but jade is priceless,” runs an old Chinese saying. Jade is not only high value but easy to transport. “Only the stones they cannot hide go to the emporiums,” said Tin Soe, 53, a jade trader in Hpakant, referring to the official auctions held in Myanmar’s capital of Naypyitaw. The rest is smuggled by truck to China by so-called “jockeys” through territory be- longing to either the Burmese military or the (KIA), both of whom extract tolls. The All China Jade Trade Association, a state-linked in- dustry group based in Beijing, declined re- GEM SHOW: Washing off chunks of jade for sale at the jade emporium in Myanmar’s capital of peated requests for an interview. Naypyitaw. REUTERS/SOE ZEYA TUN Hpakant lies in , a rugged region sandwiched strategically between China and . Nowhere on Earth does in 2008 in a bid to cut off revenue to the jade exist in such quantity and quality. military junta which then ruled Myanmar, “Open the ground, let the country abound,” billion also known as Burma. But soaring demand reads the sign outside the Hpakant offices $2.6 from neighboring China meant the ban of the Ministry of Mines. Total jade sales at the last had little effect. After Myanmar’s reformist In fact, few places better symbolize how official auction of the precious government took power, the United States little Myanmar benefits from its fabulous stone in June scrapped or suspended almost all economic natural wealth. The road to Hpakant has and political sanctions - but not the ban pot-holes bigger than the four-wheel-drive Source: Government of Myanmar on jade and rubies. It was renewed by the cars that negotiate it. During the rainy sea- White House on Aug. 7 in a sign that son, it can take nine hours to reach from Myanmar’s anarchic jade industry remains , the Kachin state capital 110 km and HIV infection rates in Myanmar. a throwback to an era of dictatorship. The (68 miles) away. There are also “obvious” links between U.S. Department of the Treasury included Non-Burmese are rarely granted official jade and conflict in Kachin State, said the industry in activities that “contribute to access to Hpakant, but taxi-drivers routine- analyst Richard Horsey, a former United human rights abuses or undermine Burma’s ly take Chinese traders there for exorbitant Nations senior official in Myanmar. A 17- democratic reform process.” fees, part of which goes to dispensing bribes year ceasefire between the military and the Foreign companies are not permitted to at police and military checkpoints. The offi- KIA ended when fighting erupted in June extract jade. But mining is capital inten- cial reason for restricting access to Hpakant 2011. It has since displaced at least 100,000 sive, and it is an open secret that most of is security: the Burmese military and the people. the 20 or so largest operations in Hpakant Kachin Independence Army (KIA) have “Such vast revenues - in the hands of are owned by Chinese companies or their long vied for control of the road, which is both sides - have certainly fed into the con- proxies, say gem traders and other indus- said to be flanked with land-mines. But the flict, helped fund insurgency, and will be try insiders in Kachin State. “Of course, restrictions also serve to reduce scrutiny of a hugely complicating factor in building a some (profit) goes to the government,” said the industry’s biggest players and its hor- sustainable peace economy,” Horsey said. Yup Zaw Hkawng, chairman of Jadeland rific social costs: the mass deaths of workers The United States banned imports of Myanmar, the most prominent Kachin and some of the highest heroin addiction jade, rubies and other Burmese gemstones mining company in Hpakant. “But mostly

SPECIAL REPORT 3 MYANMAR JADE BENEFITS CHINA

JADE TRADERS: Traders (left) wait for handpickers to arrive with their stones at a tea shop in Hpakant. Buyers, mostly from China, inspect stones at “jade tables”. REUTERS/MINZAYAR.

it goes into the pockets of Chinese families should also get a greater share of Kachin and the families of the former (Burmese) State’s natural wealth, say analysts and ac- government.” tivists. That includes gold, timber and hy- Other players include the Union dropower, but especially jade. of Myanmar Economic Holdings Ltd 7% The estimated effective tax rate A two-week auction held in the capital (UMEHL), the investment arm of the coun- on total sales of jade in Myanmar Naypyitaw in June sold a record-breaking try’s much-feared military, and Burmese ty- $2.6 billion in jade and gems. But jade tax coons such as Zaw Zaw, chairman of Max Source: Harvard Ash Center report on Myanmar revenue in 2011 amounted to only 20 per- Myanmar, who made their fortunes collabo- cent of the official sales. Add in all the “un- rating with the former junta. official” sales outside of the emporium, and triggered a violent police crackdown. The Harvard calculates an effective tax rate of THE CHINA CONNECTION mine’s two operators - UMEHL and about 7 percent on all Burmese jade. Soldiers guard the big mining companies Myanmar Wanbao, a unit of Chinese weap- It is, on the other hand, highly lucrative and sometimes shoot in the air to scare off ons manufacturer China North Industries for the mining companies, whose estimated small-time prospectors. “We run like cra- Corp - shared most of the profits, leaving cost of production is $400 a ton, compared zy when we see them,” said Tin Tun, the the government with just 4 percent. That with an official sales figure of $126,000 a handpicker. contract was revised in July in an apparent ton, the report said. UMEHL is notoriously tight-lipped attempt to appease public anger. The gov- “Kachin, and by extension Myanmar, about its operations. “Stop bothering us,” ernment now gets 51 percent of the profits, cannot be peaceful and politically stable Major Myint Oo, chief of human resources while Myanmar Wanbao and UMEHL get without some equitable sharing of resource at UMEHL’s head office in downtown 30 and 19 percent respectively. revenues with the local people,” said analyst , told Reuters. “You can’t just come China’s domination of the jade trade Horsey. in here and meet our superiors. This is a could feed into a wider resentment over its THE PECKING ORDER military company. Some matters must be exploitation of Myanmar’s natural wealth. kept secret.” A Chinese-led plan to build a $3.6 mil- At the top of the pecking order in Hpakant This arrangement, whereby Chinese lion dam at the ’s source in are cashed-up traders from China, who buy companies exploit natural resources with Kachin State - and send most of the power stones displayed on so-called “jade tables” military help, is both familiar and deeply it generated to Province - was sus- in Hpakant tea-shops. The tables are run controversial in Myanmar. pended in 2011 by President Thein Sein by middleman called laoban (“boss” in Last year, protests outside the Letpadaung amid popular outrage. Chinese), who are often ethnic Chinese. copper mine in northwest Myanmar The national and local governments Text continues on page 6

SPECIAL REPORT 4 MYANMAR JADE BENEFITS CHINA

HANDPICKERS: Small-time prospectors (above) search for jade in the rubble dumped by mining companies in . Handpickers and traders smoke opium , shoot heroin and take “yaba” or methamphetamines at a home in Hpakant. Kyaw Myo Aung, 17, rests in his tent at a jade mine. Handpickers sleep during the day after working through the night. REUTERS/MINZAYAR

SPECIAL REPORT 5 MYANMAR JADE BENEFITS CHINA

They buy jade from, and sometimes employ, handpickers like Tin Tun. Myanmar’s jade industry The handpickers are at the bottom of the Jade production Mining capital heap - literally. They swarm in their hun- dreds across mountains of rubble dumped Production O‹icial sales by the mining companies. It is peril- 50 $2.5 100 miles ous work, especially when banks and slag mln kg bln KACHIN 100 km heaps are destabilized by monsoon rain. Hpakant Landslides routinely swallow 10 or 20 men 40 2.0 Myitkyina at a time, said Too Aung, 30, a handpicker INDIA CHINA from the Kachin town of . “Sometimes we can’t even dig out their 30 1.5 bodies,” he said. “We don’t know where to look.” MYANMAR In 2002, at least a thousand people were 20 1.0 killed when flood waters inundated a mine, Jadeland Myanmar chairman Yup Zaw Hkawng told Reuters. Deaths are common 10 0.5 Bay of but routinely concealed by companies eager Bengal to avoid suspending operations, he said. Yangon The boom in Hpakant’s population co- 0 0 incided with an exponential rise in opium 2008- ‘09- ‘10- ‘11- ‘12- THAILAND production in Myanmar, the world’s sec- ’09 ’10 ’11 ’12 ’13 ond-largest producer after Afghanistan. Sources: Reuters; Central Statistical Organisation Its derivative, heroin, is cheap and widely available in Kachin State, and Hpakant’s workforce seems to run on it. About half the handpickers use heroin, Sometimes we can’t even by KIA insurgents who for a modest fee while others rely on opium or alcohol, said Tin dig out their bodies. We don’t granted access to small prospectors. Four Soe, 53, a jade trader and a local leader of the know where to look. people with iron picks could live off the jade opposition National League for Democracy harvested from a small plot of land, said party. “It’s very rare to find someone who Too Aung Yitnang Ze Lum of the Myanmar Gems doesn’t do any of these,” he said. Describing the frequent landslides and Jewellery Entrepreneurs Association Official figures on heroin use in Hpakant on the slagheaps of jade mine operations (MGJEA) in Myitkyina. are hard to get. The few foreign aid workers A 1994 ceasefire brought most of operating in the area, mostly working with Hpakant back under government control, drug users, declined comment for fear of then injecting it. His habit now devours his and large-scale extraction began, with hun- upsetting relations with the Myanmar gov- earnings as a handpicker. “When I’m on dreds of backhoes, earthmovers and trucks ernment. But health workers say privately (heroin), I feel happier and more energetic. working around the clock. “Now even a about 40 percent of injecting drug users in I work better,” he said. The shooting gal- mountain lasts only three months,” said Hpakant are HIV positive - twice the na- lery he frequents accommodates hundreds Yitnang Ze Lum. tional average. of users. “The place is so busy it’s like a fes- Many Kachin businessmen, unable to Drug use is so intrinsic to jade mining tival,” he said. Soe Moe said he didn’t fear compete in terms of capital or technology, that “shooting galleries” operate openly in arrest, because the gallery owners paid off were shut out of the industry. Non-Kachin Hpakant, with workers often exchanging the police. workers poured in from across Myanmar, lumps of jade for hits of heroin. looking for jobs and hoping to strike it rich. MOVING MOUNTAINS Soe Moe, 39, came to Hpakant in 1992. The mines were closed in mid-2012 when Three years later, he was sniffing heroin, Twenty years ago, Hpakant was controlled the conflict flared up again. Myanmar’s

SPECIAL REPORT 6 MYANMAR JADE BENEFITS CHINA

JADE TABLES: Buyers crowd a jade market in the northern city of . REUTERS/SOE ZEYA TUN

military shelled suspected KIA positions; bringing fuel in and jade out. Such is the Additional reporting by Ben Blanchard in the rebels retaliated with ambushes along scale and speed of modern extraction, said Beijing; Editing by Bill Tarrant the Hpakant road. Thousands of people were Yitnang Ze Lum, Hpakant’s jade could be displaced. Jade production plunged to just gone within 10 years. 19.08 million kg in the 2012/13 fiscal year “Every Kachin feels passionately that FOR MORE INFORMATION from 43.1 million kg the previous year. But their state’s resources are being taken Andrew R.C. Marshall, Special the government forged a preliminary cease- away,” a leading Myitkyina gem trader told Correspondent, fire with the Kachin rebels in May, and some Reuters on condition of anonymity. “But [email protected] traders predict Hpakant’s mines will re-open we’re powerless to stop them.” Bill Tarrant, Enterprise Editor when the monsoon ends in October. [email protected] When operations are in full swing, the Andrew R.C. Marshall reported from Myitkyina, Michael Williams, Global Enterprise Editor road to Hpakant is clogged with vehicles Min Zayar Oo reported from Hpakant; [email protected]

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SPECIAL REPORT 7