Non-Burmese are rarely granted official access to Hpakant, but taxi drivers routinely take Chinese traders there for exorbitant fees, part of which goes to dispensing bribes at police and military checkpoints. The official reason for restricting access to Hpakant is security: The Burmese military and the Kachin Independence Army (KIA) have long vied for control of the road, which is said to be flanked with land mines. But the restrictions also serve to reduce scrutiny of the industry’s biggest players and its horrific social costs: the mass deaths of workers and some of the highest heroin addiction and HIV infection rates in Myanmar.
There are also “obvious” links between jade and conflict in Kachin State, said analyst Richard Horsey, a former United Nations senior official in Myanmar. A 17-year ceasefire between the military and the KIA ended when fighting erupted in June, 2011. It has since displaced at least 100,000 people.
“Such vast revenues – in the hands of both sides – have certainly fed into the conflict, helped fund insurgency, and will be a hugely complicating factor in building a sustainable peace economy,” Horsey said.
The United States banned imports of jade, rubies and other Burmese gemstones in 2008 in a bid to cut off revenue to the military junta that then ruled Myanmar, also known as Burma. But soaring demand from neighbouring China meant the ban had little effect. After Myanmar’s reformist government took power, the United States scrapped or suspended almost all economic and political sanctions – but not the ban on jade and rubies. It was renewed by the White House on Aug. 7 in a sign that Myanmar’s anarchic jade industry remains a throwback to an era of dictatorship. The U.S. Department of the Treasury included the industry in activities that “contribute to human rights abuses or undermine Burma’s democratic reform process.”
Foreign companies are not permitted to extract jade. But mining is capital intensive, and it is an open secret that most of the 20 or so largest operations in Hpakant are owned by Chinese companies or their proxies, say gem traders and other industry insiders in Kachin State. “Of course, some [profit] goes to the government,” said Yup Zaw Hkawng, chairman of Jadeland Myanmar, the most prominent Kachin mining company in Hpakant. “But mostly it goes into the pockets of Chinese families and the families of the former [Burmese] government.”
Other players include the Union of Myanmar Economic Holdings Ltd (UMEHL), the investment arm of the country’s much-feared military, and Burmese tycoons such as Zaw Zaw, chairman of Max Myanmar, who made their fortunes collaborating with the former junta.
Soldiers guard the big mining companies and sometimes shoot in the air to scare off small-time prospectors. “We run like crazy when we see them,” said Tin Tun, the handpicker.
UMEHL is notoriously tight-lipped about its operations. “Stop bothering us,” Major Myint Oo, chief of human resources at UMEHL’s head office in downtown Yangon, told Reuters. “You can’t just come in here and meet our superiors. This is a military company. Some matters must be kept secret.”
This arrangement, whereby Chinese companies exploit natural resources with military help, is both familiar and deeply controversial in Myanmar.
Last year, protests outside the Letpadaung copper mine in northwest Myanmar triggered a violent police crackdown. The mine’s two operators – UMEHL and Myanmar Wanbao, a unit of Chinese weapons manufacturer China North Industries Corp. – shared most of the profits, leaving the government with just 4 per cent. That contract was revised in July in an apparent attempt to appease public anger. The government now gets 51 per cent of the profits, while Myanmar Wanbao and UMEHL get 30 and 19 per cent respectively.
China’s domination of the jade trade could feed into a wider resentment over its exploitation of Myanmar’s natural wealth. A Chinese-led plan to build a $3.6-million dam at the Irrawaddy River’s source in Kachin State – and send most of the power it generated to Yunnan Province – was suspended in 2011 by President Thein Sein amid popular outrage.
The national and local governments should also get a greater share of Kachin State’s natural wealth, say analysts and activists. That includes gold, timber and hydropower, but especially jade.
A two-week auction held in the capital Naypyitaw in June sold a record-breaking $2.6-billion in jade and gems. But jade tax revenue in 2011 amounted to only 20 per cent of the official sales. Add in all the “unofficial” sales outside of the emporium, and Harvard calculates an effective tax rate of about 7 per cent on all Burmese jade.