Ethnic Issues

Jade Trade Bedevils Burma’s Transparency Aspirations

By Seamus Martov 16 February 2015

While Burma pushes ahead with plans to become a full-fledged member of the Extractive Industries Transparency Initiative (EITI), a global standard promoting openness in the natural resources sector, the country’s lucrative jade trade remains hidden behind a wall of army checkpoints and official government secrecy.

The entrenched opacity has created perfect conditions for the large-scale plunder of billions of dollars generated annually by jade mining in Burma’s northernmost state, a trade that is dominated by a group of well-connected crony companies, their Chinese partners and the Burma Army.

If Burma, which is currently an EITI candidate country, does become a bona fide member of the global pact without making major changes to the way the jade trade is run, it will render the EITI “completely meaningless,” predicts Tsa Ji of the Kachin Development Networking Group (KDNG), an organization that has been monitoring Kachin State’s lucrative natural resources sector, and the jade trade in particular, for more than a decade.

But prospects for a more transparent jade trade do not look bright at present, despite the rhetoric emanating from President Thein Sein’s advisers about turning over a new leaf in the country’s natural resources sector. Hpakant, the jade-rich corner of western Kachin State that is home to the world’s best supply of the highly sought imperial jadeite, is a no-go area for most foreigners and journalists in particular. Officially this is for security reasons—Hpakant has seen some intermittent fighting between Burma Army troops and the armed wing of the Kachin Independence Organization (KIO) since a 17-year ceasefire between the two sides collapsed in June 2011. Clashes that broke out again last month in Hpakant forced more than 1,000 villagers in the area to flee for their safety.

But the Hpakant region, which according to a 2013 Harvard University study is thought to have yielded between US$6 billion to US$9 billion worth of jade in 2011 alone, was off limits to outside scrutiny long before the ceasefire broke down. The Harvard study, which benefited from the “full support and cooperation of the Myanmar government,” found that the central government raised more than $500 million in tax revenue from the total $2.65 billion generated in sales at a Naypyidaw jade emporium in 2011. The half-billion dollar figure cited by the study included $274 million raised in the form of a 40 percent contribution from the various jade joint ventures that the government has entered into, with the remaining $265 million coming from a 10 percent royalty tax on the Naypyidaw emporium sales.

A leaked copy of the 2013 emporium figures obtained by The Irrawaddy indicates that the government received 250 million euros ($280 million) in revenue from the government’s jade mining joint ventures. The document also indicates that the government charged an 11 percent tax on the total 2.4 billion euros in sales made at the 2013 emporium (a slight increase from the 10 percent charged in 2011), netting the government an estimated 262 million euros. The taxes were split three ways, with 3 percent going to the Myanmar Gems Emporium (MGE), 7 percent to the Internal Revenue Department (IRD), and 1 percent to the Emporium Central Committee.

While the Harvard study noted that the level of taxation on jade was significantly lower than natural resource tax levels in other countries and could easily be increased to boost government revenue, the funds raised are still significant. But tax revenues generated by the jade trade go to a central government that spends an inordinate amount of its budget on the military, an institution that remains the most important power broker in not just Hpakant but the rest of Burma.

The poor condition of Kachin State’s schools, hospitals and general infrastructure make clear that the vast sums of money generated by the jade trade is not helping the conflict-wracked state much, if at all. “Our state has a lot of wealth but we are still very poor,” says Tsa Ji, a sentiment shared by many Kachin frustrated by what they see as the mass pillaging of their people’s land.

Indeed, negotiations over resource rights and revenue sharing will likely be some of the most challenging for the government and ethnic rebels when the two sides sit down to map out the structure a federal state, should the peace process actually get this far.

The Rich-Poor Divide

While the overwhelming majority of Burma’s people aren’t benefiting from the billions of dollars generated by the jade trade, a small minority certainly is. Some of the richest, most well-connected people in the country—from top-ranking Burmese generals to the country’s biggest tycoons—are said to be profiting handsomely from jade. Proving who exactly is involved and how much they are making, however, is a daunting task. Many of the mining firms based in Hpakant are known to change their names on a regular basis, according to a Kachin researcher who has traveled extensively in and around the jade mining district.

Documents obtained by The Irrawaddy support the widely held claim that Kyaing International Gems, a firm that for many years had access to what jade industry insiders say were some of the most valuable spots in Hpakant’s jade fields, is affiliated with the family of the now officially retired head of Burma’s former military regime, Snr-Gen Than Shwe. Kyaing International’s registration with government authorities includes an individual with the same name as Than Shwe’s son Kyaing San Shwe, listed as one of the firm’s directors.

Kyaing San Shwe, who for many years was listed on the European Union sanctions list as the owner of a Rangoon donut shop, has kept a low profile since Than Shwe officially stepped down from power in 2011. According to sources in the business community, Kyaing International recently underwent a name change, apparently because the firm’s name too closely resembled that of Than Shwe’s wife Kyaing Kyaing (Kyaing San Shwe’s mother). The Irrawaddy has learned that the entity formerly called Kyaing International Gems was absorbed by another firm reportedly controlled by Kyaing San Shwe, Classic International, at some point during the last year.

The appearance of Kyaing San Shwe’s name on the official registration of a company he appears to control is rather unusual. Many Burmese firms controlled by people affiliated with the previous military regime—both those in jade dealings and other sectors—are known to be held in the names of obscure proxies.

Another firm that was for many years a major player in the jade trade is Wai Aung Gabar Mining. The firm, which is also known to be close to senior figures in the previous military regime, was according to its registration controlled by three directors: Daw Htet Htet Wai, U Lee Kyone Yin and Sai Shan Twee. The similarly named Wai Aung Gabar Gems was also listed with U Lee Kyone Yin and Daw Htet Htet Wai as directors, alongside two other individuals, Daw Kyawt Kyawt San and U Sai Yee.

Despite the large scale of its jade operations, Wai Aung Gabar was relatively unheard of in Burma until August 2012, when a large explosion destroyed the company’s mining compound in Hpakant. At the time of the blast, the compound was reportedly occupied by army soldiers who were dispatched to the area to fight against KIO troops. A large number of troops were killed in the explosion, which is widely believed to have been carried out by the KIO. Whether the relatively unknown individuals listed as directors of Wai Aung Gabar actually own the firm or someone else remains unclear.

The United Wa State Army (UWSA), Burma’s largest ethnic armed group, has extensive jade operations in Hpakant using various front companies including one called Seven Stars (Thauk Pa Kyae in Burmese), which also appears to be known as Bright Shining Star, according to sources in the jade industry. The UWSA’s powerful southern commander Wei Hsueh-Kang and the conglomerate he and his colleagues founded, Hong Pang, are also said to be involved in Hpakant’s jade mines but under a different name since US authorities added Wei’s profitable conglomerate to the US sanctions list. While the UWSA, which stands accused by US authorities of being heavily involved in the drug trade, has been active in the jade business for many years, the organization expanded its presence in Hpakant significantly in 2011 when it purchased several mining concessions from Tay Za’s Htoo Trading, according to industry sources. Tay Za-owned firms continue to be active in Hpakant, although they appear to have largely ceased using the Htoo name in order to avoid unwanted attention.

Various quasi state-owned firms, affiliated with the military and other government departments, are known to be involved in joint venture jade mining projects in Hpakant. According to government figures obtained last year by The Irrawaddy, of the total 7,812 mine sites in the Hpakant area, 301 are operated as part of joint ventures between state-owned firms and private companies.

National Prosperity Co. Ltd. (Amyo Thar Kyee Pwarr Toe Tat Yay Co. Ltd. in Burmese), a mining company chaired by Soe Htun Shein, is on a list of firms that participated in the 2013 government-run annual jade emporium. Several of the firm’s directors are either senior staff employed by the Ministry of Livestock, Fisheries and Rural Development or the relatives of senior ministry staff, according to a company directors list obtained by the Irrawaddy. National Prosperity, which also runs one of the country’s largest gold mines, continues to have a close working relationship with the ministry, industry sources tell the Irrawaddy. While jade and gold mining may seem to most people to be enterprises unrelated to livestock and fishing, it seems to go hand in hand for Ohn Myint, the minister in charge. Ohn Myint, a former major-general, previously served as the Northern Region military commander, a role that made him the highest ranking general in Kachin State and saw him directly involved in the state’s mining sector. The minister, who last year made headlines when he was caught on video threatening to slap a group of villagers for insubordinance, was elected to Parliament representing Hpakant in the 2010 election, defeating land rights activist Bauk Ja after election authorities controversially invalidated 13,255 votes.  He later gave up his seat in order to become a minister.

Another firm involved in the jade trade is Sea Sun Star Jade & Gems Production & Marketing Co., and its similarly named sister firm Sea Sun Star Mining Production & Marketing Co. Ltd. Both are owned by Kachin businessman Hka Mai Tang, an elected parliamentarian in Burma’s Lower House representing Kachin State’s Sumprabum constituency for the ruling Union Solidarity and Development Party (USDP). Sea Sun Star’s placement on the EU sanctions list from 2007 until its lifting in 2012 did not appear to have much if any impact on Hkai Mai Tang’s profitable business dealings, which apart from jade also involve mercury-intensive gold mining operations across Kachin State and in particular in the Hukaung Valley, where local environmentalists contend that Sea Sun Star’s gold mining activities helped contribute to destruction of the area’s unique ecosystem.

Another Kachin businessmen turned USDP politician is Kachin State’s Chief Minister La Jon Ngan Seng, one of the very few chief ministers in the country who doesn’t have a military background. He made his fortune and his political connections in the jade trade through his firm Mega Jade Star Co. Ltd. (later called Mega Jade Star Mining Co. Ltd.). The firm’s registration with central government authorities expired in 2012, one year after La Jon Ngan Seng became chief minister, and appears no longer to be active.

The military-controlled Union of Myanmar Economic Holdings Ltd. (UMEHL), the same entity involved in the deeply unpopular Letpadaung copper mine in Sagaing Division, is also said to be a major player in the jade trade. Both the military and UMEHL itself appear to be completely unwilling to be any more transparent, a stance that flies in the face of the government’s much-touted efforts to join the EITI. As Reuters reported in 2013, their attempts to meet with UMEHL officials for an interview were denied. “You can’t just come in here and meet our superiors. This is a military company. Some matters must be kept secret,” Reuters was told by Maj. Myint Oo, chief of human resources at UMEHL.

Another military-owned firm involved in the jade business is the Myanmar Economic Corporation (MEC). MEC appeared on an internal government list of firms that took part in the 2013 jade emporium in Naypyidaw. The document does not, however, list how much jade MEC, which also owns the Myawaddy Television channel and Innwa Bank, sold at the emporium. It is unlikely that that kind of information would be willingly disclosed by MEC, which according to a German government-funded 2013 report also has operations in Mogok’s lucrative ruby mines. Much like UMEHL, the firm is not known for its openness and according to Human Rights Watch both entities provide the military with “off-budget access to funds.”

Smuggling ‘Green Gold’

According to the 1996 Myanmar Gemstone Law, all jade mined in Kachin State must be officially sold at the Jade Emporium in Naypyidaw. Although vast quantities of jade are sold on the black market in defiance of the law, the law’s selective enforcement has meant that there is very little polishing or cutting and related value-added processes being done in Kachin State—activities that in theory could help boost the local Kachin economy. Much of the jade is instead smuggled from Hpakant, with the complicity of the army and or various armed groups, to China where it is cut down, polished and then sold for very high sums.

In mid-2012, in a dingy hotel room in southern Yunnan province close to the Kachin border, this correspondent was invited to observe some Kachin businessmen as they sold a sizeable chunk of jade to a Chinese buyer.

“We bought this for $10,000 and we’re going to sell it to him for $20,000,” beamed the Kachin jade trader as the Chinese buyer squatted on the floor shining a specialized flashlight on the watermelon-sized jade boulder.

This piece was of medium quality, he explained. The boulder, which had been smuggled past at least seven army checkpoints on the way out of Hpakant before crossing the porous Kachin-China border, was just one of thousands like it destined to be carved up into smaller pieces and sold to China’s growing middle class.

China’s impressive economic growth over the past two decades has sent the price of jade soaring. What Kachin State gets in return for being the primary source of this highly sought-after commodity appears to be more of a curse than anything else. Many of the thousands of laborers toiling away in Hpakant are known to be hooked on heroin and amphetamines. Rampant use of dirty syringes has resulted in Hpakant and Kachin State overall having one of the highest rates of HIV and hepatitis C in the country and the entire region, explains a doctor who was previously stationed in Hpakant. Restrictions on the ability of NGOs to operate in Hpakant and the government’s refusal to do much of anything about the drug problem in the area has resulted in a serious health crisis.

Militias aligned with the government are also known to have profited significantly from the jade trade. A group headed by the KIO’s deposed intelligence chief Col. Lasang Awng Wa (also spelled Lasan Aung Wah) and his followers, who broke away from the KIO after a power struggle, may not be numerically large but is known to be heavily involved in the jade business as well as gold mining in other parts of Kachin State. One of Lasang Awng Wa’s deputies appeared in a recent documentary broadcast on Al-Jazeera on the jade trade. The individual, who went unnamed, told Al-Jazeera’s correspondent: “When we smuggle jade by the truckload, we pay royalties to the army commanders.”

His former organization the KIO, which ran Hpakant exclusively prior to the 1994 ceasefire agreement, has been involved in jade for decades. The extent of the KIO’s involvement in the jade trade at present is far less than what is was prior to the ceasefire, explains a retired Kachin man who worked as a mine manager in Hpakant for the KIO during the late 1980s. “We had no big equipment, the mining was much smaller back then,” he tells The Irrawaddy. What was considered a large mine in Hpakant 20 years ago would now be considered tiny by today’s standards, he says.

Despite not controlling most of Hpakant, the KIO are not completely out of the jade trade. Dau Hka, the head of the KIO’s technical advisory team office in Myitkyina, recently admitted in an interview with The New York Times that jade firms operating in areas under KIO influence give his organization financial payments. “The donations aren’t exactly legal,” he said.

An apt description for much of what takes place in Hpakant these days.