Myanmar’s Jade-Rich Hpakant Caught in a ‘Winner’s Curse’

By Joe Kumbun 13 July 2020

Natural resources are bestowed by the Earth and seem a blessing for human beings. However, an abundance of natural resources is not necessarily a blessing if the country cannot manage its endowments properly. In fact, they can be a curse rather than a blessing. The term “resource curse” was coined by Richard M. Auty, who investigated the puzzling phenomenon of why resource-rich countries tend to be poor.

Myanmar suffers from the resource curse. It is home to substantial natural resources ranging from significant quantities of minerals—for example, coal, jade, rubies, silver, etc.—to timber including teak and more.

However, these resources have been shackled as the private businesses of elites, and mismanaged by successive Myanmar governments. Consequently, the manufacturing sector, which can support the service sectors, tends to shrink. Myanmar’s natural resources become a major tradeable product, but manufacturing shrinks and labor and capital that could be used in the manufacturing sector are diverted to resource extraction.

In particular, jade-rich Hpakant, Kachin State, seems afflicted by what Murshed S. Mansoob coined the “winner’s curse”. It refers to the fact that a country with a great endowment of natural resources may be blessed for the present, but will eventually be harmed by it. The jade extraction companies have generated enormous profits, which often end up being spent on imported luxury goods or in foreign bank accounts. Many Chinese businessmen, high officials from both the Myanmar military (or Tatmadaw) and ethnic armed organizations and their business cronies have earned billions of dollars and become what the Chinese call “laoban”, or bosses, from Hpakant’s massive jade extraction.

However, the profits they gain are not plowed back into the overall prosperity of local people and the “freelance miners”, or scavengers, who rely solely on Hpakant for the survival of their families. These people are seeing their livelihoods disappear due to the intensifying scramble for the area’s most prized asset. Besides, these scavengers always face human rights abuses and many have been shot by security forces working for mining companies.

Reform urgently needed

Freelance miners are frequently killed by the collapse of mounds of improperly dumped waste soil. The recent tragic mudslide on July 2 in Wei-kha, Hpakant, highlights the failure of the government’s management.

After the mudslide, which killed more than 100 people and left many injured, President U Win Myint immediately formed an Investigation Body on July 3 with six members. The Investigation Body is led by U Ohn Win (Union minister for natural resources and environmental conservation) and its other members are Lieutenant General Soe Htut (minister of home affairs), Dr. Win Myat Aye (minister for social welfare, relief and resettlement), Dr. Hkyet Aung (chief minister of Kachin State), U Min Thu (director of the Myanmar Gems and Jewellery Entrepreneurs Association) and U Tun Zaw (secretary of the Office of the Kachin State government).

On July 5, the panel visited the site of the incident in Hpakant and met with local people, journalists, and freelance miners to conduct investigations. But when meeting with these people, the Investigation Body’s chair, U Ohn Win, said, “These people [the victims] died because of their greed.” This vituperative comment exacerbated the anger over State Counselor Aung San Suu Kyi’s comment, which aroused the wrath of nearly every freelance miner and all people across Kachin State and beyond: “There were many illegal miners among the dead people. Being an illegal miner shows there are some difficulties to some extent in our country to get a job legally.”

At the meeting, Lt-Gen Soe Htut also revealed that security forces would be reinforced in Hpakant to prevent freelance mining. Consequently, on July 8, Kachin State Police Chief Colonel Nyan Myint Kyaw immediately upgraded the Seik-mu police unit to a Police Office and vowed to deploy more police forces.

The state government has received about 579,900,000 kyats (about US$423,900) in donations from the Kachin State government, the Tatmadaw, mining companies and individual donors. Some of the money appears to have been delivered by the Investigation Body to the victims’ families.

Indeed, such “ad hoc” donations from the Tatmadaw, the state government and exploitative mining companies are not what the public, including freelance miners, want. Such “velvet glove” sympathy will not help improve the standard of living of local people.

Nor is the Ministry of Home Affairs’ decision to deploy more security forces to mining sites any solution. This could rather lead to what Professor Michael L. Ross at the University of California at Los Angeles formulated as the “repression effect”. By “repression effect” he means that the revenue from resource extraction is spent by the authorities on internal security and blocking the people’s demands. Such demands may include reforms of Myanmar’s gem law and greater transparency, among other things.

Thus, the government should pay attention to three processes—reducing large-scale mining, making payments more transparent, and higher taxes. The NLD government passed the Gemstone Law, which is partly aimed at reducing large-scale production, but it has not been enforced yet. Therefore, the government should immediately suspend large-scale and dangerous mining sites. They should restrict extraction licenses, which could reduce production.

Likewise, the government should disclose information about revenue from jade extraction in Hpakant. Since successive governments have disclosed only partial or scant information about their resource revenue, particularly formal revenue collection, the incumbent government should be transparent not only in disclosing revenue, but also in publishing data on license bidding processes and production volumes.

Last but not least, not only is levying proper taxes on natural resource extraction important to mitigate tax holidays and illegal trade, but higher taxes on the natural resource sector will also reduce the production of resources and increase state revenues. The government should impose higher taxes on the resource sector.

Unless the government introduces vigorous reforms, Hpakant’s “winner’s curse” will continue and local people, freelance miners and scavengers will continue to suffer.

Joe Kumbun is the pseudonym of an analyst based in Kachin State

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