Myanmar's changing ties with China

Myanmar's old guard keeps grip on US$8b jade trade

Myanmar's military and tycoons make billions by smuggling the precious stones to China, depriving the country of much-needed revenue

PUBLISHED : Monday, 30 September, 2013, 12:00am
UPDATED : Friday, 30 May, 2014, 8:22am

Tin Tun picked all night through teetering heaps of rubble to find the palm-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 million kyat," he said, trekking past the craters and slag heaps of this notorious jademining region in northwest Myanmar. That's about US$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 country where most jade ends up - China.

Almost half of all jade sales are "unofficial" - that is, spirited over the border into China with little or no formal taxation. This represents billions of dollars in lost revenues that could be spent on rebuilding a nation shattered by nearly half a century of military dictatorship.

Official statistics confirm these missing billions. Myanmar produced more than 43 million kilograms of jade in the 2011-2012 fiscal year. Even valued at a conservative US$100 per kilogram, it was worth US$4.3 billion. But official exports of jade that year stood at only US$34 million.

Official Chinese statistics only deepen the mystery. China doesn't publicly report how much jade it imports from Myanmar. But jade is included in official imports of precious stones and metals, which in 2012 were worth US$293 million - a figure still too small to explain where billions of dollars of Myanmar jade has gone.

In a rare visit to the heart of Myanmar's secretive jade-mining industry in Hpakant, Reuters found an anarchic region where soldiers and ethnic rebels clash, and where mainland Chinese traders rub shoulders with heroin-fuelled "handpickers" who are routinely buried alive while scavenging for stones.

After sending researchers to the area this year, the Harvard Ash Centre published a report in July that put sales of Myanmese jade at about US$8 billion in 2011. That's more than double the country's revenue from natural gas and nearly a sixth of its 2011 GDP.

"Practically nothing is going to the government," David Dapice, the report's co-author, said. "What you need is a modern system of public finance in which the government collects some part of the rents from mining this stuff."

Jade is not only high value but easy to transport. "Only the stones they cannot hide go to the emporiums," said Tin Soe, a jade trader in Hpakant, referring to the official auctions held in Myanmar's capital city of Naypyidaw.

The rest is smuggled by truck to China by so-called jockeys through territory belonging to either the Myanmese military or the Kachin Independence Army, both of whom extract tolls. The All China Jade Trade Association, a state-linked industry group based in Beijing, declined repeated requests for an interview.

Hpakant lies in Kachin state, a rugged region sandwiched strategically between China and India. Nowhere on earth does jade exist in such quantity and quality.

The United States banned imports of jade, rubies and other Myanmese gemstones in 2008 in a bid to cut off revenue to the military junta which then ruled the country. But soaring demand from neighbouring China meant the ban had little effect. After Myanmar's reformist government took power, the US scrapped or suspended almost all economic and political sanctions - but not the ban on jade and rubies.

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 [Myanmese] government."

Other players include the Union of Myanmar Economic Holdings, the investment arm of the country's much-feared military.

At the top of the pecking order in Hpakant are cashed-up traders from China, who buy stones displayed on so-called jade tables in Hpakant's tea shops. The tables are run by middlemen called laoban ("boss" in Chinese), who are often ethnic Chinese. They buy jade from and sometimes employ handpickers like Tin Tun.

The boom in Hpakant's population coincided with an exponential rise in opium production in Myanmar, the world's second-largest producer after Afghanistan. Its derivative, heroin, is cheap and widely available in Kachin state, and Hpakant's workforce seems to run on it.

Drug use is so intrinsic to jade mining that "shooting galleries" operate openly in Hpakant, with workers often exchanging lumps of jade for heroin.