Fri, Oct 04, 2013 - Page 9 News List

Myanmar’s old guard clings to US$8 billion jade empire

The government is losing billions of dollars in ‘unofficial’ jade sales — revenue that could be used to rebuild a nation devastated by dictatorship

by Andrew R.C. Marshall and Min Zayar Oo  /  Reuters, HPAKANT, Myanmar

“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 Max Myanmar chairman Zaw Zaw who made their fortunes collaborating with the former junta.

THE CHINA CONNECTION

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,” Tin Tun said.

UMEHL is notoriously tight-lipped about its operations.

“Stop bothering us,” said Major Myint Oo, chief of human resources at UMEHL’s head office in downtown Yangon. “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 percent. That contract was revised in July in an apparent attempt to appease public anger. The government now gets 51 percent of the profits, while Myanmar Wanbao and UMEHL get 30 and 19 percent 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 US$3.6 million dam at the Irrawaddy River’s source in Kachin — and send most of the power it generated to Yunnan Province — was suspended in 2011 by Burmese President Thein Sein amid popular outrage.

The national and local governments should also get a greater share of Kachin’s natural wealth, analysts and activists say. That includes gold, timber and hydropower, but especially jade.

A two-week auction held in Naypyidaw in June sold a record-breaking US$2.6 billion in jade and gems. However, jade tax revenue in 2011 amounted to only 20 percent of the official sales. Add in all the “unofficial” sales outside of the emporium, and Harvard calculates an effective tax rate of about 7 percent on all Burmese jade.

It is, on the other hand, highly lucrative for the mining companies, whose estimated cost of production is US$400 a tonne, compared with an official sales figure of US$126,000 a tonne, the report said.

“Kachin, and by extension Myanmar, cannot be peaceful and politically stable without some equitable sharing of resource revenues with the local people,” Horsey said.

THE PECKING ORDER

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 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.

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