Chaos in Myanmar’s Jadeite Industry

Somewhere in Mandalay in central Myanmar, a crane hoists a two-tonne rock onto an unobtrusive truck. Yawning, the truck driver secures the boulder and covers the open back with canvas. It is 2 am and the driver sets off with his partner, both boosted with an inexhaustible supply of caffeine. The twisting, unlit mountain roads are especially dangerous during the torrents in the rainy season – high pay sends the men on such a dangerous trip

That massive boulder is jadeite. It is a part of the 90 percent-plus of Myanmar’s jadeite that is exported to China, most of it smuggled to avoid the 33 percent Chinese tariff. Legally or illegally the industry is valued by Global Witness at as much as US$31 billion – half of Myanmar’s GDP. But little of it is injected into Myanmar’s domestic economy and most of the profits benefit Chinese merchants. It is a chaotic industry characterized by ethnic conflict, corruption starting at the top of the junta that ruled the country from 1962 to 2010, and the presence of tens of thousands of desperate scavengers.

And, while massive fortunes can be and are made, the industry is currently in economic turmoil. Two recent stock market collapses in China and a nagging economic recession have cut into trading between Chinese connoisseurs, leading to a concomitant recession for excavation in Myanmar and leading to desperation for the poor who scramble for illicit stones. The Hong Kong Jewelry and Jade Trade Association estimates the average price of jadeite products has dropped by over two times, and many smaller companies have gone under.

The trade association says many wealthier businessmen are stocking up on more valuable items at lower prices in hopes of higher profits in the future, but the amount of trade has diminished to the extent that mine owners in Hpakan, the epicenter of the mining district in the rebel Karen state, have not sold any excavated stones for a whole year. Until Myanmar’s economy builds sufficient internal demand for its products, its jadeite industry would not contribute to its domestic economy.

On the Road Again

After two days of non-stop driving save breaks to refuel and relieve themselves, the men meet contacts near the Chinese border, where another crane lifts the rock onto another dusty truck. The two men hop off, sleepless and red-eyed. They greet the border guards and shake hands, with US$100 bills clasped in their palms for each guard.

Shortly after, in a room reeking of cigarette smoke, Chinese and Myanmar businessmen sit around a table on which a portion of the two-tonne jadeite stone rests. At other times, the men look at earrings or other finished jadeite products. A man picks up the section and shines a torch through the opened surface, and the beam of light exits through the opposite side, now with a greenish hue.

“This is a transparent one. And it’s got good color too,” says the Burmese man operating the torch. He owns the rock.

“Ten million?” asks a Chinese man sitting at the table.

“I was thinking 12,” replies the man with the torch.

“Eleven then,” offers the Chinese.

Chinese businessmen usually make their money by reselling these untouched rocks, or cutting raw rocks open and creating bracelets or cabochons, which can in turn form necklaces, earrings, rings, and other accessories. The latter method could yield higher profit despite higher risk, as stones can become worthless once opened. Jadeite stones are usually much heavier than normal rocks, but their value is dependent on their transparency and color distribution, which are very difficult to gauge with their unimpressive, grey surface. Torches are said to be a jadeite businessman’s best friend, as experienced businessmen can derive a jadeite product’s worth merely by shining light through it to test its transparency.

Many Myanmar officials, such as cabinet ministers of the past military government and notably Than Shwe, the head of state of Myanmar from 1992 to 2011, have seized mines, registered them under their relatives’ names, and partnered with powerful excavation corporations to reap financial benefits.

Most of the mines are located in Hpakan in Kachin state, bordering China. However, such mines are mostly controlled by the rebel Kachin Independence Army (KIA), who sell mining rights to businessmen and often retain shares for lucrative profits. For the ones under the Myanmar government’s jurisdiction, businessmen bid for mining rights off the government, allowing opportunities for nepotism through which high-ranking government officials derive profit.

The government has often invaded jadeite-rich areas controlled by the Kachin. As a result, businessmen and civilian workers are often caught in crossfire between the two armies.

Due to the constant warfare, mining is often intermittent, while businessmen have to protect themselves from the Kachin rebels, who continue extorting “protection fees” despite their purchase of mining rights, and from the government, which could label the businessmen “rebel aides” and imprison them.

Jurisdiction over mining areas is also ever-changing, meaning that a jadeite mine purchased from Kachin rebels could be seized by the government should it defeat the rebels. The volatile nature of the industry and the rebels’ relentless fight with the government renders the relationship tense and intricate, with neither side budging.

Any jadeite discovered in government-controlled mines must be sold in auctions held by the government in Naypyidaw, escorted from the mining areas by the Tatmadaw to the capital. However, such auctions are often subject to political relationships between government and Kachin state, where most of the jadeite is found.

The Tatmadaw has taken control of much of the Hpakan area. In response, the Kachin rebels launch guerilla counterattacks, halting excavation for long periods. Thus auctions are often postponed until ceasefire agreements are reached.

For mines controlled by the rebels, businessmen approach them privately. The mines have been a valuable source of income for the rebels, who demand a split in profits. The rebels unsuccessfully sought to negotiate an additional 10 percent tax on top of the current 10 percent tax that goes to the government, preventing a formal ceasefire between the two groups. With no compromise, guerilla warfare is likely to continue.

Free-for-all at mine sites

Thousands of desperate men surround a crater at least two kilometers wide, hundreds of meters deep. Disregarding orders to back off, they stare coolly into the crater at the backhoes digging up chunks of dirt that could contain priceless jadeite stones. The Bagan Police are obligated to protect these mines, usually under demands for bribes.

“Rush! Now!” barks someone.

Screaming, the crowd surges down the steep slopes into the heart of the crater and surrounds the machines, forcing the workers to halt their progress. A man swoops under a backhoe, deftly avoiding a swiveling arm that could break his skull, and tucks a small jadeite stone under his coat.

‘We didn't dare fight back,’ claims an unnamed worker. ‘There were only less than a hundred of us, and thousands of them.’

Because the trade has been known to create billionaires overnight, these thousands of men dig through the dirt feverishly, driven by this dream. Others are homeless, manipulated by businessmen through drugs, treated like animals, splitting their profits if there are any. Some 200,000 of these scavengers drift in the Hpakan mining area. The Kachin Independence Army rebels have been in constant conflict over ownership of the mines, to the point the area was shut down from 2013-2015. People from all over Myanmar swarmed over to dig for rocks that might have been overlooked, ignoring the stray bullets.

Even after the mining area reopened, the scavengers continue to disregard the private ownership of the mines and trespass in large numbers. Previously, they only dug in deep pits that contained unwanted rocks, although quite a number of them were crushed to death by boulders tossed down by backhoes. Presently, the scavengers snatch rocks in areas where the workers are digging, or even bring their own dynamite, directly interfering with existing mining operations.

Neither the policemen nor the Tatmadaw are willing to shoot them out of a fear of international censure. But there isn’t enough manpower to stop them. The scavengers have started negotiating with the wealthy mining companies to build them houses, hospitals, and other infrastructure that would aid their settlement there, and in return they pause their depredations for a day or two. To this day, mines are still susceptible to such ambushes and their owners are powerless to fight back.

Suu Kyi’s Money-Laundering Campaign

The jadeite trade has often been associated with mony laundering by high-ranking officials in the previous government. In response, Suu Kyi has launched an anti-corruption campaign, banning government officials from accepting golf memberships or gifts worth more than €15. Suu Kyi also promised supporters a government “free from corruption” during the Myanmr General Election in September 2015. Thus she is theoretically obliged to target any politicians’ practices of bribery, such as strongman Than Shwe’s family’s reported holdings of US$100 million worth of jadeite.

However, Suu Kyi has promised not to pursue accusations of corruption related to previous military officials, and will only strive to keep her party corruption-free. Moreover, along with te ban on gifts is a clause that provides exception should rejection of such gifts invoke offense, thus leading observers to question Suu Kyi’s promise to fight corruption.

As the Union Solidarity and Development Party, the Tatmadaw’s party, retains 25 percent of parliamentary seats according to the Myanmar constitution, Suu Kyi must remain wary of her relationship with corrupt officials from the previous government to avoid political repercussions.

The NLD government also lacks administrative and governing experience with the majority of its members being former political prisoners, some of whom have been in prison for more than 20 years, such as Bo Bo OO, who was imprisoned for 20 years for supplying medication to former activists who had fled to remote areas after the failed uprising in 1988.

Such parliamentarians lack political prowess, as evidenced in the administration of lectures and tests educating them, ironically, about the Myanmar Constitution. As a result, the current government must cooperate with other parties in the parliament including corrupt ex-officials.

Shockingly, the newly appointed Finance Minister Kyaw Win is revealed to hold fake master’s and doctorate degrees, highlighting the dubiousness of the new government’s efficacy. It is also is the policy makers of Myanmar that have been changed, but not those in the military nor those executing such policies at a local level, casting doubts over the functionality of the new government. Bribery has not yet cropped up among new officials and the industry, but Suu Kyi’s promise for a corruption-free and efficient government remains uncertain.

Aung San Suu Kyi has also raised tariffs of jadeite sold in auctions held in Mandalay from 15 percent to 30 percent in an attempt to lessen the one-sided profits to mine owners and Chinese merchants. Suu Kyi aims to do so by indirectly redistributing wealth through government income and subsequent spending, but such action is likely to discourage excavators from participating in auctions, and thus encourages smuggling activity across borders, cutting into government income.

To prevent foreign exploitation, the government could require a certain proportion of company shares to be reserved for the government or other Myanmar corporations, but not to the level of 30 percent of tariffs for the auctioned jadeite that shocks jadeite merchants away.

The government is exploring the possibility of limiting jadeite excavations due to fatal landslides, but such regulations are unlikely to influence the industry. On Nov. 22 last year, a landslide in Hpakan killed 114 scavengers, who resided in squalid conditions. These excavators, often forced into subsistence living or dreaming of stratospheric wealth, explore abandoned mines, hoping to discover an overlooked gemstone, and suffer from malnutrition and other diseases such as malaria. They split their profits with their employees who provide them daily sustenance.

Kachin representative Hkyet Hting Nan in the Myanmar Upper House voiced concerns regarding the mining companies’ disposal of unwanted dirt and rocks, but received no response. A similar incident on a smaller scale occurred on MY 7, killing 13 scavengers when a 50-meter pile collapsed.

In response, Suu Kyi has promised measures to limit mining operations, some of which cover hundreds of hectares. According to mining executives in Myanmar, Suu Kyi’s government proposes to categorize such operations into three sectors: ‘large,’ ‘medium’ and ‘small,’ which would cover up to 50, 30 and 10 acres and control up to 20 pieces of machinery respectively.

However, this response does not target the main cause of such incidents: the disposal of unwanted materials, and thus will have little effect on the issue. Even if the government aims to limit the rate of mining excavations, such mines are within jurisdiction of the Kachin Independence Army, which the Myanmar government has no authority over, casting concerns over the regulations’ effectiveness. Therefore, before Suu Kyi implements regulations targeting the jadeite industry, she would also have to consider the government’s relationship with rebel groups in Myanmar.

Suu Kyi has emphasized peace-talks between the government and the rebels and proposed wide-ranging talks. However, such civil strife has lasted for over 60 years. However, with the Kachin rebels controlling most of these mines, the Tatmadaw’s venture into Kachin territory has often been fruitless and resulted in civilian casualties. Probably the best solution is to allow Kachin state to continue its control over the mines.

According to a Kachin rebel executive, the Tatmadaw has been ignoring Suu Kyi’s calls for ceasefires to prove to her that she does not have complete control over Myanmar and the Tatmadaw, highlighting tensions, another complexity within the government’s conflict with the rebels.

Nevertheless, any side should strive for peace to protect civilians. The government could still derive income from the jadeite industry through the mines currently under its control, and also from tariffs in jadeite auctions held in Mandalay, where the majority of excavated jadeite, even that discovered in Kachin-controlled mines, is sold.

Taking over more jadeite mines would also increase the possibility for corruption, which arguably overshadows the prospective economic benefits. Promises of autonomy should be followed through by Suu Kyi should there be any hope of thawing relations between the Kachin Independence Army and the new Myanmar government.

Joey Cheng has extensive knowledge of Myanmar's jadeite industry because of family business involvements