I often say that official GDP figures and what not are grossly under reported and that outsiders often aren't aware of the informal economy.
Well, this is just jade. Consider the other precious stones, minerals and things like teak etc. And ofcourse, drugs.
The challenge is for the government to force these people to declare their activities and tax their revenues. It won't be easy.
Illicit jade worth $31b a year: report
Illicit jade worth $31b a year: report
Myanmar's illicit jade trade is controlled by networks of military officials and their business allies, according to a new report, which also values the industry at up to US$31 billion last year alone.
Jade miners dig at Hpakant in Kachin State. A new report claims that Myanmar’s illicit jade trade is worth up to US$31 billion each year. (Kaung Htet/The Myanmar Times)
The report, published today by NGO Global Witness, argues that the elites who have the most to lose from an open, fair and peaceful future for the country “also have access to a multi-billion dollar jade ‘slush fund’”.
Global Witness said the value of illegal jade in 2014 equates to almost half of Myanmar’s GDP, which the World Bank says was $64.33 billion. The jade figure is also 46 times national spending on health last fiscal year.
“Myanmar’s jade business may be the biggest natural resource heist in modern history,” said Juman Kubba of Global Witness.
“Since 2011, a rebranded government has told the world it is turning the page on the ruthless military rule, cronyism and human rights abuses of the past. But jade – the country’s most valuable natural resource and a gemstone synonymous with glitz and glamour – reveals a very different reality.”
If this vast wealth was fairly distributed among the residents of Kachin, where the mines are located, it could pull the region out of poverty and drive development of the entire country, she said.
The sector and its players have received very little attention, partly because a web of obscure companies and proxy owners make it difficult to work out who is making money, said Ms Kubba.
However, after extensive research Global Witness claims that “those involved in the jade trade today reads like a who’s who from the darkest days of junta rule in Myanmar”.
The families of heavyweights in the former military regime are among the biggest beneficiaries, as well as at least one Union government minister, a Union Solidarity and Development Party powerbroker and serving parliamentarians.
None of the individuals or their linked companies could be reached for comment at deadline.
Companies including Asia World, Htoo Group and KBZ are among the other players in the jade industry – in some cases through front companies – the report said.
A Htoo Group spokesperson said in an emailed statement said that the company focuses on development of the jade industry and finished products, rather than on extraction and sales in Hpakant.
“While the other companies extracted thousands of tonnes of jade annually from this area, Htoo Group of Companies’ annual production is just about 20 tonnes at the most,” the spokesperson said.
None of the other companies replied to requests for comment by press time.
The Tatmadaw too is “helping itself to a gigantic slice of the pie via its own conglomerates and an elaborate extortion racket run by officers in Kachin State”, Global Witness says.
A Tatmadaw spokesperson did not respond to questions by press time.
A number of Chinese individuals also reportedly play a role – either as backers for local companies, or by taking Myanmar identities – and much financing comes from within China, said the report.
Chinese import data indicates gemstone imports from Myanmar were worth $12.3 billion last year, though Global Witness believes that 50 to 80 percent of jade is smuggled across the border. Myanmar official figures for 2013-14 put the trade at barely $1 billion.
Sources interviewed by Global Witness describe bribery, tax evasion, market manipulation, money laundering and smuggling.
This should sound alarm bells for those hoping to build a peaceful and prosperous future for Myanmar, said the report, this is not just a political issue, but should be a major consideration for international businesses operating in Myanmar.
The report names the Coca-Cola Company, which reportedly spent more than $1 million on due diligence but failed to spot its local partner’s interests in the jade industry.
Caterpillar, too, reportedly has business relations with the front man for a group of jade companies that Global Witness claims is controlled by drug lord Wei Hsueh Kang, a commander in the United Wa State Army who is wanted by US authorities. Spokespeople for both companies told
The Myanmar Times that they have conducted comprehensive due diligence and are committed to transparency.
Local destruction
The negative impact on local communities cannot be overstated, said the report, which cites fatally dangerous conditions around the jade mines, and endemic drugs and prostitution.
“The elites cream off vast profits while local people suffer terrible abuses and see their natural inheritance ripped out from beneath their feet,” it said.
“Those who stand in the way of the guns and machines face land grabs, intimidation and violence.”
The majority of the jade is excavated at Hpakant in Kachin State by migrant workers, with locals “systematically cut out of the business”.
Elites on both sides continue to benefit from the industry since the war in Kachin State reignited in 2011, Global Witness said, creating incentives for military commanders and hardliners to prolong the conflict.
Furthermore, according to the report, extraction in Hpakant has intensified over the past year. “Now jade mountains disappear in just a few days,” one jade businessman is quoted as saying.
Licences only last for three to five years, creating incentives for businesspeople to grab as much of the precious stone as they can, as quickly as possible.
According to Global Witness, while the situation is dire, all is not lost. It argues that resource sharing must be addressed immediately “and built into a comprehensive peace agreement to end the conflict”.
Change is urgently needed, said Ms Kubba. Reformers within the government have already signed Myanmar up to the Extractive Industries Transparency Initiative (EITI) – an international scheme aimed at halting corruption and abuse in the oil, gas and mining sectors.
“EITI offers a credible framework for change, but unless officials take urgent steps to implement its recommendations openly and fully in the jade business, the process risks being a sham,” said Ms Kubba.
Htoo Group is a surprising early champion of transparency, she said. The company – owned by well-known businessperson U Tay Za, has disclosed data on its jade mining interests.
Peace negotiations are also a chance to increase transparency – greater involvement from local people is necessary for a new model of shared ownership, management and revenue distribution, it said.
The jade industry is also an important test of US foreign policy in Myanmar, said Ms Kubba. The US supports EITI and has sanctions on the jade sector “imposed during the Than Shwe dictatorship to deny money and power to abusive members of the military junta”.
However, in many cases, these sanctioned individuals continue to rake in billions of dollars – as do others who are under US sanctions for their roles in the drugs trade.
Global Witness has asked the US along with other international governments to benchmark sanctions against reforms in the jade sector. Priorities should include sharing control and benefits with people in Kachin State, and making businesses accountable to the public, it said.
“The US is uniquely placed to help take the jade out of the hands of the military, cronies and drug lords. It must make this a priority for its partnership with the new government that emerges from November’s elections,” said Ms Kubba.
A US embassy spokesperson said he had read the report, and that remaining sanctions are carefully targeted, including investment with the military, as well as a general prohibition on importing jadeite and rubies mined or extracted from Myanmar into the US, including jewellery containing such gems.
“The US government remains committed to breaking the link between conflict, violence and natural resources. The purpose of maintaining the current sanctions on jadeite and rubies is to encourage the government to make reforms that would address continuing concerns about management of the gem sector, including violations of land rights, corruption and lack of transparency,” he said.
“We will continue to support those promoting reform and taking positive steps to operate in a transparent and accountable manner.”
