How Myanmar’s Landmark Election Could Influence One of Its Most Lucrative, and Shady, Industries

It's 5am, and the sun has yet to rise over the Masen Kwang outpost in the Kachin mountains of Myanmar, on the border with China. Soldiers from the Kachin People Militia, operating under the umbrella of the Kachin Independence Army, are gathering around a fire. The men warm their hands above the flames as they whisper, giggle, and smoke.

Less than 500 meters away, separated by only a couple of bamboo fences and a heavily mined jungle, lies the nearest outpost of their enemy: the Myanmar Army.

"We're always on alert," says the outpost commander, Lieutenant Kumbau Maw Awng. "We know the Burmese are planning something. They have just rotated their troops and increased the number of soldiers here at the frontline."

This mountainous region is home to one of the world's longest-running civil wars. It began in 1961 with the formation of the Kachin Independence Army or KIA, whose goal was an independent land for the Kachin people — a Christian minority in the otherwise predominantly Buddhist Myanmar. Since the resurgence of fighting in 2011, after a 17-year ceasefire, the conflict has claimed thousands of lives and added about one hundred thousand to Myanmar's already vast number of internally displaced people.

As most of the country went to the polls on Sunday in the first openly contested — although not entirely free — election in 25 years, heavy fighting raged on in the north, with the Myanmar Army using helicopters and heavy artillery to attack the KIA.

The question of how Myanmar's resource-rich ethnic border regions should be governed has always been at the heart of this conflict. Over the last decade, one specific resource has emerged as more important and valuable than any other: jade, Myanmar's single most precious natural resource. And it is central to today's conflict in Kachin state.

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In a recent report, Global Witness detailed the major players as well as the social and environmental effects of the jade business in Myanmar. It's a shady industry, but the London-based NGO's research indicates that jade production in 2014 is likely to have been worth $31 billion. That's about half of Myanmar's annual GDP.

The people profiting from this lucrative gem are part of, or have close ties to, Myanmar's military and government. They are, among others, former dictator Than Shwe; the former leader of the ruling Union Solidarity and Development Party and retired army general Maung Maung Thein; and the Minister for Livestock, Fisheries and Rural Development, also a former army commander in Kachin State, Ohn Myint.

These people's families hold multiple concessions for mining jade. At the 2014 jade emporium, which is the government's official jade sale, their companies generated pre-tax sales of $220 million, according to the report.

The Myanmar Army also has a large stake in the jade business. Between them, the Army's companies reportedly registered official emporium sales of $180 million in 2014.

According to Mike Davis, Asia director for Global Witness and one of the authors of the report, these profits are not reaching the people in Kachin state, which remains poor and underdeveloped.

"We see staggering wealth going to all the wrong people," he says.

But while the local population gets none of the profits, it bears almost all of the costs of the business.

"We have seen an environmental collapse in the mining area around Hpakant in Kachin state," says Davis. "There's an extraordinary number of landslides which are engulfing people, workers and their homes. The landscape is literally being turned upside down. People living there describe it as mountains becoming valleys and valleys becoming mountains."

Earlier this year, one landslide in Hpakant killed between 30 and 60 people. The mining has also caused floods and disrupted rivers and streams in the area. The long-term effects are poorly understood.

"It's difficult to even visit the mining areas, but we desperately need quantitative data and assessments of the environmental impact of jade mining," says Davis. "We can't overlook the human costs or the overall damage to the environment and biodiversity. But the authorities make it difficult for foreigners and local journalists to visit, because they don't want people to see the dystopian landscape that Hpakant has become."

The election may even accelerate mining in the area.

"Based on satellite imagery, there was a substantial increase in jade mining and environmental destruction in Hpakant from 1998 to 2015," says Matthieu Salomon, Myanmar manager at the New York-based Natural Resource Governance Institute. "Plans to adopt a new mining bill at the national level and the impending election encourage expansion, since miners cannot be certain that the next government will not review current licenses or crack down on lax enforcement of contracts."

The industry's bigger stakeholders may also be using their political influence to prolong the armed conflict in Kachin and limit the process of political reform.

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"The people making the biggest profits are the ones who have the most to lose from reform," Davis says. "A new government might change the rules of the game, threatening the current patronage network."

While the largest share of the jade profits is siphoned off by political and military elites and their cronies, the Kachin Independence Army is also active in the jade business. Taxation, transport and trade has made jade the single biggest source of income for the KIA.

"Jade is closely related to the armed conflict," Davis says. "The jade money enables the KIA to continue operating, and puts them in a position where they don't have to accept any peace deal that isn't fair or genuine."

The Myanmar military units based in Kachin state extort miners, usually for around 20 percent of the value, and collect protection money from companies operating in the area. Global Witness has documented how a lot of this money goes to top military commanders and generals in Kachin state, who then have an economic incentive to keep the conflict going.

"If there was peace, these guys would have to go home and would no longer be able to make this money off the jade business," according to Davis. "Same goes for the bigger companies, owned by cronies, politicians and generals. They know they would lose out in an equitable peace deal with a fair settlement of managing the jade findings in Kachin state."

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The conflict has also enabled unsustainable exploitation of other natural resources, notably timber. In September this year the Environmental Investigation Agency called on the Chinese and Myanmar governments to stop the illicit timber trade between the countries, worth hundreds of millions of dollars a year. According to the organization, Chinese businesses are bribing corrupt officials as well as armed groups in Kachin state to acquire logging rights.

"If the [Myanmar] government had a genuine interest in the well-being of its citizens, the revenue from jade would be spent to improve the well-being of the entire nation," said General Gun Maw, the Kachin Independence Army's vice chief of staff.

The KIA would like to see discussions on the management of natural resources and revenue sharing as part of the political dialogue, according to the general.

"A country's sustainable development has a direct relation with how these issues are being addressed and handled," he says.

Back at the Masen Kwang outpost, the Kachin rebels get busy. Some, on guard duty, man their lookout position and stare down the Myanmar Army outposts on neighbouring mountaintops. Others start digging trenches.

"We don't have much heavy weaponry, but we will never give up this place,' says Kumbau Maw Awng, the outpost's commander. "This is our land. The Burmese are attacking us. We have to be ready."

A Baptist pastor, Brang Aung, has come by to hold a sermon for the outpost's soldiers. While half the men keep guard duty, the others gather on a bamboo bench. With heads bowed and rifles between their legs, the soldiers close their eyes and listen to the pastor. He's reading from the Gospel, Luke 12:32.

"Fear not, little flock," the pastor says,"for it is your Father's good pleasure to give you the Kingdom."

Follow Axel Kronholm on Twitter: @axelkronholm