US embassy cable - 02RANGOON1585

UNCLAS SECTION 01 OF 02 RANGOON 001585 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/BCLTV, EB/ESC 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA JEFF NEIL 
CINCPAC FOR FPA 
 
E.O. 12958: N/A 
TAGS: EMIN, ECON, PHUM, BM, Ethnics, Economy, Human Rights 
SUBJECT: KACHIN JADE MINING: THE ROAD TO RICHES AND RUIN 
 
REF: RANGOON 1571 
 
1. (SBU) Summary: Jade mining and smuggling are big business 
in Kachin State.  Concession sales provide revenue for both 
the government and the Kachin ethnic cease-fire groups. 
However, little trickles down to the average citizen.  End 
summary. 
 
Jade Mining Ain't What it Used to Be 
 
2. (SBU) Kachin State has the world's only pure jadeite 
mines.  However, according to Kachin jade miners and various 
community leaders, the jade industry is not what it used to 
be.  In the past, the jade mines (focused on the town of Hpa 
Kant, northwest of Myitkyina) were the employer of last 
resort for local people.  If all else failed, it was always 
possible for an individual to try his luck at jade mining. 
Now, the jade mines have been re-organized by the government 
to cater to larger mining companies that rely more on heavy 
machinery than manpower.  While this has cleaned up the wild 
west image of Hpa Kant, the economic outlet and opportunities 
for local people have also declined significantly. 
 
3. (SBU) Most Kachin mining executives started as small time 
prospectors, making their money as independent miners and 
traders.  Now they have companies that, while capital-poor, 
are able to offer experience and knowledge of the local 
mining conditions.  Engineers and geologists are shunned in 
the Kachin jade fields, while a nose for the rock is rewarded 
handsomely.  The capital, and heavy equipment, necessary for 
today's mining industry comes from three primary sources: (1) 
Chinese investors from the PRC operating at arms length or 
with illegally acquired Burmese ID papers; (2) the Burmese 
military's Union of Myanmar Economic Holdings, Ltd.; or, (3) 
businesses from the Wa, Kokang, or Pa-O cease-fire groups who 
have the cash to buy the heavy equipment, but not the 
expertise to mine effectively. 
 
4. (SBU) On the surface, the SPDC's Ministry of Mines 
operates a rational bidding system.  Periodically, the 
government auctions off surprisingly short 3-year leases on a 
number of plots (of varying size) for prospecting and 
development.  Bidders must put down a 100,000 kyat (about 
$100) deposit for each bid, which is returned if the bid is 
not successful.  The government establishes a minimum bid for 
each plot (usually 1 million kyat ($1,000), but can be up to 
55 million kyat ($55,000) for the best areas).  The bidding 
process is far from transparent, as bidders are not allowed 
to be present when the Ministry of Mines unseals the bids. 
Not surprisingly, those with the best connections usually get 
the best plots.  The Kachin miners say that partnering with 
UMEHL ensures the best results during the bidding process, 
but that the company is an unreliable partner that takes far 
more than its share of the profits. 
 
5. (SBU) In areas of the state that are under the 
semi-autonomous control of the ethnic Kachin cease-fire 
groups, the process is a bit different.  For plots not 
specifically put up for bid by the SPDC, Kachin Independence 
Organization (KIO) business representatives told us that they 
are free to negotiate directly with private firms.  Non-KIO 
Kachin jade miners and businessmen told us that dealing with 
the KIO is often easier than negotiating with the SPDC 
because the smaller bureaucracy means fewer bribes. 
 
Taking the Backdoor 
 
6. (SBU) There are two ways to get high-quality jade stones 
onto the market.  The first, and more popular, route is to 
hire couriers to illegally bring stones over the border 
directly, or via Mandalay, to buyers in China or Thailand. 
This bypasses the government's ostensibly rigid controls on 
the sale of gems, and also the government's taxation system. 
The second, legal, route is to pay an up front 20 percent tax 
to the Ministry of Mines, bring the stones to Rangoon for 
sale at the semi-annual gem emporium, and then pay taxes on 
the profits (as well as various bribes along the way). 
According to the miners, the only benefit of the second 
route, besides its legality, is that foreign exchange profits 
from these sales are "white" and thus can be used for 
importing, etc. 
 
7. (SBU) Comment:  The restructuring of the jade mining 
industry has brought about some positive short term 
reductions in drugs and prostitution in mining towns. 
However, these short term localized benefits are overshadowed 
by increasingly serious economic and social ills across the 
state.  Though NGOs can and do make a difference, until the 
government and KIO focus on turning mining profits into 
economic development, and creating economic alternatives for 
local people, the humanitarian problems in Kachin State will 
continue to expand.  End comment. 
Martinez