In Burma, business ventures start with military - San Francisco Chronicle

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(11-13) 04:00 PST
Hpakant, Burma -- Located in dense jungle hills, this jade mining town is a prime example of the nation's business climate.
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The northern town of 20,000 residents is connected to the outside world by a single crumbling road, a bone-crushing 16 hours to the closest transport hub during the rainy season. Ancient hulking trucks putter along in the mud, some stuck for days. Like a cruel joke, red road signs announce: "The Government has arranged for road repair from each company in Hpakant," meaning companies with lucrative government contracts are expected to pay for highway upkeep even though the military regime takes a hefty profit from each venture.

In Burma, residents call this business as usual.

More than 450 private companies and some 100 joint ventures operate in the area, the majority of which are owned by Burmese with Chinese heritage, according to Sai Joseph, 34, a gregarious family man and manager of a midsize jade company.

"There are only a few wealthy people in Burma - those who get in with the political people, the authorities who have power," said Joseph. "This is a good chance to get rich."

All of Burma's big-ticket industries are based around natural resources, including oil, natural gas, timber and mining. In essence, the country is run like a mafia, from the languid tea shops of Rangoon to this remote jungle area of Kachin state, where the mining town of Hpakant is located and provides much of the world's jade.

In 2007, sales of natural gas brought in some $3 billion, while teak and other lumber earned about $480 million. The jade industry earned an estimated $400 million.


"You name it and they (military) have figured out a way to flip it and make money out of it," said a former Western diplomat who asked not to be named. "If a businessman wants to do something - build a hotel, import cards, export lumber or get a government contract - he hooks up with an army officer who can influence the decision. There are some outright cash payoffs, but mostly it works on favors in kind."

Shining a light
Uncovering information about the regime's business deals is notoriously difficult. But in September, Earth Rights International (ERI), a Thailand-based environmental and human rights organization, released a report detailing the investments of 68 Chinese multinationals in 88 hydropower, oil, natural gas and mining projects.

Pieced together from a range of Chinese companies and government Web sites and news sources, the report aimed to raise awareness for the nation's 48 million inhabitants, who are kept in the dark on government's dealings and a global movement to pressure the military into making reforms.

"The Burmese regime has successfully convinced these companies that nothing will compromise its grip on political power," said Matthew Smith, a project coordinator with ERI. "This is a conviction the regime doesn't hesitate to demonstrate, as we've seen through its political imprisonments and violent treatment of dissent."

The report showed that Burma's generals continue to thrive off their relationship with China, evidenced by new air-conditioned supermarkets and shopping malls, packed with Chinese-made goods in major cities like Rangoon and Mandalay - products only a few Burmese can afford. Signs of conspicuous consumption are evident by a small group of multimillionaires whose wealth stands in direct relation to their proximity to junta leader Senior Gen. Than Shwe and other top generals.

Many pro-democracy exiles regard China as the linchpin for meaningful change, which may be hope prevailing over logic. China is the largest supplier of military equipment to Burma and is a crucial veto on the U.N. Security Council to stifle harsher economic sanctions by the international community.

In Hpakant, jade businessman Joseph estimates that there are as many as 3,000 mines set among a series of denuded hills slowly eaten away by heavy machinery. Green plant life bursts forth where it can, but most earth is an excavation site, undulating for miles into the distance.

What was once depicted as a scene out of "Dante's Inferno" - the few outsiders who had visited jade quarries here described thousands of half-naked men, women and children clawing at rocks - is now a largely mechanical process characterized by large yellow Caterpillar and Volvo backhoes and industrial-size dump trucks. A few mines still employ human diggers, and weeks before I visited Hpakant, one mine collapsed killing 20 people.

The jade trade
Just before the start of the Beijing Olympic Games, President Bush signed into law the Burma Jade Act, adding Burmese jade and rubies to a long list of restricted goods. Even though such prominent jewelers as Bulgari and Tiffany & Co. have gone along with the ban, jade sellers in the crowded outdoor markets of Rangoon told me they are doing landmark business thanks to China, India, Thailand, Singapore and Arab gulf states.

Like many business activities, the military junta takes a hefty percentage - 50 percent of profits from private companies and 80 percent from joint ventures - leaving jade miners destitute and diseased (HIV is believed to be rampant among miners, though exact statistics are impossible because international aid groups are not allowed in Hpakant).

But jade mines are a prime example of how the military regime co-opts even its enemies. Burma is home to more than 130 ethnic groups, and some continue to fight for an independent homeland. For years, some of these rebel groups financed their armed struggle through the sale of opium and jade.

Militants to middlemen
Kachin rebels, one of the most formative armed forces and mostly an animistic hill people, once mined jade illegally to buy guns. But after signing a cease-fire with the military regime in 1994, they have become "middlemen for the state's revenue generation, much of it semi-legal and all designed to prop up military rule," said David Matthieson, a researcher for Human Rights Watch.

Engaging in business rather than war with the military junta is tacit acknowledgement that real power is determined by proximity to the ruling generals.

"Without having personal ties with high-ranking personnel in one way or another, no businesses could survive or expand," said Win Kyaw Oo, a former journalist who is now in the private import business.

Change comes, if slowly, to Burma
Despite an economic growth rate of 5.5 percent in 2007, resource-rich Burma remains one of the world's poorest nations. The country ranks 132 out of 177 countries in the United Nations' Human Development Index. It is tied with Somalia for being the world's most corrupt country, according to Transparency International's 2007 rankings.

Burma is also known around the globe for government repression.

The military junta's use of detention and torture has been denounced even by the neutral International Committee of the Red Cross. The nation's most famous champion of democracy, Nobel Peace Prize winner Aung San Suu Kyi, has been under house arrest for most of the past 19 years, and more than 2,500 political prisoners languish in prison, according to Amnesty International. At least 900 have been locked up in the past year, and 14 pro-democracy activists were given harsh prison sentences on Tuesday.

Yet, Burma is also a nation where change is occurring - albeit at a snail's pace.

In recent years, Internet cafes have more than tripled in major cities and are even sprouting in backwater towns carved out of the jungle. In the afternoons, young people gab on G-talk and check their profiles on Orkut, Hi5 and Friendster. Signs posted openly explain how to circumvent government censors through proxy servers and Web sites such as www.yoyahoo.com and www.bypassany.info.

The music of Zayar Thaw, a well-known hip-hop artist who was jailed this year, is an increasingly dominant genre of choice among many young Burmese.

Access to the Internet and to satellite TV is further eroding the regime's monopoly on information, a giant step in a nation where people once solely relied on crackling shortwave radios for a connection to the outside world.

E-mail Daniel Pepper at foreign@sfchronicle.com.

This article appeared on page A - 17 of the San Francisco Chronicle