Myanmar is transitioning from military rule to democracy — a difficult project considering that the country has never been united. The difficulties of this transition date back to 1947 when the Panglong Agreement was reached, which formalized Myanmar’s independence from Britain. But while the Burmese military argued for a unitary state, ethnic minority groups wanted a choice of whether to remain or secede from the newly established Union of Burma.

Since most of the natural resources and almost a third of the population are in ethnic states it was logical for the military to take this stance. Without these ethnic states Myanmar would have been much smaller and poorer. But the 50 years of conflict that have followed has driven millions of ethnic people into Thailand and other countries, led to the pursuance of poor economic and social policies, and further deepened many ethnic divisions. Ethnic states now want limited autonomy within Myanmar and a share of the revenues from their own raw materials.

In the past two decades another complication has arisen — jade. Jade has been mined for centuries, mainly for the Chinese market. In the early 1990s, production was only a few hundred tonnes per year and mined with hand tools and dynamite. But production grew rapidly as jade prices began to rise in China and the first round of cease-fire agreements brought about a tenuous peace.

Estimates of jade sales are now in billions of dollars per annum and neither the Kachin Independence Army nor the Myanmar military want to surrender their access to such riches. Members of the Wa, a semi-autonomous group supported by China but nominally part of Myanmar, own or control many of the mines. Official taxes and royalties on jade are less than US$500 million a year, which is only 2–3 per cent of sales. They should be much more. The most expensive jade, which is 90 per cent or more of the value but just a few percent of the physical jade, is taken directly to China and isn’t subjected to any legal taxes.

People look for precious stones in the mine dump piled by major mining companies at a jade mine in Pharkant township

Photo Credit:RT/ 達志影像

People look for precious stones in the mine dump piled by major mining companies at a jade mine in Pharkant township in Myanmar's Kachin state January 11, 2010. Being abundantly rich in mineral resources, Myanmar produced over 30 million kilos of jade during 2008-09 (April/March) . REUTERS/Soe Zeya Tun

The Burmese political economist J.S. Furnivall, writing in 1931, may have been right. Furnivall argued that imperialism brought together many different peoples who rubbed shoulders and traded but didn’t have any real social bond. He called this a plural society. He said that unless a more unifying idea could bind them together (like Pancasila in Indonesia) ‘we may find, after a period of anarchy more or less prolonged, our descendants will find themselves a province of China’. His point was not that China was expansionist but that nature abhors a vacuum and anarchy.

So is there a way out? Possibly. If the main actors — the National League for Democracy (NLD) government, the military, armed ethnic groups and major industry actors — could agree on a more realistic jade taxation of roughly 50 per cent of sales and negotiate beforehand a distribution of those revenues, then there could be a basis for a united federal nation in which the ethnic states have a share of their own resources and some meaningful autonomy.

If conflict ceased then there would be more money to invest in roads, electricity, education and health. It would also be easier for the government to negotiate with China if they have a stronger handle on their own domestic issues. Myanmar needs a healthy relationship with China but not a neocolonial one. A healthier relationship should include energy and goods trade between Myanmar and China, negotiating better terms and conditions for hydroelectric investments and having greater control over some restive areas in the Shan state. There might even be some revenue left over from addressing these issues to de-escalate the violence in Rakhine state, which is yet another threat to Myanmar’s democracy and unity.


Photo Credit: AP / 達志影像

Myanmar's State Counselor Aung San Suu Kyi, left, and Chinese President Xi Jinping, right, wait for Myanmar delegates to enter for a meeting at the Diaoyutai State Guesthouse in Beijing, China, Friday, Aug. 19, 2016. Suu Kyi was welcomed by Premier Li Keqiang at a formal ceremony as part of a visit that included talks with President Xi. The trip was her first to China since her party won a historic majority last year. (Rolex Dela Pena/Pool Photo via AP)

The current peace process is not necessarily conducive to a grand bargain. The military believes that it must defeat the ethnic rebels and then, perhaps, negotiate a degree of carefully controlled federalism. But a grand bargain requires real negotiation. Trust is very low between the ethnic groups, the NLD (which defeated ethnic parties in many of the recent national elections) and the military. In order to build this trust, policies of former administrations, such as government land grabs in ethnic states, will have to be reviewed and reversed and provisions for employing ‘retired’ ethnic militias will need to be funded. Larger formal military budgets are also required, even if conflict subsides.

It will not be easy. But the alternatives are worse.

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