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How Southeast Asia’s biggest drug lord used shell companies to become a jade kingpin

Southeast Asia’s most notorious narcotics trafficker has become one of the most powerful figures in the country’s corrupt, abusive jade business, a new Global Witness report reveals today.

Building on Global Witness’ explosive recent reporting, Lords of Jade shows how Wei Hsueh Kang controls a range of companies licensed to exploit the Hpakant jade mines in conflict-affected Kachin State. Wei is the architect of a methamphetamine epidemic that has ripped through Southeast Asia, and is the subject of sanctions and a US$2 million bounty from the US government. His network is alleged by business insiders and observers to control Yadanar Yaung Chi, a company that was depositing waste at the tailings dump in Hpakant that collapsed on 21 November, killing over a hundred people.

“Wei Hsueh Kang’s grip on parts of the jade trade shows just what a dirty business it is, and the levels of impunity enjoyed by the elites whose operations bring death and misery to the people living near the jade mines,” said Mike Davis, Global Witness’ Asia Director. “Following the template of terrorists, kleptocrats and mafia groups the world over, Wei and his associates have used a web of shell companies to disguise a lucrative jade empire that is wreaking havoc on the local people and environment.”

Companies controlled by Wei Hsueh Kang were originally given jade licences by Myanmar’s military dictatorship following a ceasefire deal with the United Wa State Army (UWSA), the best equipped of the country’s ethnic armed groups, in which Wei has played a leadership role. The US authorities announced indictments and sanctions on Wei’s jade business in 2005 and 2008, but it simply shed one corporate skin and grew another. As one analyst of drugs business told Global Witness, “It’s a shell game, they just changed the shell”.

Wei’s group have used their connections with the much-feared UWSA to deter scrutiny of their activities. Described by one jade business insider as “a gangster group doing black business”, they operate a form of protection racket that exerts control over at least fifty jade mines. Many insiders consider them the most powerful players in Myanmar’s staggeringly lucrative jade sector. In the words of one, “If you don’t use the Wa name, you cannot operate in Hpakant”.

The firms at the core of this group collectively posted sales of over US$100 million in jade across two official gems sales events in 2013 and 2014 but are reported to have made far more through smuggling of jade into China.

While many of Wei Hsueh Kang’s international business connections are believed to be in China and Hong Kong, the front man for the jade companies he controls has a close relationship with American machinery giant Caterpillar Inc., which has invited him on promotional tours of several countries. This reflects both the extent of Wei Hsueh Kang’s evasion of US sanctions and the risks that international investors face in Myanmar. In the case of Caterpillar, these risks have been exacerbated by the company’s apparent failure to do adequate due diligence on the owners of its dealership in Myanmar.

Wei Hsueh Kang’s role is a stark reminder of the toxic state of the jade trade, but Myanmar’s new government does have options to start addressing it. The Extractive Industries Transparency Initiative (EITI), a global anti-corruption scheme which Myanmar joined in 2014, offers one entry point for tackling the opacity of the jade business, including the specific problem of hidden company ownership. It recommends that companies in the oil gas and mining industries be required to disclose their ultimate ‘beneficial’ owners and Global Witness is arguing that this provision be applied to jade and other extractive industries as soon as possible.

Meanwhile, US sanctions on jade and key players in the business such as Wei Hsueh Kang offer a source of leverage which can be used constructively to reinforce and provide incentives for an agenda for cleaning up the sector.

“The new government of Myanmar and its international partners should sit down at the earliest opportunity to agree a road map for reforming the jade business and prising it from the grip of the rogues’ gallery of military hardliners, drug lords and cronies that currently run the show,” said Global Witness analyst Juman Kubba. “Shining a light on the real owners of the companies that are getting licences to extract the country’s most valuable natural resource must be a priority.”

Les opinions exprimées et les arguments avancés dans cet article demeurent l'entière responsabilité de l'auteur-e et ne reflètent pas nécessairement ceux du CETRI.