MAC: Mines and Communities

South Asia Update

Published by MAC on 2006-10-13

South Asia Update

13th October 2006

As another report last week revealed defects in the international system to block sales of "conflict diamonds" (this time primarily from Cote d'Ivoire) news emerges from Burma of the increasing trade in "blood-stained" gems - commerce which international NGOs have so far largely ignored.

In this case the tables are perversely turned: it's the unlawful regime which declares the smuggling "illegal" - even though it's made deals with "rebel" groups who also use the trade to launder profits from manufacturing drugs. On the other hand, smallscale miners, desperate to scrape a living, reap at least some benefit from selling their stones into the hands of Thai and Chinese middlemen.

Chinese outfits are playing a central role in gold mining within an ASEAN-designated Heritage site in Kachin State. According to one NGO, these mines - using both mercury and cyanide - are a key factor in destroying fish and wildlife and ruining the quality of Lake Indawgyi. Of course the Burmese military is complicit in this destruction, too - although it's a signatory to the UN Convention on Biological Diversity.

With the recent killings of protestors against Asia Energy's Phulbari project still fresh in Bangladeshi minds, a new report reveals the unacceptable toll of the country's largest coal mine, situated in the same district and constructed by a Chinese-led consortium.

China is also making determined moves to invest in India's iron and steel industry - but only so long as the price is right.


Gemstone Cowboys

By Yeni, The Irrawaddy

11th October 2006

Despite official efforts to raise income from gem fairs, most of Burma's precious stones are being smuggled abroad

Burma's gems sales are officially held several times a year in Rangoon, but traders like Win Aung from the country's famous ruby mining district know that the most lucrative precious stones business is going on every day across the border in Thailand at Mae Sot and Chanthaburi.

Daily from 11 am to 2 pm, the main street of the border town of Mae Sot bustles with traders, brokers and retailers. They huddle in cramped shop fronts, or stroll along the sidewalks touting for custom.

Gems from as far away as Africa exchange hands here, but mostly the stones are from Burma-much to the anger of the junta generals who have tried to monopolize their country's supposedly fifth-biggest export.

Officially, exports of ruby, jade, emerald, topaz, pearl, sapphire, coral and a variety of garnet nets the regime about US $30 million a year. But commodities analysts in Bangkok say the backdoor exports, via Thailand and China in particular, are most likely valued at around $300 million a year.

Win Aung, 50, from the northern town Mogok-noted worldwide for its rubies and sapphires- admits that his secret trade in Mae Sot is perhaps selling his own country short. "We know we are selling our country's heritage illegally," he said, "But I feel the price offered here is fairer than the price inside Burma."

Perhaps in an effort to curb this illegal trade, the authorities have recently begun increasing the frequency of its Rangoon gems sales fairs and raising production demands on miners. The government has held two fairs within the last three months and is planning another during October.

Jade has become the main feature of the fairs. The official media said in August that mining companies might be punished by having their licenses restricted in future if they failed to provide adequate quantities of stones-seen by observers as an attempt to curtail gems finding their way out of the country illegally.

Precious stones are mined in the Mogok area, where Win Aung is based, and around Mongshu in Shan State and Hpakant in Kachin State.

Officially, all mined precious stones have to be declared and many mines are run by companies controlled by the army, such as the Union of Myanmar Economic Holdings Limited and Northern Star Company, others are operated by friends of the military or, increasingly, Chinese companies working via Burmese fronts. The gold mines of Kachin State are dominated by the Chinese, according to the Pan Kachin Development Society, an NGO based in Thailand.

For Win Aung and other residents in Mogok-known as the "gem city in the cloud"-government policies do not favor them. For instance, in addition to various mining permit costs, the regime collects a 20 percent tax on all declared finds. They say that's why they trade illegally across the border in Thailand. "Illegal mining and smuggling is part of the daily business survival of ordinary people like me," Win Aung said.

When the military regime reached peace agreements with several rebel groups in gemstone mining regions, the flow of gems-both legal and illegal-greatly increased, say analysts, notably from Kachin State where rebel groups used to control most of the jade mines.

But peace deals have also allowed drug money to be laundered more easily into precious stones mining. In January this year, US Department of Justice named eight members of the United Wa State Army as laundering heroin trafficking profits into gems-linked businesses, including Hong Pang Gems and Jewelry Ltd. Some sources said former opium warlord Khun Sa also is allegedly involved in ruby mining at Mongshu in Shan State.

As a result of intensive exploration, several new gemstone fields have been found in northern Burma. The Pyinlon and the Namsa deposits at the Nawarat Stone Tract were discovered near the Chinese border with Shan State in 1990, and now produce rubies and sapphires. Since then, more rubies have been discovered near Mongshu in the eastern part of the country and fine quality jadeite also was discovered near Khamti, beside the Chindwin river in northwestern Burma.

Some Rangoon and Thailand-based observers believe many precious stones still reach the official gem auctions. Others disagree. "Almost all of the stones go underground and are smuggled outside the country, especially across the Thai and Chinese borders," a China border-based trader told The Irrawaddy.

The clandestine movement of gems out of Burma takes different forms, ranging from theft at the mines by individual workers during mining or sorting, or later by collusion between mine owners and individual military officers.

But there have been instances when the Burmese generals have taken ruthless action to recover gems.

The Nawata ruby, a 496-carat golf ball-sized uncut ruby, which is now on display in Rangoon's Gems Museum, was originally smuggled into Thailand when it was unearthed in 1990. It found its way to Chiang Mai where a major local dealer rejected an offer to buy it and instead informed the Rangoon authorities.

The story goes that a team of agents was sent to Chiang Mai and seized the stone and its smugglers, who were reportedly murdered. High-ranking Burmese officials who were involved in the smuggling were jailed.

Critics of the Burmese military regime say it has failed to develop what could be a highly beneficial industry for the country. Although Burma is one of the world's leading sources of raw gemstones, it has no refining and polishing capacity.

The pressure to mine more gem stones is leading to the destruction of landscapes and pollution and silting of rivers and lakes, warn environmentalists. "Companies have completely disregarded the environment," said a Rangoon-based editor who is concerned with environmental issues. "There are no restrictions on mining practices which damage the environment."

A report on gold mining practices by the Chiang Mai-based Pan Kachin Development Society quoted one source as estimating that there were about 2,000 dredges operating on the Chindwin river. The report cites some evidence of cyanide being used as a means of leaching gold traces out of the ground. Mercury is also used. These poisons are said to be getting into the human food chain.

Ruby mining in northern Burma has a history going back at least 800 years, and possibly as long ago as the 6th century AD, but its recent international image has become mired in politics and skullduggery.

Sanctuary Under Threat

By Khun Sam, The Irawaddy

11th October 2006

A wildlife heritage site in Kachin State is being plundered for profit, say environmentalists

One of Southeast Asia's biggest and oldest lakes-set in a supposedly protected area of northern Burma-is being ruined, warn environmentalists.

Lake Indawgyi in Kachin State "faces threats from pollution, unsustainable fishing methods, and the hunting of water birds and large mammals," says Asean's Regional Center for Biodiversity Conservation. "Local forests are threatened by clearing for agriculture, timber and by forest fire."

The lake is on Asean's Heritage Sites list, but the Manila-based body, which is supported by the European Union and several environmental groups, says the wildlife sanctuary is being abused and plundered.

The military junta has condoned logging of the forested lakeside hills that are part of the 300-square-mile sanctuary, permitted an expansion of mining for gold, and auctioned off sections of the lake to large companies who fish indiscriminately with impunity.

Hkawn Bu* grew up in Na Mawn, one of 20 villages dotted around the 15-mile-long lake and remembers the big fish that were pulled out of the water when she was a girl. But it is hard to catch fish now, she says. "Big fish are not available. If we want to host a ceremony, we have to order fish from lower Burma," Hkawn Bu told The Irrawaddy.

Indawgyi Lake Wildlife Sanctuary was established by Burma's military-run government in 1999, supposedly to conserve the rich animal, bird and fish life and help promote eco-tourism.

But the authorities parcel out sections of the lake for three-year terms to large fishing companies in return for fees, say local observers.

Environmentalists say the lake was home to 200 species of fish, as well as turtles, while the surrounding woodland sheltered 120 species of birds. The Asean organization says increasingly rare elephants, leopards, golden cats, sunbeam, the goat-like serow, and rhinoceroses, some of which are on endangered lists, were known to wander the hinterland forests.

But various international bodies now believe the plant and wildlife is being irreparably damaged by lack of the very thing the sanctuary status was meant to provide-protection.

Brang Gam,* a community worker and lakeside resident who has been carrying out research on the Indawgyi for years, said some fish that were once popular have become rare, and some migratory birds that relied on the lake are now hardly seen. "By implementing the auction fishing system, fish are caught and sold regardless of their size or the spawning season," he said.

Fishing companies also seek to catch other valuable lake wildlife, including hard and soft-shelled turtles and crocodiles, said Brang Gam. These are illegally traded to China for use in traditional medicine, he said.

Shifting slash-and-burn hill agriculture practiced by some local people over the years has contributed to environmental damage. "Logging has taken place here since I was a child. Now woods near my village are gone," said Hkawn Bu. "They are now cutting down trees far away from here like Mai Nawng and Lung Tung areas [5 to 10 miles away]," she said.

But Brang Gam alleges that the "main felon" is mismanagement by local government authorities who have auctioned off every form of natural resource, allowing a handful of businesspeople to exploit the area for quick profit.

Probably the worst examples of this are the gold mining concessions handed out by the authorities. Kachin State is noted for its gold but environmentalists say an increase in the number of mines close to the lake is causing contamination.

Mercury is a by-product of gold mining and might have leaked into creeks that feed into the lake, but there is also some evidence that cyanide is being used as a means of extracting gold more efficiently from the ground, says the Thailand-based NGO Pan Kachin Development Society.

A report by the society said most of the mining in Kachin State is done by Chinese companies who often bring their own equipment and workers.

"Northern Star and Sea Sun Star are the largest of around ten companies operating in Kachin State," says the report. "They have large concessions in the Indawgyi area, where permits are given for one to three years, allowing a company to mine or sell mining rights to an area of land or stretch of the Indaw creek which flows into the Indawgyi Lake."

Brang Gam said sediment is starting to build up in some parts of the lake.

"Sand is building up and making the lake narrower. If no one reacts to this degeneration of the environment I think the lake won't last long. It will not be useful apart from being able to drive around in a boat."

Hkawn Bu adds: "I feel like our nature is gone and everything seems strange compared to my childhood. I think it is time for someone or a group to work on this issue to protect this."

Burma is a signatory to the UN's Convention on Biological Diversity, supported by more than 150 countries as a commitment to promoting sustainable development.

The UN citation reads: "The Convention recognizes that biological diversity is about more than plants, animals and micro-organisms and their ecosystems-it is about people and our need for food security, medicines, fresh air and water, shelter, and a clean and healthy environment in which to live."

In May last year Burma also ratified the supplementary UN protocol on biosafety, which seeks "the prevention of large-scale loss of biological integrity, focusing both on ecology and human health."

Such terms might not mean much to the lakeside villagers, but they are the very people the convention is intended to protect. "It has been years since I last ate Lapi," lamented Hkawn Bu, referring to an indigenous Indawgyi fish that was once an appetizing staple for the villagers around the lake. The fish has not been seen for several years.

* Not their real names


Barapukuria Coal-fired Project

by Kongkon Karmaker with Sharier Khan, The Daily Star (Bangladesh)

13th October 2006

* Plant pumps out 1,100 tonne groundwater an hr
* Exhausts water level fast, poses ecological disaster in 15 villages

The Barapukuria 250 megawatt coal-fired power project pumps out a staggering 1,100 tonnes of groundwater per hour imposing an unforeseen environmental disaster in 15 villages around the coalmine area. The plant built by a Chinese consortium led by CMC is using at least 1,100 tonnes of water per hour for power generation and then wasting it all away, power plant sources said.

Within a span of about eight months, the underground water-table has apparently depleted by three times, villagers said. As a result, almost all the tube-wells in these 15 villages have become completely dry, creating an acute crisis of drinking water.

Villagers are now being compelled to use polluted and unfiltered water for drinking, cooking, cleaning and other purposes while the authorities are yet to take any remedial action.

Lowering of groundwater level now affects nearly 35,000 acres of land of the 15 villages, and the water level is going down day by day, much to the distress of the farmers, sources at the Department of Agriculture Extension said.

Farmers said at least 30 per cent arable land of these villages remain uncultivated due to water shortage. The affected people of the 15 villages formed a Sangram Committee to protest this excessive underground water usage by the power plant.

The situation is also posing a threat to the existence of fish species, aquatic resources and birds of the area as most of the ponds in the area are drying up, said experts in the Parbatipur Fisheries Department. Many ponds and small canals of the affected area became vulnerable for fish and birds, they added.

It is not clear how the CMC was given the government's environmental clearance for such an operation, and why the authorities till date took no action to force the CMC to change its design or penalise the company for the disaster.

To meet the huge water demand for the plant, the authorities installed 24 deep-tube-well pumps with 35 to 40KW horsepower sinking 350 to 420 feet pipes at West Sherpur village near the Power Plant, according to the project outline.

To produce power, each of the two 125 MW units of the power plant demand 550 tons of water per hour by running eight pumps round-the-clock, plant sources said.

The second unit of the plant also emits black smoke and creates noise pollution in the area.

Locals of Sherpur, Dudipukur, Jaruadanga, Tuniapara, Ramvadrapur, Chakbir, Muzidpur, Bagra, Sultanpur, Hossainpur, Telipara, Pacheempara, Rampura and Yousufpur villages alleged that the water levels fell since the plant went into operation in February this year.

Locals and power plant officials agree that excessive pumping of water is the reason for the depletion of the underground water level in the 15 villages for the last 8 to 10 months.

People of these villages used underground water by sinking hand tubewell pipes to the depth of 60 to 65 feet a year ago. But now, they need to sink pipes to a depth of 150 to 200 feet to reach the underground water table, said the locals.

Nurzahan, a housewife of Yosufpur village, said as the local hand tubewells have gone dry, she has to go two kilometres from her house every day to bring safe water.

Mukti, a trader of Barapukuria, said affected people of the villages informed the plant authorities about the depleting underground water level five months ago, but till date nobody took any initiative to resolve the matter.

"To meet the current crisis, we need to spend between Tk 9,000 and Tk 12,000 to sink extra pipes for one deeper hand tubewell in each of the affected villages," he added.

During a spot visit, a Daily Star correspondent noted that about 98 per cent installed tubewells have become dry in Barapukuria area whereas these tubewells were functioning earlier this year.

There has been very inadequate rainfall in the region for the last six months and so the chances of natural replenishment of the underground and surface water remain very slim, officials of the Department of Agriculture Extension observed.

Most people of the affected villages are now depending on the discharge canal of the plant that drains the used water into the Tilaimari river.

The local people said instead of draining this water into the Tilaimari river, the plant authorities should consider scientifically channelling the water to the villages for irrigation as a compensation.

The plant officials, however, said the water is polluted with chemicals.

"The drain's water is unfit for irrigation purposes, even for consumption by livestock and humans," said an official.

The unplanned use of water is harming nature in many other ways that may not be directly observable, said local Union Parishad Chairman Anwar Hossain.

Many villages complained of increasing cases of diseases in the eyes, teeth, skin and stomach and loss of hair and jaundice.

A power expert who has been involved in several power projects said the use of water is based on plant design. Inefficient and cheap equipment use more water than cost-effective machinery.

"Generally, the contractor is required to conduct a ground water reservoir usage modelling and then design the plant based on the results. The CMC should have obtained permission for ground water extraction by submitting water modelling results. Bangladesh Department of Environment, World Bank, and other relevant water resources authority have guidelines that should not have been violated," said the expert.

"There is also guidelines for water quality discharge. Depending on the effluent discharge, they should have constructed wastewater treatment plant at the site and channelise the waste-water through that plant," he said.

"Another thing to look at is the heat-rate of the plant. If they have supplied cheap boiler, it will use more coal per unit of electricity produced," he pointed out.

A letter was sent to Petrobangla on the underground water situation of the area, Barapukuria Power Plant Project Director Shamsur Rahman told The Daily Star.

When asked what remedial measures the authorities took, he said several letters were written to the CMC that built and designed the plant but it has not taken any steps.

The Department of Environment has given clearance to the power plant, he said.

The CMC officials declined to make any comment to The Daily Star.

The CMC built the 250 MW plant with two 125 MW units, at a record high price of US$ 257 million under a Chinese Supplier's Credit. In contrast, the 450 MW Meghnaghat plant needed $170 million as designing, engineering, installation and procurement costs. The over-priced plant that benefited only the CMC consortium and its local representative Hosaf Group, however, failed to perform as per the contract. The plant started partial operation after months of delay and kept on tripping repeatedly. The second unit of the plant has remained shut for quite sometime due to technical glitches.

The power plant requires 2,500 tonnes of coal every day, produced by the mine that was also developed by the CMC at a staggering price of Tk 1,600 crore.


It's the profit, stupid!

China is hoping to establish a long-term iron ore supply agreement with India, according to a senior official from China Chamber of Commerce of Metals, Minerals & Chemicals Importers and Exporters. .

"China needs iron ore from India and India needs the Chinese market for its iron ore"

In 2005, China imported 68.55 mln tons of iron ore (worth USD 5.2 bln) from India, accounting for 27.8% of the total China-India trade volume. About 83.13% of India's exported iron ores were sold to Chinese steel makers.

The problem - for China - is that India "has no controlling iron ore suppliers, like CVRD in Brazil and BHP in Australia" , so the world's biggest consumer of iron is hoping that India will set up an iron ore exporter association with which China can negotiate long-term contracts.

"It takes time to achieve that goal," the senior offical told Interfax news service. "But India is certainly a card that China can play when it negotiates with Brazil and Australia. Without the Indian card, China has no alternative if Brazil and Australia raises iron ore prices."

Meanwhile the Sinosteel Group, one of China's largest steel product and raw materials traders, says it's also interested in investing mines, infrastructure, and steel mills in India. India's steel output was around 40 mln tons in 2005, which was only 10% of China's output. Sinosteel will also seek out opportunities to build steel mills, either on its own account or with local partners, and also engage in India's engineering and infrastructure sector . However, "these are long-term plans and whether they would work out effectively largely depends on the improvement of India's investment environment."

In other words: India should lower even further the bar on foreign direct investment

[Commentary by Nostromo Research, London. News source: Interfax China, October 13 2006]

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