The List: Burma’s Economic Lifelines

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Teak

Scale: A country of nearly 50 million people, Burma exports a paltry $3.56 billion worth of goods each year. Hardwood sales, mainly of teak, represent an estimated 11 percent of Burmas official foreign exchange earnings. The unofficial total is undoubtedly higher due to rampant smuggling through neighboring China and Thailand.

The problem: Burmese teak is the toughest and most beautiful in the world; it makes great patio furniture. The country boasts around 60 percent of the worlds native teak reserves, and about a quarter of the worlds internationally traded teak originally comes from Burma. But much of it is logged with little concern for sustainable forestry, and fights over lucrative resources such as timber have perpetuated violent conflicts among the countrys many fractious ethnic groups. Burmas rapid deforestation accelerated in the early 1990s after the government brokered a number of peace agreements with armed ethnic opposition groups along the eastern border areas, where a good deal of the smuggling takes placeboth with and without the involvement of the national military.

The trouble with sanctions: They have already backfired. Western sanctions arent the cause of the timber smuggling, but by hindering the development of the legitimate economy (such as the garment industry), experts say, they have merely added fuel to the fire. China, hungry for timber, has shown little appetite for reducing illegal logging in Burma and in fact Chinese companies are a major part of the problem.

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Natural Gas

Scale: Thailand, not China or India, is actually Burmas largest trading partner. Twenty percent of Thailands electricity comes from the Burmese junta, which exports $2.8 billion worth of natural gas each year to fuel Thai power plants. Burma holds an estimated 283.2 billion cubic meters of natural gas, placing the country at 44th in the world in terms of proven reserves.

The problem: In part due to Western sanctions, natural gas exports are by far the regimes largest source of foreign cash. The junta has used its gas bonanza to purchase new weapons from India and China, set up a test nuclear reactor from Russia, and build a bizarre new capital 200 miles north of Rangoon, where there are no pesky protesters.

The trouble with sanctions: The neighbors dont want them. Thailand is building four new natural gas plants to accommodate growing demand for electricity, and is expanding its purchase of hydroelectric energy from Burma as well. And more easy money is on the way for the junta: A joint initiative between Indian and South Korean companies is close to edging out the Chinese for a major gas concession off Burmas western coast that, at about $2 billion a year, would rival the Thais stake in the country.

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Precious Stones

Scale: Burma officially exports about $60 million worth of rubies, sapphires, pearls, and jade each year, mainly to China (jade) and Thailand (rubies). Since the passage of a 1995 law that allows for private gem trading companies, production has increased dramatically. The government owns a majority stake in all mining operations in Burma, which it runs as joint ventures with 10 private companies. As a whole, the mining sector represents about 0.4 percent of Burmas official economy. But the official numbers may understate the real size of the gem trade by a factor of 10, experts say.

The problem: Burmas rubies, and the famous pigeons blood rubies from the northern Mogok valley in particular, are prized for their clarity and beauty. In 2006, an 8.62-carat ruby from Burma sold for a record 3.7 million dollars at a Christie’s auction. Over 90 percent of the worlds rubies come from the country, and the military regime turns a small profit on the export of gems and jade. Human rights groups say that many of Burmas ruby mines use forced labor, and the cover of legal gem sales has been used for money laundering of drug profits, according to the U.S. Department of Justice.

The trouble with sanctions: A major loophole in the U.S. sanctions regime that was enacted in 2003 allows companies to import stones mined in Burma but cut or polished in other countries. Given the scale of the existing black market for Burmese gems, tighter sanctions are likely to merely drive more trade underground.

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Illicit Drugs

Scale: Once the worlds largest exporter of rice, Burma holds the dubious honor of being the worlds second-largest supplier of opium after Afghanistan. Sales of opiates equaled 0.7 percent of Burmese GDP in 2005. Sixty percent of Burmas opium production goes through China and about 30 percent is trafficked through Thailand and/or Laos. Most profits from the drug trade are earned outside of Burma by Chinese and Thai criminal organizations.

The problem: The Bush administration lists Burma as a country that has failed demonstrably to adhere to international counter-narcotics agreements. It is true that drug traffickers exert a powerful influence in favor of the relatively tolerant status quo. But the government claims emphatically that it is cracking down on drugs, and has even vowed to make the country opium-free by 2014. Opium poppy cultivation has dropped 83 percent since 1998, an achievement for which the military regime feels it has gotten no credit from the West. Insurgent groups in the east have been responsible for much of the drug cultivation problem, the Burmese government points out. Indeed, more than 90 percent of opium poppy production in Burma takes place in Shan state, part of the Golden Triangle border area with Thailand and China, where insurgent groups have a bloody history of fighting for autonomy from the central government. In 2005, the U.S. Department of Justice indicted eight members of the United Wa State Army, a separatist organization cum drug syndicate that controls a good chunk of Shan state, for trafficking heroin and methamphetamine. As their opium production has declined, the border regions have become major production zones for meth, with the heavy involvement of Thai gangsters. The unhappy result: An estimated 4.3 percent of Thais are addicted to drugs, with more than 90 percent of addicts using methamphetamines. And as the U.N. Office on Drugs and Crime has noted, declining profits from opium have taken a toll on rural incomes, and the central Burmese government has done a poor job in providing alternative livelihoods and development aidthus, meth production has become an alternative to growing poppies.

The trouble with sanctions: In fact, this is one area of the Burmese economy where restrictions on importsspecifically, on sales of precursor materials that go into meth may be having some beneficial effect. Most precursor chemicals are smuggled into Burma via China, which has been cracking down of late, though corrupt border officials make enforcement extremely difficult.