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U.S. Department of State
Bureau for International Narcotics and law Enforcement affairs
March 1998

Narcotics Control Reports-1997

BURMA
I. Summary

Burma continues to be the world's largest source of illicit opium and heroin. Production declined slightly from 1996 levels. The 1997 crop estimates indicate there were 155,150 hectares under opium poppy cultivation which could yield up to a maximum of 2,365 metric tons of opium gum - enough to produce an estimated 197 metric tons of heroin and satisfy the US heroin market many times over. The Burmese government increased seizures of opium and heroin and destroyed more heroin refineries than in the past, and engaged in greater drug control cooperation with the USG and Thailand. Overall efforts, however, paled in comparison with the narcotics problem and continued to suffer from a lack of resources and political will. There was no discernible effort during the year to stop money laundering, suspected to be carried out on a massive scale. The government systematically encouraged leading drug traffickers to invest in infrastructure and other domestic projects.

The ethnic drug trafficking armies with whom the government has negotiated cease-fires (but not permanent peace accords), such as the United Wa State Army and the Myanmar National Democratic Alliance Army (MNDAA-Kokang Chinese), remain armed and heavily involved in the heroin trade. Through cease-fire agreements, the GOB appears to have given the trafficking armies free hand to continue their trade, although there are reports that the agreements provide for an end to the trade at some future date.

Among the top leaders of those ethnic groups believed by the USG to be involved in the heroin and/or amphetamine trade are: Sai Lin (Lin Mingxian) of the Eastern Shan State Army (ESSA); Yang Maoliang, Peng Jiasheng and Liu Goushi of the MNDAA; Pao Yuqiang, Li Zuru and Wei Xuekang of the United Wa State Army; Mahtu Naw of the Kachin Defense Army (KDA); Mong Sa La of the Monkoe Defense Army (MDA); and Yawd Serk of the Shan United Revolutionary Army (SURA), which was formerly allied with drug lord Chang Qifu's (Khun Sa's) Mong Tai Army. Chang Qifu disbanded his army in January 1996 in return for generous terms of surrender, which allow him to avoid criminal procedures. Reporting continues to suggest that Chang remains involved, at least indirectly, in the narcotics trade through his subordinates.

A number of ethnic groups announced opium free areas in 1997, but they did not offer details on how these objectives would be met. In the past, similar pledges have been unfulfilled. Toward the end of the year, there were reports of crop eradication in some of these areas.

There is reason to believe that money laundering in Burma and the return of narcotics profits laundered elsewhere is a significant factor in the overall Burmese economy, though the extent is impossible to measure accurately. Political and economic constraints on legal capital inflows magnify the importance of narcotics-derived funds in the economy. An underdeveloped banking system and lack of enforcement against money laundering have created a business and investment environment conducive to the use of drug-related proceeds in legitimate commerce.

Drug abuse--in particular intravenous drug use--is on the rise in Burma and with it an alarming spread of the HIV/AIDS virus, especially in the ethnic minority areas that are the source of the drugs.

II. Status of Country

Burma provides over half of the world's supply of illicit opium and has done so for years. According to USG estimates, Burmese opium production has remained at high and stable levels for the past eight years, since doubling in 1989, the year after the State Law and Order Restoration Council (SLORC), now known as the State Peace and Development Council (SPDC) took power. This increase may be correlated with political accommodations the regime reached with several drug trafficking insurgent groups, and the regime's abandonment of effective eradication efforts. (As noted above, at the end of the year there were reports of renewed interest in eradication.) The US also ended its narcotics assistance in 1988, in response to massive human rights abuses and further disintegration of the rule of law.

Burma currently accounts for approximately 90 percent of the total production of Southeast Asian opium. Most of this supply of illicit opiates is produced in ethnic minority areas of Burma's Shan State. Over the past year, the GOB has increased its presence in this region, particularly the area formerly under the control of Chang Qifu. Since 1989, Rangoon has negotiated cease-fire agreements with most of the drug-trafficking groups that control these areas, offering them limited autonomy and development assistance in exchange for ending their insurgencies. The regime's highest priority is to end insurrection, and counternarcotics interests in these areas are a secondary consideration. Moreover, these cease-fire agreements have had the practical effect of condoning money laundering, as the government encouraged these groups to invest in "legitimate" businesses.

In the past two years, as overt military challenges to Rangoon's authority from the ethnic groups have diminished somewhat, the government, while maintaining its primary focus on state security, has stepped up its counternarcotics enforcement efforts. The GOB garrisoned troops on a year-round basis for the first time in the Kokang region during 1997. (The Wa, however, have not accepted a permanent GOB presence.) Perhaps at GOB urging, the MNDAA, the KDA, and the MDA in northern Shan State declared their intention to establish opium-free zones in territory under their control by the year 2000. Earlier in the year, ESSA leader Sai Lin had also declared an opium-free zone in the area known as Special Region-4 in northeastern Shan State. This region, however, has traditionally had low density opium cultivation. The Wa announced opium free zones in 1995.

The GOB, for its part, stated that it would support these eradication efforts with development assistance in the form of infrastructure improvements and advice on crop substitution. The GOB also requested USG assistance in verifying whether these groups fulfill their commitments. The USG has requested additional information to pinpoint the areas in question. This information has been provided. In view of China's long border with the Wa area, the GOB asked China for assistance in curbing Wa trafficking.

Ethnic groups have made "opium free" pledges since 1989, but, with the exception of the Kachin, have shown no success in enforcing their stated intentions. In view of the extensive opium cultivation in northern Shan State, the area of greatest opium density, any reduction in cultivation would require considerable eradication, law enforcement and alternative development efforts by the authorities. Implementation of such a program would also require a spirit of cooperation between the government and ethnic groups. It is too early to assess these latest pledges.

III. Country Actions Against Drugs in 1997

Policy Initiatives. Burmese counternarcotics efforts improved during 1997, especially with regard to heroin and opium seizures as well as the destruction of heroin refineries. A quieter security situation in parts of northern Shan State permitted the Burmese anti-drug forces to conduct more vigorous law enforcement efforts, especially in the Kachin and Kokang regions. The Kokang area, in particular, is a major center of narcotics cultivation and refining. These efforts must be stepped up if they are to have a significant impact on the overall trafficking problem.

With support from DEA and US embassies in Rangoon and Bangkok, the Burmese and Thai governments agreed to undertake joint operations against drug trafficking along Thailand's northern border with Burma. To this end, they agreed in principle to establish a joint anti-drug task force in Tachilek, Burma, and Mae Sai, Thailand. This approach, which has been under consideration for several years, has the potential to permit coordinated enforcement operations in one of the most active trafficking areas in Southeast Asia.

The GOB also apprehended and rendered to Thailand, Li Yunchung, a former associate of Chang Qifu who had bribed his way out of a Thai jail and fled to Burma. Li had been awaiting extradition by the Thai to the United States on narcotics charges. Acting on intelligence provided by DEA through the US Embassy in Rangoon, Burmese authorities arrested Li in April and formally turned him over to Thai authorities in May. The GOB understood that the Thai would extradite Li to the United States. This was the first time the Burmese had returned to Thailand a high profile drug trafficker sought by the US.

The Burmese continued to refuse the rendition of drug lord Chang Qifu on the grounds that he had not violated his 1996 surrender agreement. This agreement reportedly stipulated that if Chang Qifu ended his insurgency and retired from the drug trade, the GOB would provide him with security in Rangoon and allow him to conduct legitimate business. Chang Qifu confirmed in a public interview his plans to fund construction of a new Rangoon-Mandalay highway valued at some $250 million; a Burmese cabinet member confirmed the accuracy of Chang's statement. Burmese authorities assert that he will continue to enjoy immunity from prosecution in Burma or rendition to another country as long as he does not violate his surrender agreement. This issue remains a source of friction with the US due to standard international legal principles calling for punishment of traffickers and other international criminals. In addition, Chang Qifu reportedly remains involved in the drug trade through his subordinates, thereby violating the reported terms of the surrender agreement.

The SPDC affirmed its intention to increase its efforts to implement the ongoing "master plan for the development of border areas and national races." The plan calls for a program of integrated development combined with law enforcement aimed at improving the living standards in the ethnic areas and providing viable economic alternatives to opium cultivation. Little effort had been made by the end of 1997 to link this plan, conceived in 1990, to measurable reductions in opium cultivation in the ethnic areas.

The GOB and UNDCP completed in late 1996 a 12-month pilot integrated rural development project in the Wa region initiated to take advantage of the United Wa State Army's unilateral decision announced in 1995 to establish five "opium poppy-free zones" in its area of control in order to bring about a gradual reduction of opium cultivation. The pilot project was designed to test the feasibility of a planned five-year, 15 million dollar rural development project aimed at opium income and crop substitution. In contrast to the UNDCP's previous projects in Mong Yang and Tachilek, the Wa project will incorporate a monitoring and evaluation component designed to measure progress in eliminating opium cultivation. As an integrated development scheme, it will also focus on infrastructure as well as the provision of educational and health facilities in the Ho Tao and Mong Pawk districts of the Wa region.

Accomplishments. Overall, the Burmese drug control situation remained bleak during 1997. The Burmese effort to seize heroin and opium improved markedly in percentage terms during 1997, but, even so, the total seized was less than one per cent of Burma's estimated annual opium/heroin output. The combined police and military narcotics task forces seized a record 1401 kilos of heroin, a more than two-fold increase over 1996 seizures, which totaled 493 kilos. Seizures of opium gum rose to 7884 kilos, compared with 1300 kilos in 1996. The seizure of 5.04 million amphetamine tablets roughly equalled last year's totals; the two-year trend in seizures of precursor chemical, acetic anhydride, was up sharply, although 1997 seizures fell from the level in 1996. The authorities destroyed 33 heroin refineries during the year, compared with 11 the previous year. Most of the refineries were located using information provided by DEA from the US Embassy in Rangoon. In November, the authorities made the largest heroin seizure ever recorded in Burma - 297 kilos near Muse in northern Shan State on the Chinese border.

Law Enforcement Measures. The 1993 narcotic drugs and psychotropic substances law brought the Burmese legal code into conformity with the 1988 UN Drug Convention. As such, the 1993 law contains useful legal tools for addressing money laundering, the seizure of drug-related assets, and the prosecution of drug conspiracy cases. However, by the end of the year, these provisions had remained apparently unused as Burmese police and judicial officials had been slow to implement the law, targeting few if any major traffickers and their drug-related assets. Burmese drug officials claim they lack sufficient expertise to deal with money laundering and financial crimes, which is not a sufficient explanation of the near total failure to address money laundering, which is believed to be carried out on a massive scale.

Formally, the Burmese government's drug enforcement effort is led by the office of the Central Committee for Drug Abuse Control (CCDAC), which is comprised of personnel from various security services, including the police, customs, military intelligence, and the army. CCDAC now has 18 drug enforcement task forces around the country, most located in major cities and along key transit routes near Burma's borders with China, India and Thailand. The CCDAC, which is under the control of the Directorate of Defense Services Intelligence (DDSI) and relies, in part, on military personnel to execute law enforcement duties, continues to suffer from a lack of adequate resources to support its law enforcement mission.

Corruption. There is no evidence that the government, on an institutional level, is involved in the drug trade. However, there are persistent and reliable reports that officials, particularly army personnel posted in outlying areas, are involved in the drug business. Army personnel wield considerable political clout locally, and their involvement in trafficking is a significant problem. In April, the authorities arrested 11 officers - including one lieutenant colonel who received a 25-year prison term - for colluding with drug traffickers in the operation of a heroin lab in northern Shan State. The Burmese have said that they would welcome information from others on corruption within their ranks.

The lack of a vigorous enforcement effort against money laundering also leaves Burma vulnerable to the growing influence of traffickers through the use of drug proceeds in legitimate business ventures. Businesses owned by family members of former or present traffickers have invested heavily in infrastructure projects, such as roads and port facilities, as well as in hotels and other real estate development projects during the year. It is believed that drug profits formed the seed capital for these otherwise legitimate enterprises.

Agreements and Treaties. Burma is a party to the 1961 Single Convention, the 1971 UN Convention on Psychotropic Substances and the 1988 UN Drug Convention. However, the Rangoon regime maintains its reservation on extradition of Burmese citizens to other countries. The United States does not have a mutual legal assistance treaty (MLAT) with Burma. It is the opinion of the US Government that a US-U.K. extradition treaty, which was accepted by the post-independence Burmese government in 1948, remains in force and is applicable for the US extradition of drug fugitives from Burma. The GOB continues to refuse to recognize the applicability of this treaty. In May, the GOB, with UNDCP, signed a six-nation (Burma, Cambodia, China, Laos, Thailand, Vietnam) memorandum of understanding on a sub-regional action plan aimed at controlling precursor chemicals and reducing illicit drug use in the highlands of Southeast Asia. The GOB signed bilateral drug control agreements with India in 1993, with Bangladesh in 1994, with Vietnam in 1995, and with the Russian Federation, Laos, and the Philippines in 1997.

Cultivation and Production. Burma remains by far the world's largest producer of opium. Potential production decreased slightly from 1996 levels; opium cultivation declined an estimated 5 percent and production declined an estimated 8 percent. After cultivation increased by 40 percent and potential production doubled in 1989 following the SLORC coup, cultivation and production have remained at this high level over the ensuing eight years. Since the early 1990's the areas of most intense cultivation have gradually shifted from southern to northern Shan State. Although cultivation has expanded in areas under government control, the bulk of the opium crop has been in areas controlled by ethnic minority groups such as the United Wa State Army, the Myanmar National Democratic Alliance Army (Kokang Chinese), the Mongko Defense Army (Kachin), the Kachin Defense Army, and the Palaung National Organization, with which the Burmese military junta has sought cease-fires since 1989. In the last two years, however, the GOB has begun to increase its presence in areas previously under ethnic control. Government eradication efforts increased at the end of 1997 with the launching of a campaign in Northern Shan State. In addition, the GOB announced plans to conduct a baseline survey of opium cultivation from January to March 1998, aimed at determining actual opium production (as opposed to potential production the USG measures) throughout the country.

Drug Flow/Transit. Most heroin in Burma is produced in small, mobile labs located near the borders with Thailand and China in Shan State in areas controlled by ethnic narco-insurgencies. As a result of increased deployment of troops in northern Shan State and more aggressive law enforcement efforts, the GOB destroyed a record, but still small, number of labs. A growing amount of methamphetamines is reportedly produced in labs co-located with heroin refineries in the Wa region and the former Shan United Army territory in southern Shan State. Heroin and methamphetamines produced by Burma's ethnic groups are trafficked largely through unmarked transit routes crossing the porous Chinese and Thai borders, and to a lesser extent the Indian, Bangladesh and Lao borders, as well as through Rangoon onward by ship to other countries in the region. Although Thailand remains an important route for Burmese heroin to exit Southeast Asia, trafficking through China and other countries is on the increase.

Traffickers continued a trend noted last year of moving a growing amount of heroin through central Burma, often from Lashio, through Mandalay to Rangoon or other seaports such as Moulmein, for seaborne export to Singapore or Malaysia. Trafficking routes leading through Kachin and Chin states and Sagaing Division in northern Burma to India continued to grow, but were used to a lesser extent. Acetic anhydride, an essential chemical in the production of heroin, is imported primarily from China, as is ephedrine, the principal chemical ingredient of methamphetamines.

Demand Reduction. Drug abuse is a growing problem in Burma. Official estimates put the drug addicted population at approximately 60,000, but UNDCP and NGOs working in the health sector estimate the actual population at 400,000-500,000. The GOB announced plans to undertake a nationwide baseline survey of drug abuse in early 1998, which is designed to provide a more accurate census of the addict population. Heroin is cheap in Burma, and its intravenous use is contributing to the rapid spread of HIV/AIDS, particularly in the Kachin and Shan states. According to the GOB's "Rapid Assessment Study of Drug Abuse in Myanmar" sponsored by the Ministry of Health and UNDCP in 1995, drug treatment services are not reaching most drug users because of a lack of facilities, lack of properly trained personnel, and inadequate treatment methods. In November, the GOB gave Cabinet approval to a $300,000 UNDCP-funded demand reduction project to be implemented by the NGO, "World Concern", in Kachin State.

IV. US Policy Initiatives. Programs

Direct material USG counternarcotics aid to Burma has remained suspended since 1988, when the Burmese military brutally repressed the pro-democracy movement. USG-supported initiatives such as an aerial eradication program have not been carried out since 1988. However, the USG funds, under congressional authority, a two-year, $500,000 crop substitution project being carried out by the NGO "Committee of 101 Veterans Inc." in the Kutkai area of northern Shan State. The aim of the project is to increase farm incomes by improving yields of corn and other crops so that farmers have economic alternatives to opium cultivation. Preliminary results of the project's first harvest indicate the feasibility of increasing corn yields by 3-5 times.

Currently, the USG engages the Burmese government on counternarcotics on a limited level. DEA, through the US Embassy in Rangoon, shares drug-related intelligence with the GOB and conducts joint drug enforcement investigations with Burmese counternarcotics authorities. Various US agencies have joined Burmese counterparts in conducting opium yield surveys in the mountainous regions of the Shan State in 1993, 1995, and 1997. Results from the surveys give both governments a more accurate understanding of the scope and magnitude of Burma's opium crop.

The US government continues to urge the Burmese government to take serious steps to curb Burma's runaway opium production and heroin trafficking. Specifically, the Rangoon regime has been encouraged to:

prosecute drug trafficking organizations and their leaders, such as Chang Qifu, and deprive them of assets derived from the drug trade; take action against drug-related corruption, including prosecution and appropriate punishment of corrupt officials and money launderers; take action against fugitive drug traffickers and render them through third countries, as was done in the Li Yunchung case; undertake opium poppy eradication on a wide scale in areas under its direct control or immediate influence; press ethnic groups such as the Wa, the Kokang, and the Kachin who have pledged to create opium-free zones in their regions, to make good on their commitments; enforce existing anti-drug, conspiracy and money laundering legislation; provide strong support to multilateral drug control projects in the Shan State. Bilateral Cooperation. USG counternarcotics cooperation with the Burmese regime is restricted to basic law enforcement operations and involves no bilateral material or training assistance from the US due to US concerns over Burma's commitment to effective counternarcotics measures, human rights, and political reform. DEA's liaison with Burmese police and military--conducted mainly through DEA's office in Rangoon--will continue with a focus on providing intelligence on enforcement targets and coordinating investigations of international drug trafficking groups. During the year, the USG encouraged contacts between Burmese and Thai law enforcement agencies and facilitated joint anti-drug operations.

The Road Ahead. Based on experience in dealing with large-scale narcotics trafficking problems elsewhere around the world, the USG recognizes that ultimately large scale and long term international aid, including development assistance and law enforcement aid, will be needed to curb significantly drug production and trafficking. The USG is prepared to consider resuming appropriate assistance contingent upon the GOB's unambiguous demonstration of a strong commitment to counternarcotics, rule of law, punishment of traffickers and major trafficking organizations (including asset forfeiture and seizure), countercorruption, eradication of opium cultivation, destruction of drug processing laboratories, enforcement of money laundering legislation, and respect for human rights.