"With unique access and information from the ground, the Lahu National Development Organisation (LNDO) examines in this report how the Burma Army benefi ts directly from the drug trade in eastern Shan State. The findings show how conflict and drug production in Burma are inextricably linked, and that only a political resolution of the decades- long ethnic conflict will enable Burma?s drug crisis to be addressed. Despite ceasefires, the central government?s refusal to cede to ethnic demands for federalism has caused a steady military build-up by both the Burma Army and ethnic armed groups in eastern Shan State. Over the past ten years, the number of Burma Army troops in seven eastern Shan townships has risen from over 10,000 to over 14,000. Significantly for the drug trade, this includes a substantial increase in the number of Burma Army militia troops—from about 2,300 to 3,400—who serve the vital purpose of maintaining central government control over inaccessible mountainous areas. The Burma Army militia-controlled areas are where most opium in eastern Shan State is being grown, as shown by maps of the United Nations Offce of Drugs and Crime (UNODC). These areas are also where scores of drug refineries that produce large amounts of heroin and methamphetamines (?yaba”) are located. The Burma Army militia groups provide security to the drug syndicates operating the refineries. In the process they make huge profits from buying opium from farmers and selling it to refinery owners, from joint investments in refineries, and from transporting drugs to distributors. These profits not only subsidize the upkeep of the militia forces, but enable militia leaders to gain substantial personal wealth. This is a key incentive to remain loyal to the Burma Army, and to continue their policing duty against ethnic resistance groups..."