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Drug article from Jane's Intelligen

Copyright 1998
Jane's Information Group Limited,
All Rights Reserved
Jane's Intelligence Review

March 1, 1998

SECTION: FOCUS ASIA; Vol. 10; No. 3; Pg. 26

LENGTH: 4804 words

HEADLINE: BURMA the country that won't kick the habit

BYLINE: Anthony Davis

DATELINE: Bruce Hawke

HIGHLIGHT: Rangoon has angrily denied that the Union of Myanmar is a 
'narco-state', but the mutually beneficial relationship between the junta 
and the narco-barons, combined with a creeping criminalisation of the 
country's economy, does much to suggest otherwise.  Anthony Davis and Bruce 
Hawke review the Burmese slide into dependency.


For the military junta of Burma (officially the Union of Myanmar) , 
international criticism over political repression and an abysmal human 
rights record is scarcely new.  More recent is a rising tide of accusations 
levelled at the regime over its poor narcotics record and charges that the 
cosy relationship between the government and heroin traffickers is turning 
Burma into a 'narco-state'.  For its part, Rangoon has angrily dismissed the 
attacks as 'false allegations' by Western critics that deliberately ignore 
its real achievements in narcotics suppression.

As yet there appear to be no grounds on which the government can be charged 
with direct involvement in the production or distribution of narcotics as a 
matter of policy - for some analysts the baseline definition of a 
'narco-state'.  Nevertheless, a compelling body of evidence does suggest 
that in a range of areas the government is moving perilously close to a 
looser definition of that term: it has permitted and indeed encouraged the 
repatriation of narco-funds back into an investment-strapped economy; there 
are recurrent reports of complicity in the trade by field level military 
units; and ex-insurgent drug dealers have enjoyed an impunity from 
investigation or prosecution that has seen them emerge as a leading force in 
the mainstream economy.  Some are even participating in the country's 
limited political process.  As US Assistant Secretary of State for 
International Narcotics Affairs Robert Gelbard wrote in 1996: "From a 
hard-headed, drug-control point of view, I have to conclude that [the 
regime] has been part of the problem, not the solution."

The events which drew the insurgents down from the hills of Shan State and 
into company boardrooms in Rangoon can be traced back to the late 1980s. 
 Between 1987 and 1989 potential opium production in Burma increased 
dramatically from an estimated 836 metric tonnes (t) to 2,430 t, according 
to US State Department figures.  To some extent, new methods of calculating 
potential yield per hectare may have contributed to the higher figures, but 
against a backdrop of near ideal weather conditions and expanded cultivation 
there was also a very real increase in production.  Between 1987 and 1989 
the area under poppy cultivation increased 55 per cent from 92,300 hectares 
to 142,000 hectares and continued to expand.

Against this backdrop came hardly less dramatic political shifts.  In March 
1989 the insurgent Communist Party of Burma (CPB), since 1968 Rangoon's most 
formidable military foe, collapsed.  Dumping a geriatric Maoist leadership, 
the party's increasingly business-oriented military leadership splintered 
along ethnic lines - Kokang Chinese, Wa and Shan - around the country's 
rugged northeastern frontiers.  Fresh from the bloody suppression of 
democracy demonstrators and determined to prevent a link-up between ethnic 
minority insurgents and ethnic Burman dissidents in central Burma, the 
government moved swiftly to neutralise the guerrillas with a series of 
cease-fire agreements.  The verbal deals, of which altogether 15 have now 
been made with ex-communist and non-communist insurgent groups, stipulated 
that the insurgents would cease hostilities against government forces and 
would be permitted in turn to continue to bear arms, administer their areas 
and, critically, participate in business activities in Burma's recently 
liberalised economy.  They were further invited to join an essentially 
rubber-stamp national convention convened to draw up a new constitution for 
the country.

The Narco Armies

 - The first agreement was made in late March 1989 between the regime's 
intelligence chief, (then) Brigadier General Khin Nyunt (he is now a 
Lieutenant General), and military leaders of the CPB's Kokang 
Chinese-dominated Northern Bureau, which comprised Kokang District east of 
the Salween River and a swathe of territory also along the Chinese border to 
the west of the river.  This territory, which includes some of the most 
intensely cultivated poppy fields in the country, was dubbed 'Special Region 
No 1' and its troops , some 1,500-2,000 strong, became overnight a 'special 
police force' otherwise known as the Myanmar National Democratic Alliance 
Army (MNDAA).  They were headed by CBP commanders Peng Jia-sheng and his 
younger brother Peng Jia-fu.

 - The second agreement came in early May with the militarily strongest 
component of the CPB, the ethnic Wa.  This established Special Region No 2 
in the Wa hills east of the Salween, south of Kokang, with its headquarters 
at the former CPB HQ of Panghsang on the Chinese border.  In November 1,989 
the ex-communist Wa linked up with another ethnic Wa insurgent force 
operating near the Thai border, the Wa National Army, to become the United 
Wa State Army (UWSA) commanded by Pao Yu-chang with a China-born ex-Red 
Guard, Li Zi-ru, serving as his deputy.

 - In eastern Shan State the CPB's former 815 War Zone was transformed into 
Special Region No 4 and its 3,500-4,000 strong forces into the National 
Democratic Alliance Army (NDAA).  Controlling an opium-rich but sparsely 
populated swathe of territory abutting China, Laos and Thailand, the NDAA is 
run by a 12-man committee headed by two other former Chinese Red Guard 
volunteers: Lin Ming-xian (Sai Lin) and Zhang Zhi-ming (Kyi Myint).  Both 
are known to have close links with Chinese military intelligence.  Sai Lin 
was subsequently appointed a special advisor to the National Constitutional 

 - Finally, in late 1990, the 4th Brigade of the Kachin Independence Army - 
which was then still fighting the government - broke away to form the Kachin 
Defence Army (KDA) led by Mahtu Naw.  Following a cease-fire with Rangoon, 
the KDA territory, an ethnically Kachin swathe of hill-country north of 
Lashio town, became Special Region No 5.  Fielding only around 800 armed 
troops, however, the KDA has become subservient to the MNDAA.

Heroin's boom period

These former insurgent groups responded to the new situation in two critical 
ways, the first being that all four factions became increasingly involved in 
the production of high-grade No 4 heroin.  Under the dispensation of the CPB 
an opium poppy crop-substitution policy had given way to a growing 
involvement in the opium trade as Chinese financial and logistic support was 
cut back in the late 1970s.  This involved both the party's local 
administration taxing the opium crop as well as some errant commanders 
running their own opium convoys south to heroin refineries on the Thai 
border.  Although there had been no heroin refineries operating in CPB 
territory, all that changed in 9.

In Kokang district, Special Region No 1, various ethnic Chinese commanders 
opened heroin refineries, among them Peng Jia-sheng and brother Jia-fu, Yang 
Mao-liang and brothers Mao-xian and Mao-an, and former CPB Northern Bureau 
treasurer Li Guo-shi.  A burst of production between 1989 and 1991 saw 23 
new refineries opened.  In late 1992, a mini-war over control of the booming 
heroin trade erupted between MNDAA boss Peng Jiasheng and the Yang clan, 
traditional local rulers of Kokang.  As a result of the swift intervention 
of Khin Nyunt, an uneasy peace was restored, leaving both players in the 
field but with the Yang brothers dominant.

To the south UWSA entry into the heroin trade was expedited by three ethnic 
Chinese brothers, Wei Xue-long , Xue-gang and Xue-yin, who had earlier been 
involved with Taiwanese intelligence and the WNA on the Thai border.  In 
late 1992 Wei Xuelong moved north to UWSA HQ at Panghsang and before long 
had established a string of refineries in the Wa hills.  The Weis were to 
provide the commercial know-how and international connections to complement 
the military muscle of Pao Yu-chang and Li Zi-ru, transforming the UWSA into 
what has been described as the world's largest armed narcotics trafficking 
organisation.  More recently UWSA has diversified its narcotics production 
into methamphetamines, a logistically simpler production process targeted at 
a booming Thai market.

In Special Region No 4 Zhang Zhiming and Lin Ming Xian had meanwhile 
established themselves at the head of a 12-man regional committee which also 
became heavily involved in narcotics production.  Given its sparse 
population, Special Region No 4 is not an area of intense poppy cultivation, 
so much opium is brought in from Laos and other areas of the Shan State to 
be refined into heroin there.

The KDA has been a late-comer to the trade but appears ready to make up for 
lost time and in recent months has been assuming a new prominence.  However, 
it appears largely to be working for Kokang Chinese interests, both in 
running refineries and in trucking opium and refined heroin north to the 
border of India's Manipur State.  As narcotics interdiction has been stepped 
up, first along the Thai border (the traditional export route for Shan State 
narcotics) and more recently along the Chinese border (the favoured export 
route of the 1990s), the porous border of India's rugged northeast has 
become a major new route.

An enthusiasm for business

The second of the insurgents' post-cease-fire responses was a demonstrated 
enthusiasm for the government's invitation to set up businesses in the newly 
liberalised but still ramshackle economy.  These were often joint ventures 
with government ministries or military-owned holding companies.  This 
process and the repatriation of funds held offshore to finance it was 
greatly facilitated by a concurrent liberalisation of foreign exchange 
policy.  In 1989 the junta dropped the previous government policy of 
confiscating bank deposits or foreign currency that could not be proved to 
have been acquired legally.  It opted instead for a 'whitening tax' on 
repatriated funds of dubious origin levied first at 40 per cent and later 
reduced to 25 per cent.  More importantly, a de facto legalisation of the 
black market exchange rate of the Burmese kyat prompted an influx of money 
from Hong Kong, Bangkok and elsewhere.  Solid evidence of the effects of 
this liberalisation became apparent by mid-1993 when real estate prices in 
Rangoon and Mandalay rocketed.  The market rate of the kyat, which had been 
falling rapidly for the two previous years, stabilised at around 110 Kyats 
to the US dollar, despite an inflation rate conservatively estimated at 
20-30 per cent per annum, an anaemic (legal) export sector and a growing 
volume of imports.  The kyat remained at that level until early 1996.

In 1992 the UWSA moved into Rangoon to establish an investment vehicle that 
has since become one of the country's largest companies: the Myanmar Kyone 
Yeom Group.  Its impressively diversified portfolio includes real estate, 
food processing, finance, import-export and 'border trade', mining, tourism 
and transport (although in the murky and ill-regulated world of Burmese 
capitalism, the profitability of many of these ventures remains 
questionable).  The group also has branch offices in Thailand, Taiwan, South 
Korea, Hong Kong and the USA, giving it a significant international reach. 
 The Kyone Yeom Group's Rangoon-based chairman and managing director is a 
former insurgent military officer of Chinese descent, 'Colonel' Kyaw Myint 
(aka Michael Hu Hwa), who heads a company board sprinkled with other 
ex-guerrilla commanders and retired government military personnel.  An 
abrasive personality known to have attended board meetings with a pistol 
strapped to his waist and flanked by bodyguards, Kyaw Myint's transition to 
corporate culture has been less than smooth.  In 1997 the volatile colonel 
attempted to ensure his own appointment as chairman of the Prime Commercial 
Bank, in which Myanmar Kyone Yeom had earlier acquired a majority 
shareholding.  However, having a high-profile member of the world's largest 
narco-army openly running a bank appears to have been too much even for the 
government of Burma and his application was turned down by the Central Bank. 
 Kyaw Myint's continued efforts to push his case eventually led to Prime 
Commercial being abruptly but quietly closed down.

Myanmar Kyone Yeom has had better success in Burma's murky finance industry. 
 Since 1995 the group has established a nationwide financial operation 
viewed by foreign analysts as a thinly disguised money-laundering vehicle. 
 The scheme involves a subsidiary, the National Races Co-operative Society, 
offering a startling seven per cent interest per month - or 84 per cent per 
annum - on term deposits, a rate of interest that undercuts Chinatown's 
informal banking network by a full two per cent.  Interest rates in Burma 
are by law capped at 16 per cent per annum while, in any event, finance 
companies have no legal standing.

Most other companies run by former insurgents tend to keep a rather lower 
profile.  Yang Mao-liang, Kokang warlord and head of the MNDAA, controls a 
rapidly expanding enterprise called Peace Myanmar Group.  It holds the 
franchise for Mitsubishi Electric in Burma and operates a paint factory and 
liquor distillery producing well-known local brands such as Myanmar Rum and 
Myanmar Dry Gin.  MNDAA treasurer Li Guo-shi has meanwhile opened a large 
consumer electronics showroom on Merchant Street in central Rangoon in a 
joint venture with the Ministry of Commerce.  Despite being ousted in 1992 
as MNDAA head, Peng Jiasheng retains considerable influence in the group as 
well as several refineries.  At Nawngchio, south of Hsipaw, he also runs a 
saw-mill and a sugar factory.

However, the real 'godfather' of Kokang and arguably the most powerful 
businessman in Burma today is 63-year-old Lo Hsing-han (pinyin: Luo 
Xing-han), one of the most venerable names in the Asian narcotics trade. 
 From lowly beginnings in Kokang in the 1960s, Lo went on in the early 1970s 
to command a government-backed militia based in Lashio.  At the same time he 
was also allowed free writ to run opium convoys south to heroin refineries 
along the Thai border.  In 1973 Lo broke with Rangoon and joined the ethnic 
Shan insurgent opposition, but he was lured across the Thai border, arrested 
by Thai authorities and extradited to Rangoon, where he served seven years 
in Insein jail for 'insurrection against the state'.  Released under a 1980 
amnesty, Lo was soon back in the militia business in northern Shan State, 
however - again with government backing.  His followers re-established 
themselves at a new base at Salween Village near Nampawng, south of Lashio.

Although he now lives in Rangoon, Lo has been a crucial figure in brokering 
peace deals in his native Kokang.  In March 1989 it was with his assistance 
that junta intelligence chief Khin Nyunt secured a cease-fire deal with the 
CPB's Northern Bureau so swiftly.  Similarly, when in November 1992 
hostilities erupted between the Yang and Peng clans over control of the 
trade, it was Lo who sat with Khin Nyunt at a government guest-house in 
Lashio to broker a peace pact between the warring factions.  Analysts are 
also convinced that Luo's involvement in the drug trade continues, albeit at 
a greater remove than in his younger days.  A 1996 Australian Bureau of 
Criminal Intelligence report refers to Lo simply as a 'major player' in the 
Burmese narcotics trade.

Following the liberalisation of the economy, Lo founded the family's 
flagship company, Asia World, in June 1992, with his Western-educated son 
Steven Law acting as managing director.  Since then Asia World has expanded 
from an import-export and trading base into bus transport, housing and hotel 
construction, a supermarket chain, manufacturing as well as major 
infrastructure projects, most notably Rangoon port development and the 
upgrading of the national highway between Mandalay and Muse on the Chinese 
border.  As one diplomatic report describes it, Asia World is Burma's 
"fastest growing and most diversified conglomerate".

Lo is well connected internationally.  He enjoys a close personal and 
business relationship with Malaysian-born tycoon Robert Kuok.  Business that 
began with the importing into Burma of Kuok's cooking oil expanded to 
include the sub-contracting of Kuok Group projects in Burma, including the 
construction of the Traders and Shangrila hotels in Rangoon.  Lo subsidiary 
Kokang Export Import & Construction later took a 10 per cent holding in the 
US$85 million Traders Hotel, while the Myanmar Fund, an institutional 
investment vehicle managed by Kuok's Hong Kong- based Kerry Securities, 
bought a 25 per cent stake in Asia World Co Ltd.

The Lo family has also established a home away from home in Singapore, with 
the Singaporean Government investment arm, the Government of Singapore 
Investment Corporation (GSIC), earlier owning a 17.2 per cent share in the 
Myanmar Fund (which was wound up last year due to adverse publicity and 
heavy losses).  In 1995 Steven Law married Singaporean businesswoman Cecilia 
Ng at a glittering Rangoon wedding attended by eight serving cabinet 
ministers and Singapore's ambassador to Burma.  The Los, both father and 
son, remain frequent visitors to the island republic, but the welcome 
extended to the family in drugs-tough Singapore has not been universal; in 
1996 Steven Law was refused a visa to the USA on suspicion of involvement in 
narcotics trafficking.

Another celebrated Burmese narcotics trafficker apparently following in the 
pattern set by Lo Hsing-han is Zhang Ji-fu, far better known as Khun Sa. 
 The Sino-Shan warlord finally surrendered to the Rangoon government in 
January 1996, moving from the base of his Mong Tai Army (MTA) near the Thai 
border to Rangoon.  Taking with him boxes of cash in various currencies, he 
has re-established himself there in comfortable semi-retirement.  His 
growing business interests are handled by three of eight children: two sons 
(Sam Heung, managing affairs on the Thai border, and Sam Seun, running a 
gems and jade business between Rangoon and the north) and a daughter (Mee 
Daw, who is understood to oversee her father's financial interests).

His legal investments include real estate in Rangoon - some of it 
confiscated from its occupiers by the government - as well as two casino 
projects.  One is under construction near Tachilek while another is planned 
to be built on an island off Kawthaung, opposite the Thai coastal city of 
Ranong.  Both projects are joint ventures with politically well-connected 
Thai businessmen.

At the same time, evidence points to an ongoing involvement in the narcotics 
trade.  Sources in Shan State recently confirmed that armed Khun Sa 
loyalists are still operating in his original stamping ground, Loi Maw, as 
well as near Tangyan and on the Thai border.  Sam Heung, meanwhile has based 
himself at Tachilkek, where, in addition to managing his father's casino 
interests, he also serves as de facto 'governor' of the Ho Mong area. 
 According to Western intelligence sources, he has opened one or more 
amphetamine plants in the Ho Mong area for which local army units provide 

Given the opaque, secretive nature of Burma's government and commerce 
(public access to company registration information, for example, is not 
permitted), much remains unclear about many of the businesses operating 
today.  Not lost on analysts of the narcotics trade, however, has been the 
sudden and remarkable growth enjoyed by Burma's only private bank with full 
foreign exchange facilities: the Myanmar May Flower Bank.  Since near 
bankruptcy in 1995, it has expanded to open branches across the country.

Founded in 1994, Myanmar May Flower Bank is part of the Myanmar May Flower 
Group, whose ethnic Chinese chairman, Kyaw Win, has emerged as Burma's new 
high-profile entrepreneur.  From humble beginnings in a border village and 
an education in Mandalay, Kyaw Win emerged in the 1980s largely as a result 
of his association with Thai logging tycoon Choon Tangkakarn, owner of 
Pathumthani Sawmills (a businessman understood to have attracted the 
attention of Western narcotics intelligence officials).  In 1989 Choon and 
Kyaw Win co-operated in a logging venture in a Rangoon government-granted 
concession which happened to be in an area abutting the Thai border 
controlled by Khun Sa's MTA.  The success of that venture necessitated an 
understanding between Khun Sa on the one hand and Kyaw Win and Choon on the 
other.  Also understood to have been involved in the arrangement was 
Rangoon's then Eastern Region commander, Lieutenant General Maung Aye (now 
army chief).  Maung Aye's association with Kyaw Win, which dates back to his 
lengthy tenure of the Eastern command, continues today.

In 1990 Kyaw Win moved from Thailand back to Rangoon to establish the May 
Flower Trading Company.  The bank opened in 1994 and in 1996 was granted a 
full foreign exchange licence by the government.  Banking sources in Rangoon 
attribute this unique privilege to Kyaw Win's relationship with General 
Maung Aye.  In September 1997 the Myanmar May Flower group's growth 
continued with the acquisition of Yangon Airways, one of Burma's two private 
domestic airlines.  Following the sale by its Thai owner, the loss-plagued 
carrier added two improbable destinations to its routings: Lashio in 
northern Shan State, and Mergui, a seaport on the Andaman coast.  Neither 
are noted as tourist or commercial centres.


In the final analysis, the quiet take-over of Myanmar's private-sector 
economy by narco-barons and their associates allows for one charitable 
interpretation: the junta is prepared to turn a blind eye to the process in 
the overriding interest of securing peace, integrating insurgent-held areas 
into the national mainstream and promoting economic development - if 
necessary with dirty money.  In terms of this analysis, Burma's ruling junta 
evidently feels it has the upper hand over the major traffickers, whose 
activities are well known to the regime's ubiquitous Directorate of Defence 
Services Intelligence (DDSI).

Some analysts, prepared to credit the junta with a long-term narcotics 
strategy, argue that the government may even hope that over time today's 
drug lords, attracted by the prospect of making real money legally, may 
mellow into legitimate business tycoons.  One senior Rangoon-based diplomat 
puts it this way: "Just as the government wants to deal with opium 
cultivators by showing them a different way to make a living, so it is 
trying to deal with leaders by showing them too there's a different way of 
making a living - 'We'll let you go 'legit', if you stop your refining and 

Proponents of this argument point to the government's more muscular approach 
to narcotics interdiction in the field.  Over the past year, military units 
have attacked opium convoys and some refineries, while drug seizures have 
risen - achievements the government trumpets at every opportunity.  It has 
also, albeit to widespread incredulity, promised the enforcement of 
'opium-free zones' in border areas by 2000.

However, successes in narcotics interdiction, as well being recent and far 
from uniformly effective, also remain decidedly relative.  What modest 
efforts Burma was once making were suspended in 1988 when US aid and a 
limited US-funded chemical spraying programme were cut after the bloody 
suppression of the democracy movement.  Since then, seizures of heroin in 
any year have never exceeded 500 kg - less than one per cent of potential 
annual production.  Figures for opium seizures as a percentage of the 
potential crop are even less impressive.

More broadly, however, the notion that Rangoon's corruption-riddled regime 
is able or willing to oversee the transition of a powerful and 
well-entrenched narco-mafia into respectable businessmen is probably naive. 
 Certainly, as Burmese heroin production has soared, the traffickers have 
evinced no interest in turning their backs on narcotics in favour of 
legitimate business.  In January 1991 Kokang warlord Peng Jia-sheng assured 
visiting diplomatic and UN officials of plans to end heroin production in 
Special Region No 1 within one year and eradicate opium production within 
seven, but the opium poppy still blooms in Kokang and heroin production in 
the area continued its relentless rise during the early 1990s.  The Yang 
clan appears equally set in its ways.  In 1994, Yang Mao-liang's younger 
brother, Yang Mao-xian, was arrested by exasperated Chinese authorities 
while visiting China and was executed in October of that year for smuggling 
large shipments of heroin into the People's Republic.  In April 1996 a 
Chinese police task force intercepted a consignment of 598.85 kg of No 4 
heroin in Guangzhou - the biggest single drugs bust in China's history. 
 Subsequent investigations revealed the shipment had been driven by Kunming- 
and Guangzhou-based Chinese traffickers in several vehicles from Longtan 
Village in the Kokang District of Burma - not far from Yang Mao-liang's 
military headquarters at Xi-ou and a nearby refinery.  Chinese sources 
pointedly noted that before crossing back into China the heroin-laden 
vehicles were waved through a Burmese army checkpoint in Kokang, no 
questions asked.

Indeed, in the field, up to the battalion and regiment level, military 
complicity in both production and transportation of narcotics and crucial 
precursor chemicals (notably acetic anhydride) has been longstanding, a 
situation aggravated by the collapse of the kyat and the dire conditions 
faced by most army units in the field.

Under circumstances such as this, the evidence suggests that 
narco-traffickers view their situation in Burma today rather differently 
from the junta.  Apparently confident of the impunity with which they can 
operate, they appear to be making investments and building for a long-term 
future as fathers retreat into comfortable semi-retirement and sons and 
daughters take up the reins of more broadly based business empires.  As one 
narcotics intelligence source puts it: "They feel they have the generals in 
their pockets."

To date there is no hard evidence to support the contention that military 
involvement in the trade has been orchestrated from Rangoon as a matter of 
policy.  However, the repatriation and laundering of narco-profits as well 
as the impunity enjoyed by the barons has clearly become institutionalised: 
a 'don't-ask' policy over the source of funds used by Burma's new generation 
of narco-capitalists has been adopted at the highest level of government. 
 Nor, interestingly, is there anything to suggest that the anti-corruption 
purge of late 1997 has affected the operations of major narco-traffickers. 
 Despite the sacking of several powerful ministers notorious for blatant 
corruption and the arrest of scores of their subordinates, it appears to be 
business as usual for the narco-barons.  Significantly, on 11 December 1997 
an article in the state-run vernacular press announced the black-listing by 
the Ministry of National Planning and Economic Development of UWSA's Myanmar 
Kyone Yeom Group for 'submitting false accounts'.  However, following 
meetings between Wa leaders and junta chief Lieutenant General Khin Nyunt, 
the minister responsible, technocrat Brigadier General David Abel was 
abruptly shunted to an inactive post.

Whether Burma deserves to be branded a 'narco-state' remains finally a 
subjective and intensely political question.  In inviting Rangoon into its 
club last July, the Association of South East Asian Nations (ASEAN) clearly 
chose to overlook the government's transgressions in the narcotics field - 
not least given concerns over growing Chinese influence in Burma.  By 
contrast, the USA, Europe and Australia have been far less ready to indulge 
the junta and have voiced their criticism of its dubious narcotics record.

Either way, in Burma itself the reality is a creeping criminalisation of the 
national economy: narco-capitalists and their close associates are now 
involved in running ports, toll roads, airlines, banks and industries, often 
in joint ventures with the government.  No less disturbing is the military 
regime's growing dependence on narco-dollars to keep a desperately 
floundering economy above water.  This wary but mutually beneficial 
relationship between the junta and the narco-barons is a habit that is 
likely to prove ever harder to break.  Ultimately, the survival of both may 
depend on it.

Authors Anthony Davis and Bruce Hawke are freelance journalists based in 

GRAPHIC: Photograph 1, The 'godfather' of Kokang: 63-year-old former opium 
warlord Lo Hsing-han has been both in and out of favour with Rangoon, but 
remains arguably the most powerful businessman in Burma today.  All 
photographs: Anthony Davis; Photograph 2, Rangoon port, where Lo Hsing-han's 
Asia World Co is involved in an upgrading and development project.; 
Photograph 3, Burmese troops on the move in northern Shan State in 
requisitioned civilian trucks.  Both the uniforms and the vehicles have 
certainly seen better days.