U.S. ANALYSIS OF BURMA IN DRUG TRAF (r)

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Subject: U.S. ANALYSIS OF BURMA IN DRUG TRAFFICKING [PART 1]

 International Narcotics Control Strategy Report, 1998
Released by the Bureau for International Narcotics and Law Enforcement
Affairs, U.S. Department of State
Washington, DC, February 1999  


BURMA
I. Summary 

Burma continues to be the world's largest source of illicit opium and
heroin. Production and cultivation declined significantly from 1997 levels,
marking the second year in a row that production declined. The 1998 crop
estimates indicate there were 130,300 hectares under opium poppy
cultivation, down 16 percent from 1997, which could yield up to a maximum of
1,750 metric tons of opium gum. This is the lowest potential production
figure in ten years and a drop of 26 percent from 1997 figures. The
government engaged in significant opium crop eradication efforts in 1998.
During 1998, seizures of methamphetamine tripled, although opium and heroin
seizures were below last year's record levels. The Government of Burma (GOB)
cancelled a U.S.-funded crop substitution project, however, and made little
if any effort against money laundering during the year. While there were
cases of interdiction and arrests of members of some cease-fire groups for
narcotics trafficking, the GOB has been unwilling or unable to take on the
most powerful groups directly. Cease-fire agreements with insurgent ethnic
groups dependent on the narcotics trade involve an implicit tolerance of
continued involvement in narcotics for varying periods of time. 

II. Status of Country 

Burma has been and continues to be the world's largest producer of illicit
opium. According to USG estimates, Burmese opium production doubled 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.
Production levels remained high and stable for several years, began to
decline in 1997, and dropped significantly in 1998. The decline in potential
production in 1998 reflects the impact of GOB eradication efforts as well as
drought. The USG discontinued most U.S. direct assistance to Burma in 1988
in response to massive human rights abuses. 

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
few years, the GOB has increased its presence in this region, particularly
the south, an area formerly under the control of Chang Qifu (Khun Sa). 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
achieve some measure of national integration; counternarcotics interests in
these areas are a lesser priority. Moreover, the cease-fire agreements have
had the practical effect of condoning money laundering, as the government
encouraged these groups to invest in "legitimate" businesses as an
alternative to trafficking. 

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 (UWSA) 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
varying degrees of autonomy; for example, Burmese troops cannot even enter
Wa territory without explicit permission. 

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
Mongko Defense Army (MDA); and Yawd Serk of the Shan United Revolutionary
Army (SURA), which was formerly part of drug lord Chang Qifu's Mong Tai
Army. Chang Qifu disbanded his army in January 1996 in return for generous
terms of surrender, which allowed him to avoid criminal prosecution. 

There is reason to believe that money laundering in Burma and the return of
narcotics profits laundered elsewhere are significant factors in the overall
Burmese economy, although 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 is
accompanied by an alarming spread of the HIV/AIDS virus, especially in the
ethnic minority areas that are the source of the drugs. 

In the past three 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, but it
does not have troops in Wa territory. Last year the MNDAA, the KDA, and the
MDA in Shan State declared their intention to establish opium-free zones in
territory under their control by the year 2000; the ESSA has already
declared its territory an opium-free zone. The Wa have announced their
territory will be an opium-free zone by the year 2005. 

Ethnic groups have made "opium-free" pledges since 1989, but, with the
exception of the Kachin, results have been limited. Kokang leader Peng
Jiasheng said in March that he had eradicated 25 percent of opium in Kokang
areas west of the Salween River. Although we cannot verify this claim,
observers noted eradication had taken place in areas near the Chinese
border. In view of the extensive opium cultivation in northern Shan State,
the area of greatest opium density, expanded reduction in cultivation will
require considerable eradication, much greater law-enforcement, and
alternative development efforts by the authorities. Such efforts necessitate
vastly greater financial resources than the government has, however.
Implementation of such a program would also require increased cooperation
between the government and the ethnic groups involved in production and
trafficking. 

The GOB, for its part, stated that it would support its 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. Exchange of information on the status of
opium cultivation could then occur during the annual opium poppy survey
carried out jointly with the GOB. In view of China's long border with the Wa
area, the GOB asked China for assistance in curbing Wa trafficking. Both
countries have established a regular forum for discussing counternarcotics
cooperation. 

III. Country Actions Against Drugs 

Policy Initiatives. Burmese counternarcotics efforts in 1998 made progress
with regard to eradication, increased methamphetamine seizures, and the
destruction of heroin refineries. An improved 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 GOB announced plans to plant opium substitute crops on 14,565
acres in the Kokang Region during 1998-99 in cooperation with Japan. Such
efforts must be stepped up, if they are to have a significant impact on the
overall trafficking problem. 

With encouragement from the Drug Enforcement Administration (DEA) and U.S.
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. Operation of a joint anti-drug task force in
Tachilek, Burma and Mae Sai, Thailand, however, has been hampered by
political disharmony between the two countries. 

The Burmese continued to refuse the rendition of drug lord Chang Qifu on
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. 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 between Burma and the
U.S.; the 1988 UN Drug Convention obligates parties, including Burma, to
prosecute such traffickers. GOB officials have stated they would be willing
to prosecute Chang Qifu or his subordinates, if it can be proven that they
have engaged in narcotics trafficking after the surrender agreement was
signed. 

The SPDC (Burma's Ruling Military Junta) 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 living
standards in the ethnic areas and providing viable economic alternatives to
opium cultivation. Few GOB resources have been devoted to such development
projects, however; health, education, and infrastructure in border areas
remain poor. GOB policy is to force the leaders in the ethnic areas to spend
their own revenues, including from the drug trade, on social and physical
infrastructure. The GOB's ability to continue or expand its opium
eradication efforts is likely to be adversely affected by the lack of such
economic alternatives. 

The UNDCP is beginning an integrated rural development project in the
southern portion of the Wa region in furtherance of the United Wa State
Army's unilateral decision announced in 1995 to establish five
"opium-poppy-free zones" in its area of control where opium cultivation will
gradually be reduced. The project is part of a planned five-year, $15
million rural development project aimed at crop substitution and alternative
development. At present, nine villages are scheduled to participate in the
first stage of the project. UNDCP has begun distributing seeds as part of
the crop substitution portion of the project. 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 developing the infrastructure as well as
providing educational and health facilities in the Ho Tao and Mong Pawk
districts of the Wa region. 

Accomplishments. While the extent of the drug threat from Burma remained
high, law enforcement efforts, particularly on seizures of amphetamine,
showed some improvement, and opium production during 1998 showed a
significant decline. Seizures of amphetamine greatly increased in 1998, but
opium and heroin seizures as of October had not reached the record 1997
levels. The combined police and military Narcotics Task Forces seized 386.8
kilograms of heroin between January and October 1998, down from a record
1,401 kilograms seized in 1997. By October, officials seized 5,200 kilograms
of opium gum, compared with 7,883.9 kilograms for all of 1997. The seizure
of over 16 million amphetamine tablets as of November is triple last year's
total and included one record seizure of 5 million tablets in July. The
authorities destroyed 32 heroin refineries, close to the record of 33 set
the previous year. DEA from the U.S. Embassy in Rangoon provided information
on the location of most of those refineries. As indicated above, opium
cultivation dropped by 16 percent and potential opium production by 26
percent to the lowest level in ten years. Another significant development
was the arrest in July of Lu Lao-Te, the Deputy Finance Minister for the
MNDAA, in connection with seizures of 7 million amphetamine tablets. Lu is
one of the highest-ranking officers from an ethnic trafficking group to be
arrested by the GOB. 

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, Burmese policy and judicial
officials have 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, but money laundering is believed to be carried out on a massive
scale. 

Formally, the Burmese government's drug enforcement efforts are 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 effective 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 corrupt army personnel posted
in outlying areas, are either involved in the drug business or are paid to
allow the drug business to be conducted by others. Army personnel wield
considerable political clout locally, and their involvement in trafficking
is a significant problem. The Burmese have said that they would welcome
information from others on corruption within their ranks, though only a few
military personnel are known to have been arrested for narcotics-related
offenses. 

The lack of an enforcement effort against money laundering encourages the
use of drug proceeds in legitimate business ventures by traffickers or
former traffickers. 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. Some of these investments are intended to
supplement government expenditures on rural development projects in areas
under control of the ethnic insurgent and trafficking groups. There is solid
evidence indicating that drug profits formed the seed capital for many
otherwise legitimate enterprises in the commercial, services, and
manufacturing sectors. In February, the GOB effectively suspended the
operations of the Myanmar Kyone Yeom Company, which had strong ties to the
Wa, for violating the Myanmar Company Act, although the government did not
indicate that this was a counternarcotics action. The company's chairman, a
former high-level United Wa State Army officer, was reportedly later
sentenced to 9 years imprisonment. The company had been active in
construction, real estate, tourism, and trade projects in Burma.