3/4)AW: 23-JAN-98 BURMA INSIDE STOR

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ASIAWEEK 23 JANUARY 1998
Part 3 of 4
INSIDE STORY DRUGS:
IS MYANMAR ASIA'S FIRST NARCO-STATE ? 
COMPELLING EVIDENCE POINTS TO THAT DUBIOUS DISTINCTION
By Anthony Davis and Bruce Hawke
--------------------------------

THE UNDISPUTED KING OF KOKANG

The real godfather of Kokang, however, is undoubtedly Lo Hsing-han. "Lo
is hugely influential and powerful." says a diplomat. "The government
thinks he made a major contribution to their efforts to reach ceasefires
with the insurgents and in exchange they have provided a variety of
economic concessions and opportunities to him." In june 1992, Lo founded
the family's flagship company Asia World with his Western-educated son,
Steven Law (a.k.a. Htun Myint Naing) acting as managing director. Since
then, Asia World and its subsidiaries have expanded from and
import-export and trading base into bus transport, housing and hotel
construction, a supermarket chain, manufacturing and major
infrastructure projects, notably Yangon port development and upgrading
the highway between Mandalay and Muse on the Chinese border.

One of the group's highest profile ventures is the Traders Hotel in
downtown Yangon, in which the Los hold a 10% stake. Put up in
expectation of a tourism and business boom that never happened, like all
the other prestige inns built at the time, Traders is largely empty and
running at a loss. The Lo family has an enduring connection with
Singaporean business figures, and Steven Law is a frequent visitor to
the island republic. But the welcome enjoyed by the Lo family in drugs
tough Singapore has not been extended by the international community as
a whole. In 1996, Steven was added to the list of those refused visas to
the U.S. for suspected involvement in narcotics trafficking.

Now older and mellower, Lo Senior has apparently stepped back from
hands-on involvement in the drug trade. Nonetheless, he maintains close
links to his old stomping grounds in northern Shan state. Armed Kokang
loyalists are still based at Salween Village, a militia headquarters
near Nampawng, south of Lashio, which was set up by Lo with government
assistance on his 1980 release from jail. Today the area presents a
telling reflection of the armed stand-off prevailing across the
northeast. In Nampawng an army garrison maintains a government presence
in -- but not beyond --its own compound. The Shan village itself is
controlled by troops of the Shan State Army; while Salween Village, four
km away, is guarded by Lo followers. In the Kutkai region north of
Lashio another insurgent group, the Kachin Defence Army, rules its own
enclave in one of the richest opium-producing areas in the north. The
KDA is assuming a growing prominence in the narcotics trade. Armed with
government issued "special permits," KDA trucks run consignments of
opium and refined heroin on behalf of Kokang Chinese producers to the
border of India's Manipur state -- an export route now preferred to the
increasingly risky Chinese border. Heroin refineries also operate in the
Indian border areas.

THE PRINCE OF DEATH'S PENSION PLAN

One of the most notorious names associated with Myanmar's drug trade is
that of Khun Sa. After surrendering to the government in January 1996,
he also gave up the rigors of the jungle for a comfortable villa in
Yangon, where he re-invented himself   as something more than a
"liberation-fighter," Khun Sa is far from retired, and up in opium
country his armed loyalists still operate in his original Loi Maw
fiefdom, as well as on the Thai border. Khun Sa's 39-year-old second
son, Sam ;Heung, now oversees operations near his father's old Thai
border base.

Having arrived in Yangon with boxes of cash in various currencies, Khun
Sa has not been short of start-up capital for new ventures. The man once
dubbed the "Prince of Death" has bought up prime real estate in the
capital's Sanchaung township, part of which is to be developed as an
amusement park. But last year's eviction of locals from the site and the
bulldozing of Kyun Taw cemetery amused no one and threatened to spill
over into communal rioting.

Elsewhere, Khun Sa is involved in two casino projects, aimed at high
spending Thais -- one outside Tachilek overseen by San Heung, the other
on an island opposite the Thai province of RAnong. Both are joint
ventures with politically well-connected Thai businessmen.

If Khun Sa and Lo Hsing-han represent the old breed of Myanmar
businessmen, they Kyaw Win symbolizes a new, increasingly prominent
class of entrepreneurs, who are flourishing in the liberalized economy.
An ethnic Chinese educated in mandalay, Kyaw Win has since the mid-1980s
been closely associated with Thai timber tycoon Choon Tangkakarn, head
of Pathumthani SAwmills and a man with a dubious reputation among law
enforcers. In 1989, Choon and Kyaw Win cooperated in a logging venture
in a government approved concession near the Thai border. At the time,
the area was controlled by Khun Sa's army. "There is no way they could
have operated where without making a deal with Khun Sa." says a
narcotics agent. Also in on the logging deal was Maj.-Gen. Maung Aye,
who is now Myanmar's army commander and whose association with Kyaw Win
continues.

In 1990, Kyaw Win moved to Yangon, founding May Flower Trading Company
in 1991 and Myanmar May Flower Bank in 1994. Two years ago, the bank was
granted a foreign exchange license, making it the only lender in Myanmar
to earn such a privilege; Kyaw Win frankly attributes the honor to his
influence in high places. Interestingly enough, since Khun Sa's
surrender, the bank has enjoyed sudden and remarkable growth. Since near
bankruptcy in late s1995, it has opened branches across the country.
"May flower was nothing just two years ago," says an intelligence
source. "There has been incredible expansion in a short period of time.

The latest acquision in Kyaw Win's burgeoning business empire is Yangon
Airways, one of two private, domestic carriers operating in Myanmar.
Last year, he approached the airline's Thai shareholder, Adul Chayupas,
with an offer to buy the loss-plagued airline. "What could possibly
prompt an investor to invest in an airline when the tourist campaign has
flopped ?" asks a bemused narcotics agent. But kyaw Win has both
invested and added some improbably remote destinations to the airline's
network, including Lashio and Mergui -- neither of which are noted
tourist
attractions.                                                                 

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