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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.

Agreements and Treaties. Burma is a party to the 1961 UN Single Convention, the
1971 UN Convention on Psychotropic Substances and the 1988 UN Drug Convention.
The Rangoon regime, however, has always refused to extradite Burmese citizens to
other countries. The United States does not have a Mutual Legal Assistance Treaty
(MLAT) with Burma. The USG believes that a U.S.-U.K. extradition treaty, which
was accepted by the post-independence Burmese government in 1948, remains in
force and is applicable to U.S. requests for extradition of drug fugitives from
Burma. The GOB continues to refuse to recognize the applicability of this treaty.

The GOB is a member of a six-nation (Burma, Cambodia, China, Laos, Thailand,
Vietnam) Memorandum of Understanding, which includes the UNDCP, on a sub-regional
action plan aimed at controlling precursor chemicals and reducing illicit drug
use in the highlands of Southeast Asia. At a meeting in Hanoi in mid-May, the six
Mekong Region Countries signed three more agreements for projects on demand
reduction, improving drug abuse statistics, and enhancing cross-border
cooperation to reduce opium cultivation. 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 the world's largest producer of opium.
Potential production decreased sharply from 1997 levels, however, marking the
second straight year of decline after a decade of high and steady production.
Opium cultivation declined an estimated 16 percent and production declined an
estimated 26 percent to 1750 metric tons. Since the early 1990s the areas of most
intense cultivation have gradually shifted from southern to northern Shan State.
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, with the
notable exception of the Wa region. Government eradication efforts increased
during 1998 with the launching of a campaign in northern Shan State. These
efforts, along with a drought in southern Shan State, were responsible for the
sharp decline in potential opium production in 1998. The GOB conducted a baseline
survey of opium cultivation from January to June 1998 aimed at determining actual
opium production (as opposed to potential production that the USG measures)
throughout the country. According to Burmese figures there were 151,201 acres of
poppy crops yielding 665.28 tons. The methodology used to arrive at these figures
is unknown, and the U.S. must rely on the higher figures resulting from the joint
opium yield survey.

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 was on
pace to match last year's record destruction of refineries. A growing amount of
methamphetamine 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. Seizures of amphetamine labs trebled in 1998, reflecting the growing
popularity of methamphetamine production among traffickers. Heroin and
methamphetamine produced by Burma's ethnic groups are trafficked largely through
unmarked transit routes crossing the porous Chinese and Thai borders; to a lesser
extent over the Indian, Bangladeshi, and Lao borders; and 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 is on
the increase.

Acetic anhydride, an essential chemical in the production of heroin, and
ephedrine, the principal chemical ingredient of methamphetamine, are imported
primarily from China. Traffickers continued moving heroin through central Burma,
often from Lashio, through Mandalay to Rangoon or other seaports, such as
Moulmein, for shipment to Singapore or Malaysia. Trafficking routes leading
through Kachin and Chin States and Sagaing Division in northern Burma to India
continued to operate as secondary routes.

Demand Reduction. Drug abuse is a growing problem in Burma. Official estimates
put the drug-addicted population at approximately 66,463, but UNDCP and
Non-Governmental Organizations (NGOs) working in the health sector estimate the
actual number is significantly higher, totaling about 400-500,000. Heroin is
cheap in Burma, and intravenous use of heroin contributed 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. A $300,000 UNDCP-funded
demand-reduction project is being implemented by the NGO, "World
Concern", in Kachin State.

IV. U.S. Policy Initiatives

Direct material USG counternarcotics aid to Burma has remained suspended since
1988, when the Burmese military brutally repressed the pro-democracy movement. In
September, the GOB refused to renew a crop substitution project, Project Old
Soldier, being carried out by the U.S. NGO "101 Veterans, Inc." in the
Kutkai area of northern Shan State. The project, which had been in operation for
two years with USG funding approved by Congress, had assisted 25 villages with
cultivation of corn and other crops as viable, economic alternatives to opium
cultivation. The project more than doubled the yield of corn compared with local
varieties as a result of improved seeds, use of fertilizers, and application of
herbicides. The GOB's decision to end the project was based on bilateral
political frictions with the U.S. and undermined farmers' hopes to develop
alternative income sources to opium.

Currently, the USG engages the Burmese government on counternarcotics on a very
limited level. DEA, through the U.S. Embassy in Rangoon, shares drug-related
intelligence with the GOB and conducts joint drug-enforcement investigations with
Burmese counternarcotics authorities. Various U.S. agencies have conducted opium
yield surveys in the mountainous regions of the Shan State in 1993, 1995, 1997,
and 1998, with essential assistance provided by Burmese counterparts. In
cooperation with Burmese counternarcotics personnel, the USG plans to conduct
another survey in early 1999. Results from the surveys give both governments a
much more accurate understanding of the scope, magnitude, and changing geographic
distribution of Burma's opium crop.

The U.S. Government continues frequently to urge the Burmese government to take
serious steps to curb Burma's large-scale opium production and heroin
trafficking. Specifically, the Rangoon Regime has been encouraged to:

Prosecute drug-trafficking organizations and their leaders, such as Wei Xuekang,
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 turn them over to third
countries;

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 anti-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 U.S. due to U.S. concerns over Burma's
commitment to effective counternarcotics measures, human rights, and political
reform. DEA's liaison with Burmese policymakers and military officials-conducted
mainly through DEA's office in Rangoon-will continue and will 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 significant
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
fundamentally and irreversibly 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, the rule of
law, punishment of traffickers and major trafficking organizations (including
asset forfeiture and seizure), anti-corruption, enforcement of anti-money
laundering legislation, continued eradication of opium cultivation and
destruction of drug-processing laboratories, and greater respect for human
rights.


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