Source: 2005
Released by the Bureau for International Narcotics and Law Enforcement Affairs
I. Summary
Burma is the world's second largest producer of illicit opium and a primary source of amphetamine-type stimulants (ATS) produced in Asia. However, annual production of opium has declined for eight straight years and in 2003 Burma produced 292 metric tons of opium, less than five percent (4.8 percent) of the opium produced in Afghanistan. Burma's opium is grown predominantly in the border region of Shan State, in areas controlled by former insurgent groups (less than one percent of Burma's poppy crop is grown outside of Shan State).
Ethnic Wa cultivators along the Chinese border now account for 65 percent of Burma's total poppy crop, and major Wa traffickers continue to operate with impunity. The United Wa State Army (UWSA) has pledged to end opium production and trafficking at the end of the 2005 poppy harvest, but the government has been unable to curb other Wa drug activities and UWSA involvement in methamphetamine production and trafficking remains a serious concern. During the 2004 drug certification process, the USG determined that Burma was the only country in the world that had "failed demonstrably" to meet its international counternarcotics obligations.
The Burmese government has for several years extended its counternarcotics cooperation with other countries in the region, including the opening over the past three years of five border liaison offices on the Chinese and Thai borders, and annual joint operations with China that have destroyed several major drug trafficking rings. Burma is a party to the 1961 UN Single Convention, the 1971 UN Convention on Psychotropic Substances, and the 1988 UN Drug Convention.
II. Status of Country
Burma is the world's second largest producer of illicit opium, but produces only a small fraction of the opium now produced in Afghanistan. Eradication efforts and enforcement of poppy-free zones have combined to depress cultivation levels for the past four years. According to the UNODC, a persistent and strong demand in Asia for opiates and a falling supply in the Golden Triangle region have led to an 80 percent increase in Burmese village-level opium prices.
Declining poppy cultivation has also led to a sharp increase in the production and export of synthetic drugs. According to a joint U.S./Burma opium yield survey, in 2004 the total land area under poppy cultivation was 30,900 hectares, a 34 percent decrease from the previous year. Estimated opium production in Burma totaled approximately 292 metric tons in 2004, a 40 percent decrease from 2003 and an 89 percent decline over the past eight years. In 2004, the average opium yield dropped eight percent from 2003 to 9.5 kilograms/hectare, well below the peak level of 15.6 kilograms/ha recorded in 1996.
Burma plays a leading role in the regional traffic of ATS.
Drug gangs based in the Burma/China and Burma/Thailand border areas annually produce several hundred million methamphetamine tablets for markets in Thailand, China, and India using precursors imported from those countries.
According to GOB figures, during the first ten months of 2004, ATS seizures totaled over 8 million tablets, more than double 2003 seizures. Aside from these seizures, the government did not take significant steps to stop ATS production and trafficking. Authorities reported that they destroyed one ATS lab in 2004.
Opium, heroin, and ATS are produced predominantly in the border areas of Shan State, areas controlled by former insurgent groups. Starting in 1989, the Burmese government negotiated a series of individual cease-fire agreements, allowing each of several ethnically distinct tribal peoples limited autonomy and continued narcotics production and trafficking activities in return for peace.
Since the mid-1990s, however, the Burmese government has elicited "opium-free" pledges from each cease-fire group and, as these pledges have come due, has stepped up law-enforcement activities against opium/heroin in the respective cease-fire territories. The government has yet to put significant pressure on the UWSA to stop illicit drug production or trafficking and the Wa, despite a pledge to be poppy-free in 2005, remain the country's leading poppy growers and opium producers. According to many reports, the Wa are also major manufacturers and traffickers of ATS pills.
Burma has a small, but growing drug abuse problem.
III. Country Actions Against Drugs in 2004
Policy Initiatives. Burma's official 15-year counternarcotics plan, launched in 1999, calls for the eradication of all narcotics production and trafficking by 2014, one year ahead of an ASEAN-wide plan of action that calls for the region to be drug-free by 2015. The plan is to proceed in stages, with eradication efforts coupled to alternative development programs in individual townships, predominantly in Shan State. The government initiated its second five-year phase in 2004. U Sai Lin's Special Region No. 4 around Mong La has been opium-free since 1997; the Kokang Special Region No. 1 banned poppy cultivation in 2003 after missing a 2000 deadline; and the Wa Special Region No. 2, after several postponements, plans to implement a ban in June 2005.
However, according to the 2004 joint U.S./Burma opium yield survey, poppy cultivation within Wa territories now represents 65 percent of the total Burma crop.
The most significant multilateral effort in support of Burma's counternarcotics efforts is the modest UNODC/Wa project financed by the United States, Japan, and Germany. UN Human Security Funds also contributed to UNODC-implemented activities parallel to this project. The UNODC/Wa project was initially a five-year, $12.1 million supply-reduction program to encourage alternative development in territory controlled by the UWSA. In order to meet basic human needs and ensure the sustainability of a projected UWSA opium ban in 2005, the UNODC extended the project until 2007, increased the total budget to $16.8 million, and broadened the scope from 16 villages to the entire Wa Special Region No. 2.
In 2003, the UNODC also established a new project in the Wa and Kokang areas ("KOWI") aimed at supporting the humanitarian needs of farmers who have abandoned poppy cultivation. The idea is to prevent any return to poppy cultivation and thus to sustain drug control efforts in the long term. Altogether 18 partner organizations--including the WFP, the FAO, and INGOs--are coordinating activities under the KOWI umbrella. The goal of these interventions, many of which commenced in 2004 or are scheduled to start in early 2005, is to provide assistance to poppy farmers and their families facing the loss of their primary source of income.
Japan and Italy were early donors to UNODC, and KOWI partners received support from Australia, Germany, the European Commission (and ECHO), New Zealand, Sweden, Switzerland, and the United Kingdom. UNODC plans to phase out its participation by 2007.
Bilateral counternarcotics projects include a small, U.S.-financed crop substitution project in northern Shan State (Project Old Soldier) and a substantial Japanese effort to establish buckwheat as a cash crop in the Kokang and Mong Ko regions of northeastern Shan State. No U.S. counternarcotics funding directly benefits or passes through the GOB.
The Government of Burma, under a 1993 Narcotics Drugs and Psychotropic Substances Law, has in the intervening years issued notifications controlling 124 narcotic drugs, 113 psychotropic substances, and 25 precursor chemicals. Burma enacted a Mutual Assistance in Criminal Matters Law in April 2004 and, in support of a 2002 Control of Money Laundering Law, enacted in December 2003 "Rules for Control of Money Laundering Law."
Law Enforcement Measures. The Central Committee for Drug Abuse Control (CCDAC)--which is comprised of personnel from the police, customs, military intelligence, and army--leads drug-enforcement efforts in Burma. The CCDAC now has 18 drug-enforcement task forces around the country, with most located in major cities and along key transit routes near Burma's borders with China, India, and Thailand. As is the case with most Burmese government entities, the CCDAC suffers badly from a lack of adequate resources to support its law-enforcement mission.
Narcotics Seizures. Summary statistics provided by Burmese drug officials indicate that during the first ten months of 2004, Burmese police, army, and the Customs Service together seized approximately 579 kilograms of raw opium, 958 kilograms of heroin, 128 kilograms of marijuana, 59 kilograms of morphine, and just over 8 million methamphetamine tablets. Opium, heroin and morphine seizures represent approximately 2.3 percent of Burma's 2003-year maximum potential opium production
Although seizures of raw opium decreased from 2003, seizures of heroin again doubled for the second year in a row, including a massive heroin bust of almost 600 kilograms in July along Burma's southern coast, leading to an international investigation, including the Burmese Police Force and DEA that resulted in 35 arrests and the seizure of significant assets and property. Seizures of ATS in 2004 also doubled, reversing a downward trend and providing compelling evidence of growth in ATS production and trafficking. In July 2004, Burmese authorities seized 5.5 million ATS tablets in a single bust in northern Shan State.
Through October 2004, according to official statistics, Burma arrested 3,436 suspects on drug related charges. In 2004 Burmese authorities also arrested and extradited 12 Chinese and 2 Thai drug traffickers, and have handed over 32 other Chinese traffickers to China during the past three years.
The government dismantled only one heroin refinery through the first ten months of 2004, compared to 24 over the previous two years. The GOB also reported the destruction of one methamphetamine laboratory. Both facilities were located in northern Shan State. The government eradicated 3,052 hectares (7,545 acres) of opium poppy in 2004, a fraction of the crops destroyed earlier. However, given a significant decline in the land under poppy cultivation, eradicated acreage represented nearly eight percent of the total 2003-04 crop. Overall eradication accounts for almost one-third of the reduction in area under poppy cultivation since 2001.
Corruption. There is no reliable evidence that senior officials in the Burmese Government are directly involved in the drug trade. However, lower level officials, particularly army and police personnel posted in border areas, are widely believed to be involved in facilitating the drug trade; and some officials have been prosecuted for drug abuse and/or narcotics-related corruption. According to the Burmese government, over 200 police officials and 48 Burmese Army personnel were punished for narcotics-related corruption or drug abuse between 1995 and 2003. Of the 200 police officers, 130 were imprisoned, 16 were dismissed from the service, 7 were forced to retire, and 47 were demoted. In October 2004, the military junta ousted Prime Minister General Khin Nyunt, accusing him and hundreds of his military intelligence subordinates of corruption, including illegal activities conducted in northern Shan State. However, none of these officials has been charged with drug-related offenses and no Burma Army officer over the rank of full colonel has ever been prosecuted for drug offenses.
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 (ratified in 1991). In September 2003, the 1971 UN Convention on Psychotropic Substances took effect in Burma. In addition, Burma is also one of six nations (Burma, Cambodia, China, Laos, Thailand, Vietnam) that are parties to UNODC's sub-regional action plan for controlling precursor chemicals and reducing illicit narcotics production and trafficking in the highlands of Southeast Asia.
Over the past several years, the Burmese government has extended its regional counternarcotics cooperation, including the signing in 2001 of Memoranda of Understanding (MOUs) with both China and Thailand; the opening over the past three years, with UNODC support, of five border liaison offices on the Chinese and Thai borders to facilitate the sharing of intelligence; annual joint operations with China that have destroyed several major drug trafficking rings; and the establishment with Thailand of three joint "narcotics suppression coordination stations."
Cultivation and Production. According to the 2004 U.S./Burma joint opium yield survey, opium production declined in Burma for the eighth straight year. The survey also found that the maximum potential yield for opium in Burma in 2004 totaled 292 metric tons, down 40 percent from the previous year.
Over the past eight years, opium production in Burma has declined by more than 88 percent. During the same period, the total area under cultivation has also dropped by over 80 percent, from 163,100 hectares in 1996 to approximately 30,900 hectares in 2004 (a 38 percent drop for the year). Due in part to poor rainfall, yields have also declined from an estimated 16 kilograms per hectare in 1996 to about 9.5 kilograms per hectare in 2004.
Results from a UNODC-sponsored survey throughout Shan State in 2004 largely corroborated the findings of the U.S./Burma joint opium yield survey. According to UNODC, the area under poppy cultivation in 2004 declined by 29 percent from the previous year and by 73 percent since 1996. UNODC also determined that potential opium yield declined in 2004 by 54 percent.
According to the GOB, Thailand planned to contribute an additional $700,000 to an opium crop substitution and infrastructure project in southeastern Shan State, having provided $960,000 since launching the project in 2002. While not formally funding alternative development programs, the Chinese government has encouraged investment in many projects in the Wa area, particularly in commercial enterprises such as tea plantations and pig farms and has assisted in marketing those products in China through relaxation of duty taxes. Also in 2004, with the support of UNODC, Burma and Laos agreed to conduct joint patrols along the Mekong River.
Drug Flow/Transit. Most ATS and heroin in Burma is produced in small, mobile labs located in the Burma/China and Burma/Thailand border areas, primarily in territories controlled by active or former insurgent groups. A growing amount of methamphetamine is reportedly produced in labs co-located with heroin refineries in areas controlled by the United Wa State Army (UWSA), the ethnic Chinese Kokang, and the Shan State Army-South (SSA-S). Heroin and methamphetamine produced by these groups are trafficked overland (or via the Mekong River) primarily through China, Thailand, India, and, to a lesser extent, Laos, Bangladesh, and Burma itself. Heroin seizures in 2004, and subsequent investigations, revealed the increased use by international syndicates of the Rangoon international airport and port for trafficking of drugs to the global narcotics market.
Demand Reduction. The overall level of drug abuse is low in Burma compared with neighboring countries, in part because many Burmese are too poor to afford a drug habit. Deteriorating economic conditions will likely stifle significant growth in consumption. However, while the government maintains that there are only about 70,000 registered addicts in Burma, surveys conducted by UNODC, among others, suggest that the addict population could be as high as 300,000 (i.e., still less than one percent of the population). Most drug users, particularly among the older generation, use opium, but NGOs and community leaders report increasing use of heroin and synthetic drugs, particularly among disaffected youth in urban areas and workers in ethnic minority mining communities. The UNODC estimated that in 2003 there were at least 15,000 regular ATS users in Burma and a joint UNODC/UNAIDS/WHO study estimated that there are between 30,000 and 130,000 injecting drug users. There is also a growing HIV/AIDS epidemic, linked in part to intravenous drug use. According to a UNODC regional center, an estimated 24 percent of all intravenous drug users in Burma have tested positive for the HIV/AIDS virus, with a range of 10 to 73 percent depending on the specific location. Infection rates are highest in Burma's ethnic regions, and specifically among mining communities in those areas, where opium, heroin, and ATS are readily available.
Burmese demand reduction programs are in part coercive and in part voluntary. Addicts are required to register with the GOB and can be prosecuted if they fail to register and accept treatment. Altogether, more than 21,000 addicts were prosecuted for failing to register between 1994 and 2002. The GOB has not provided 2003-04 data. Demand reduction programs and facilities are strictly limited, however. There are six major drug treatment centers under the Ministry of Health, 49 other smaller detox centers, and eight rehabilitation centers which, together, have reportedly provided treatment to about 55,000 addicts over the past ten years. There are also a variety of narcotics awareness programs conducted through the public school system. In addition, the government has established demand reduction programs in cooperation with NGOs. These include programs with CARE Myanmar, World Concern, and Population Services International (PSI), all of which focus on injecting drug use as a factor in the spread of HIV/AIDS.
IV. U.S. Policy Initiatives and Programs
Policy and Programs. The USG suspended direct counternarcotics assistance to Burma in 1988, when the Burmese military began its suppression of the pro-democracy movement. The USG now engages the Burmese government in regard to narcotics control only 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. The U.S. also conducted opium yield surveys in the mountainous regions of Shan State in 1993 and 1995 and annually from 1997 through 2004 with assistance provided by Burmese counterparts. These surveys give both governments an accurate understanding of the scope, magnitude, and changing geographic distribution of Burma's opium crop.
The Road Ahead. The Burmese government has in recent years made significant gains in reducing opium poppy cultivation and opium production and cooperated with UNODC and major regional allies (particularly China and Thailand) in this fight. Although large-scale and long-term international aid--including development assistance and law-enforcement aid--is necessary to help curb drug production and trafficking in Burma, the military regime's ongoing political repression has limited international support of all kinds, including support for Burma's law enforcement efforts.
Furthermore, a true opium replacement strategy must undertake an extensive range of counternarcotics actions, including crop eradication, effective law enforcement, alternative development, and support for former poppy farmers to ensure sustainability. The Government of Burma must foster cooperation between itself and the ethnic groups involved in drug production and trafficking, especially the Wa, and enforce counternarcotics laws to eliminate poppy cultivation and opium production.
The USG believes that the Government of Burma must continue to reduce poppy cultivation and opium production; prosecute drug-related corruption, especially corrupt government and military officials who facilitate or condone drug trafficking and money laundering; take action against high-level drug traffickers and their organizations; enforce its money-laundering legislation; and expand demand-reduction, prevention, and drug-treatment programs to reduce drug use and control the spread of HIV/AIDS. The GOB must also address the explosion of ATS that has flooded the region by gaining support and cooperation from the ethnic groups, especially the Wa, who manufacture and distribute ATS, as well as through closing production labs and preventing the diversion of precursor chemicals needed to produce synthetic drugs. The USG also urges the GOB to stem the growth of a domestic market for the consumption of ATS before this problem becomes more significant.
Burma is a primary source of amphetamine-type-stimulants (ATS) in Asia, producing hundreds of millions of tablets annually, and is the world's second largest illicit opium producer, though opium poppy cultivation is decreasing. Burma does not have a significant chemical industry and does not manufacture ephedrine, pseudoephedrine, acetic anhydride, or any of the other chemicals required for ATS or heroin production. Most of the chemicals required for illicit dug manufacture are smuggled into Burma from neighboring countries.
Burma is a party to the 1988 UN Drug Convention, but it does not have laws and regulations to meet all its chemical control provisions. In 1998, Burma established a Precursor Chemical Control Committee responsible for monitoring, supervising and coordinating the sale, use, manufacture, and transportation of imported chemicals. In 2002, the Committee identified 25 substances as precursor chemicals, including two not in the 1988 UN Convention (caffeine and thionyl chloride) and prohibited their import, sale or use in Burma.
In January 2003, Burma held its first trilateral conference with India and China on precursor chemicals. In 2004, the conference expanded to include Laos and Thailand. As a result, India and China have taken steps to divert precursor chemicals away from Burma's border areas and India has added ephedrine to the 100-mile wide exclusion zone for acetic anhydride along its border with Burma. In addition, Burma is one of six countries (Burma, Cambodia, China, Laos, Thailand, and Vietnam) that are parties to the UN Office of Drugs and Crimes sub-regional action plan for controlling precursor chemicals and reducing illicit narcotics production and trafficking in the highlands of Southeast Asia.
Burmese seizures of precursor chemicals declined substantially during the first ten months of 2004. Over this period, authorities seized 183 kilograms of ephedrine, 7 gallons of acetic anhydride, and 17, 286 liters of other precursor chemicals.
Burma, a major drug producing and trafficking country, has a mixed economy with private activity dominant in agriculture and light industry, and with substantial state-controlled activity, mainly in energy and heavy industry. Burma,s economy continues to be vulnerable to drug money laundering due to its under-regulated financial system, weak anti-money laundering regime, and policies that facilitate the funneling of drug money into commercial enterprises and infrastructure investment.
In October 2004, the Financial Action Task Force (FATF) withdrew countermeasures against Burma that it had called upon member countries to impose in 2003 for Burma,s failure to remedy deficiencies to its anti-money laundering regime identified in 2001 when the FATF placed Burma on its Non-Cooperative Country and Territories list. The October FATF decision came in response to passage in April 2004 of the "Mutual Assistance in Criminal Matters Law" (MLA) along with subsequent amendments and implementing regulations to the MLA and the 2002 "Control of Money Laundering Law."
In January 2004, the Government of Burma (GOB) took steps to improve its money laundering law. It set a threshold amount for reporting cash transactions by banks and real estate companies, albeit at a high level of 100 million kyat (approximately $100,000). The government also formally named representatives to a financial intelligence unit established in December 2003. At the request of the FATF, in October 2004 the government added fraud to its list of predicate offenses for money laundering and made clear that there was not a threshold amount for money laundering offenses associated with any of the listed predicate crimes. Shortly thereafter, in November 2004, Burma further amended its money laundering law to specify a penalty of up to three years imprisonment and/or fine, for "tipping off" that a suspicious transaction report has been filed on a particular individual.
These moves amended regulations instituted in 2003, which had set out 11 predicate offenses, including narcotics activities, human and arms trafficking, cyber crime, and "offenses committed by acts of terrorism," among others. The 2003 regulations also called for suspicious transaction reports (STRs) by banks, the real estate sector, and customs officials, and imposed severe penalties for non-compliance.
Despite the lifting of countermeasures, Burma remains on the FATF,s list of non-cooperative countries and territories because of remaining shortcomings in its anti-money laundering regime. As of January, 2005, the United States has maintained the countermeasures it adopted in April, 2004, against Burma. At that time, the United States issued final rules finding the jurisdiction of Burma and two private Burmese banks, Myanmar Mayflower Bank and Asia Wealth Bank to be "of primary money laundering concern," and requiring U.S. banks to take certain special measures with respect to all Burmese banks, including Myanmar Mayflower and Asia Wealth Bank in particular. These rules were issued by FinCEN of the Treasury Department pursuant to Section 311 of the 2001 USA PATRIOT Act.
The rules prohibit certain U.S. financial institutions from establishing or maintaining correspondent or payable-through accounts in the United States for, or on behalf of, Myanmar Mayflower and Asia Wealth Bank and, with narrow exceptions, all other Burmese banks. Myanmar Mayflower and Asia Wealth Bank have been directly linked to narcotics-trafficking organizations in Southeast Asia. In December 2003, the Burmese Government announced an investigation of these two private banks. However, in 2004 there were no publicly available interim reports or other evidence of progress in these investigations.
Burma remains under a separate U.S. Treasury Department advisory, stating that U.S. financial institutions should give enhanced scrutiny to all financial transactions relating to Burma. The Section 311 rules complement the 2003 Burmese Freedom and Democracy Act (renewed in July 2004) and an accompanying executive order.. These laws imposed new economic sanctions on Burma following the Burmese government,s May 2003 attack on pro-democracy leader Aung San Suu Kyi and her convoy. New sanctions prohibit the import of Burmese-produced goods into the United States, ban the provision of financial services to Burma by U.S. persons, freeze the assets of identified Burmese institutions including the ruling junta, .and expand visa restrictions to include managers of state-owned enterprises, among other officials and family members associated with the regime.
Burma holds observer status in the Asia/Pacific Group on Money Laundering and is a party to the 1988 UN Drug Convention. Over the past several years, the Government of Burma (GOB) has extended its counternarcotics cooperation with other states. The GOB has bilateral drug control agreements with India, Bangladesh, Vietnam, Russia, Laos, the Philippines, China, and Thailand. It is not known whether these agreements cover cooperation on money laundering issues. Burma has signed, but not yet ratified, the UN International Convention for the Suppression of the Financing of Terrorism. In March 2004, Burma ratified the UN Convention against Transnational Organized Crime.
The Government of Burma now has in place a framework to allow mutual legal assistance and cooperation with overseas jurisdictions in the investigation and prosecution of serious crimes. Burma must increase the regulation and oversight of its banking system, and end policies that facilitate the investment of drug money in the legitimate economy or encourage widespread use of informal remittance or "hundi" networks. Burma should create an environment conducive to establishing a viable anti-money laundering regime. Burma should provide the necessary resources to the administrative and judicial authorities that supervise the financial sector and implement fully and enforce its latest regulations to fight money laundering successfully. Burma should become a party to the UN International Convention for the Suppression of the Financing of Terrorism and criminalize the funding of terrorism.