Executive summary of the report

This investigative report exposes as a charade the Burmese military regime's "War on Drugs" in Shan State. It provides evidence that the drug industry is integral to the regime's political strategy to pacify and control Shan State, and concludes that only political reform can solve Burma's drug problems.

In order to maintain control of Shan State without reaching a political settlement with the ethnic peoples, the regime is allowing numerous local ethnic militia and ceasefire organisations to produce drugs in exchange for cooperation with the state. At the same time, it condones involvement of its own personnel in the drug business as a means of subsidizing its army costs at the field level, as well as providing personal financial incentives.

These policies have rendered meaningless the junta's recent "anti-drug" campaign, staged mainly in Northern Shan State since 2001. The junta deliberately avoided targeting areas under the control of its main ceasefire and militia allies. The people most affected have been poor opium farmers in "unprotected" areas, who have suffered mass arrest and extrajudicial killing. The anti-drug campaign was not waged at all in Southern Shan State, and in only a few token areas of Eastern Shan State.

Opium is continuing to be grown in almost every township of Shan State. Burmese military personnel is involved at all levels of opium production and trafficking, from providing loans to farmers to grow opium, taxation of opium, providing security for refineries, to storage and transportation of heroin. The diversification of drug syndicates into methamphetamine production since the mid-90s has also been with the collusion of Burmese military units.

S.H.A.N. has documented the existence of at least 93 heroin and/or methamphetamine refineries in existence this year, run by the regime's military allies, with the complicity of local Burmese military units. Raids on refineries carried out during the regime's "war on drugs" have targeted only smaller players and served to consolidate control of the refineries into the hands of the major drug operators such as the United Wa State Army.

High-profile drug-traffickers continue to operate with impunity, many using legal businesses as a front. None have been prosecuted under the new anti-money laundering legislation introduced in 2002.

While colluding in and profiting from the drug business, the regime has taken no serious measures to deal with its social impacts. It has failed to implement public health campaigns against drug abuse, leading to growing addiction problems, particularly with methamphetamines, which Shan villagers are now routinely taking as "energy" pills. The lack of state drug treatment centres has led many communities to set up their own.

The junta's token attempts at crop substitution, often with international assistance, have also failed miserably, due to poor planning, coercive implementation and complete disregard for the welfare of local populations. Under the so-called "New Destiny" project launched in April 2002, farmers in many townships have been forced to plant a new strain of rice from China, which has failed in each locality.

The report also questions the latest figures for opium cultivation given by UNODC in its 2003 Burma opium survey, which show a decrease of 24% since the previous year, and an overall decrease of 62% since 1996. Data collected by S.H.A.N. in Mong Yawng, show that the actual amount of land under opium cultivation in the township during the 2002-2003 growing season was at least four times higher than that listed in the UNODC survey. The UNODC field teams surveyed only along the main roads, collecting data from villagers who were too intimidated to reveal the truth about the extent of poppy growing in the area.

Given the regime's use of the drug trade within its political strategy to control Shan State, it is clear that no amount of international aid will succeed in solving the drug problem unless there is political reform. As Shan analysts have reiterated for decades, this can only be achieved through the restoration of genuine peace, democracy and the rule of law in Burma.

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