BURMA'S COUNTERNARCOTICS PERFORMANCE

UNCLAS SECTION 01 OF 04 RANGOON 000757

SIPDIS

STATE FOR EAP AND INL
TREASURY FOR OASIA
DEA FOR OF,OFF
CDR USPACOM FOR FPA

E.O. 12958: N/A
TAGS: SNAR KCRM BM
SUBJECT: BURMA'S COUNTERNARCOTICS PERFORMANCE

REF: A. STATE 100273

B. STATE 153955


1. Summary: The Burmese government (GOB) has reduced opium
cultivation, cooperated with the United States, Australia,
China, Thailand, and other states on a series of major
narcotics cases, and continued to prosecute traffickers. It
has failed in regard to its new money laundering law, whose
implementation has been delayed by the collapse of Burma's
private banking system. The GOB has deliberately chosen to
give the Wa and other former insurgent groups time to exit
the narcotics trade - the last of these grace periods expires
in 2005. The GOB has cracked down whenever former insurgent
groups have broken their pledges and, after 2005, the United
Wa State Army, like all other groups in Burma, will be fair
game for government enforcement actions. Burma's current
narcotics legislation (basically the 1993 Law on Narcotic
Drugs and Psychotropic Substances) is more than adequate for
the investigation and prosecution of major drug offenses. It
has been used already to put more than 10,000 felons behind
bars with sentences in excess of ten years each. End
Summary.


2. The paragraphs below are keyed to the criteria outlined in
our counternarcotics demarche (reftel A).


3. Facilitate the participation of independent monitors to
verify poppy eradication and other counternarcotics efforts.

Burma cooperates with the United States on its annual opium
yield survey and UNODC on census surveys of opium production.
In fact, all recent estimates of opium and heroin production
in Burma have been compiled by the United States and the
United Nations on the basis of these surveys. According to
the United States, Burma reduced opium production by more
than three-quarters between 1996 and 2002. According the
United Nations, Burma reduced its opium production by more
than half over the same period. The results of the U.S.
survey in 2003 is not yet available. According to the United
Nations, Burma reduced its opium fields by a further 24
percent in 2003, despite good weather. By their estimate,
the acreage under opium cultivation in Burma in 2003 declined
to only 62,200 hectares, down more than 100,000 hectares from
the area under cultivation in 1996.

Burma cooperates closely with the United States' Drug
Enforcement Administration and the Australian Federal Police
on narcotics enforcement activities. Both DEA and AFP
maintain active offices in Burma. Both offices have
maintained detailed records of the Burmese government's
seizures, arrests, and other law enforcement operations in
recent years. DEA's file, compiled and verified by agents
who have been involved in investigations in Burma, is
available in Washington.


4. Arrest and prosecute the senior leadership of heroin and
methamphetamine trafficking organizations.

Burma has arrested over 90,000 persons on drug-related
charges over the past 15 years. Through the end of 2002, 42
persons were sentenced to death for drug-related offenses in
Burma, and another 37 were imprisoned for life. During the
same period, more than 12,500 persons were sentenced to
prison for ten years or more for narcotics-related offenses.
These arrests and prosecutions continued in 2003. While
statistics on prosecutions are not yet available, preliminary
data indicate that Burma arrested more than 700 suspects in
drug-related cases during the first three months of 2003.

Many of these arrests and convictions involved major drug
syndicates. Many also involved close cooperation with the
United States, Australia, and other western law enforcement
agencies. Among the most notable were the following:

-- Cooperation with the United States and China in the
investigation of the "1-2-5" syndicate, which led to the
arrest of 28 persons in the United States, Hong Kong, China,
and India in May 2003. Reportedly, this group had been
responsible for the export of more than $100 million in
heroin to the United States since 2000.

-- Cooperation with China in a series of arrests and seizures
that have continued throughout 2001 and 2002 all along the
Chinese border following the signature of a Chinese/Burmese
MOU on counternarcotics operations in January 2001. Since
then, Burma has turned over 60 fugitives to China, including
members of one group (Tan Xiao Lin and company) which China
described as the "largest armed drug-trafficking gang in the
Golden Triangle."

-- Cooperation with Thailand in the seizure of 116 kilograms
of heroin and 7.8 million methamphetamine tablets in February

2002. Two of the principals behind this shipment were also
eventually convicted in Rangoon and sentenced to "indefinite"
(i.e., unending) terms in prison.

-- Cooperation with the United States Drug Enforcement
Administration and the Australian Federal Police in the
seizure of 357 kilograms of heroin in Fiji in October 2000.
Death sentences were eventually handed down in Rangoon for
two drug kingpins connected with this case.


5. Establish a mechanism for reliable measurement of
methamphetamine production and demonstrate progress in
reducing production and increasing seizures.

There is no mechanism for reliably measuring illicit
methamphetamine production in any country, including the US.
The most commonly used procedure is to take seizures and
multiply by 10. If applied to Burma, that measure would
suggest production of 320 million tablets in 2001, 94 million
tablets in 2002, and 19 million tablets during the first
three months of 2003. However, the GOB believe that this
reduction in seizures is due more to changing patterns of
methamphetamine production and trafficking than it is to the
overall reduction in production. Since 2002, under pressure
from the GOB, more traffickers have taken to mixing chemicals
at sites along the Chinese/Burmese border and then shipping
the product in powder or crystal form along the Mekong River
to plants in Laos, Thailand, and Burma where the drug is
flavored for local markets and stamped into tablets. The net
result is that the product spends far less time in Burma than
before; hence, the lower seizures.


6. Establish an effective program for the control of
precursor chemicals.

Burma does not have a precursor chemical industry; nor does
it produce any of the precursor chemicals used in the
manufacture of heroin, amphetamine-type stimulants, or other
synthetic drugs. All chemicals used for the production of
narcotics in Burma (with the exception of opium itself) are
imported from China, India, Thailand, and other states. None
are produced locally.

Burma has outlawed 25 precursor chemicals, including
ephedrine, acetic anhydride, and even caffeine (in bulk).
However, it has not yet been able to stem trafficking from
neighboring countries, despite seizures in 2002 which
amounted to 2,900 liters of acetic anhydride, 26,000 liters
of chemical liquids, 4,800 kilograms of chemical powders, and
1,700 kilograms of ephedrine. On the other hand, it has
begun to build the international cooperation that is required
to control this trade. In January 2003, Burma held its first
trilateral conference with India and China on precursor
chemicals, and in March met bilaterally with India on the
same topic. As a result of those meetings, India is now
considering creating a 100-mile wide exclusion zone along its
border with Burma within which any possession of ephedrine
would be illegal. A similar zone on the Indian frontier
already exists for acetic anhydride.


7. Create a special task force of police and prosecutors to
target and investigate high-level drug traffickers and drug
trafficking groups.

Drug enforcement efforts in Burma are led by the Central
Committee for Drug Abuse Control (CCDAC),which is comprised
of personnel from the police, customs, military intelligence,
and the army. CCDAC now has 21 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. CCDAC's units are underfunded and badly
equipped. Nevertheless, they are bringing narcotics
traffickers to heel and securing convictions. As noted
above, more than 90,000 persons have been arrested for
narcotics-related offenses in Burma over the past 15 years
and more than 10,000 have sentenced to 10 years or more in
prison. CCDAC has also developed arrangements for
cooperation with the United States, China, Thailand, and
India, among others, that have allowed law enforcement agents
around the world to move effectively against major drug
cartels.

Burma, in short, has an organization that has already proved
that it can move effectively against high-level drug
traffickers and drug trafficking groups. What it does not
have is a political situation that will allow it to move
aggressively against former insurgent groups, like the United
Wa State Army and others implicated in the drug trade, for
fear of reigniting the insurgencies that devastated eastern
Burma for so many decades before 1989. Burma has
deliberately chosen to slowly wean these former insurgent
groups from their dependence on the narcotics trade, while
building power at the center to use when the grace periods it
has allowed these groups run out. In 1997, the Eastern Shan
State Army of Sai Lin promised to end opium production in its
cease-fire area and did so. In 2000, the Kokang Chinese of
Pen Kya Shin broke their pledge to end opium production and,
since 2001, have been raked by counter-narcotics operations
that have been mounted by both the Burmese and Chinese
governments. In 2003, as a result, opium production in the
Kokang Chinese capital district of Lawkai was a mere fraction
(20 percent) of its level two years earlier. In 2005, the
United Wa State Army is scheduled to end opium production.
If it fails, it will get the same treatment from the Chinese
and Burmese that the Kokang Chinese have already tasted.


8. Fully implement and enforce Burma's money-laundering
legislation.

The GOB enacted new and relatively powerful money laundering
legislation in June 2002. That legislation criminalizes
money laundering in connection with virtually every kind of
serious criminal activity and levies heavy responsibilities
on banks in regard to reporting. Penalties are also
substantial. Implementation of the new legislation has
lagged, however. While the government held training seminars
on money laundering, started several investigations, and
seized assets in connection with several major narcotics
cases, it has not yet prosecuted these cases as violations of
the money-laundering law. Neither has it published
regulations to guide bank reporting in regard to suspicious
transactions.

The net result is that the government is effectively working
only with the asset seizure provisions of its 1993 narcotics
law. Perhaps deterred by a banking system crisis which
ripped through the country in February 2003, it has not
really yet put its money laundering legislation to work.


9. Take effective measures to stem the flow of illicit drug
money into the banking system and economic enterprises and to
end joint economic ventures with the leaders of drug
trafficking organizations.

Money, illicit or otherwise, is not flowing into Burma's
banking system, which collapsed in February 2003. Since then
deposits at Burma's banks have declined by estimated 40
percent, with the hardest hit banks being those, like the
Asia Wealth Bank, Myanmar Mayflower Bank, and Myanmar
Oriental Bank, that were rumored to have connections with
criminal elements. The GOB has not attempted to bail the
banks out of their current predicament; rather, it has let
them slowly collapse as monuments to bad banking.

A variety of factors contributed to this banking system
crash, including a long-standing climate of financial
repression, the collapse of Burma's informal financial
institutions, and the introduction of Burma's new money
laundering law, which required bank depositors to prove, if
challenged, the legal origin of their funds. Since accurate
record-keeping is a rarely practiced art in Burma, many
businessmen reacted to the new legislation, and the
possibility that the government might seize their funds, by
withdrawing their deposits. This was probably not the
primary cause of the crash, but was one of the straws that
broke the back of Burma's banks.

The GOB does not have joint ventures with the leaders of drug
trafficking organizations. Rather, it has given corporations
like the United Wa State Party's Hong Pang Company outright
concessions for the operation of a variety of businesses
which range from farms to ranches to ruby mines and other
trading and industrial establishments. This has been
controversial, both in Burma and abroad, but the GOB has
argued that it is necessary, for two reason: (1) to give
known narcotics trafficking groups an alternative source of
income; (2) to tie these groups more closely to the Burmese
economy. The Burmese view is that these former insurgents
are less likely to go back into rebellion if they have
interests in the Burmese economy.


10. Amend Burma's substantive and procedural criminal laws
to facilitate effective investigation and prosecution of
major drug traffickers.

With UNODC's assistance, Burma has recently completed the
draft of a new mutual legal assistance law which will
facilitate legal and judicial cooperation with other
countries. Reportedly, this draft legislation will be made
law later this year. The legal regime will also be helped by
the final publication of the rules and regulations for the
2002 money laundering law. However, with the banking system
now imploding, that is not a critical issue.

Otherwise, Burma's current narcotics legislation (basically
the 1993 Law on Narcotic Drugs and Psychotropic Substances)
is more than adequate for the investigation and prosecution
of major drug offenses. It is completely in compliance with
the recommendations of the 1988 UN Drug Convention and has
been used already to put more than 10,000 felons behind bars
with sentences in excess of ten years each.
Martinez