US embassy cable - 03RANGOON1339

UNCLAS SECTION 01 OF 03 RANGOON 001339 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/BCLTV, EAP/CM, EB, INL 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA JEFF NEIL 
USPACOM FOR FPA 
 
E.O. 12958: N/A 
TAGS: SNAR, PREL, PINS, PGOV, ECON, BM 
SUBJECT: POPPIES, AK-47S, AND WOLFRAMITE: A TRIP TO WA AND 
KOKANG 
 
1. (SBU) Summary: A brief visit to a major opium production 
region in eastern Burma, some of it well outside the writ of 
the Rangoon generals, presented some clear themes.  The 
non-Burman militias and governments that hold sway in the 
eastern border zones govern a region that is far more reliant 
on China than Rangoon for its economic well-being.  Poppies, 
opium, and heroin are on the decline, while amphetamines are 
gaining strength.  The reduction of poppy production is in 
part due to some economic development and crop substitution 
programs.  However, all admitted much more needed to be done 
-- and the international community should help.  The question 
that stuck in our mind, though, is whether the obviously 
wealthy ethnic leaders were doing enough on their own to give 
their people a better, drug-free, life.  End summary. 
 
Where in the World? 
 
2. (U) To publicize its efforts to fight narcotics 
production, and to make the case for more international aid, 
the Burmese counter-narcotics police and military 
intelligence organized a trip for ASEAN, EU, Japanese, and 
U.S. diplomats and police officials into northern Shan State, 
and the otherwise off-limits Special Regions One (Kokang) and 
Two (northern Wa).  Shan State is the largest of Burma's 14 
states and divisions, and forms a large "bubble" on the 
eastern portion of the country, bordering China, Laos, and 
Thailand.  This particular trip focused on the primary border 
crossing at Muse, along the northern border of Shan State and 
China, before swinging east into the semi-autonomous Special 
Regions on the northeastern Shan-China border.  This rather 
inaccessible area is notorious for insurgent groups, and the 
production of poppies, opium and heroin, and now amphetamines. 
 
3. (U) The Wa and Kokang zones are visitable now because of 
cease-fire agreements the government negotiated in the late 
1980s and 1990s.  In exchange for significant political and 
economic autonomy, the regions were opened up to "outsiders" 
-- both Burmans and international organizations -- to assess 
the narcotics situation and try to reduce production and 
trafficking.  Although the Burmese national police and 
military maintain large presences in the two Special Regions, 
both the Wa and Kokang ethnic groups maintain their own 
leadership structure and well-armed militias, and seem to run 
their own local government with minimal interference from the 
central government. 
 
Drugs: Beating Poppies Into Rubber Trees 
 
4. (SBU) Poppy growing and the production and trafficking of 
opium and heroin seem to be on the decline.  A senior Kokang 
leader said his region has been poppy and opium free since 
2002.  Police sources reported that local seizures of heroin 
have been rising steadily since 2001, but that seizures of 
raw opium are down significantly since 2002.   One of the 
most serious challenges now, the police reported, is stopping 
the production and export of amphetamine type substances 
(ATS) and the import of ATS precursor chemicals.  These 
trends track with our own findings, and the findings of the 
joint U.S.-Burma annual opium survey. 
 
5. (U) There was much talk from all sides of the importance 
of crop substitution and other economic development programs 
as antidotes to poppy and ATS production.  The GOB officials 
(police and military) along with the Wa and Kokang ethnic 
representatives all complained that without more 
international support, though, these efforts were doomed to 
failure.  Besides a lack of international aid, local 
officials pointed out other constraints to the success of 
crop substitution: the lack of secure and accessible markets 
for the new cash crops (China has agreed to accept a lot duty 
free, but infrastructure remains a problem); the difficulty 
of finding suitable crops for the local soil and climate for 
which there is also a demand in China; and, the lack of 
adequate motorized transport and good roads to take the new 
crops to market. 
 
6. (SBU)  Despite these constraints, in this corner of Shan 
State there were a number of examples of substitution efforts 
underway.  However, our brief visits to these sites and the 
one-sided presentations we heard made it difficult to assess 
these projects' significance or success.  Throughout the 
region we saw hillsides once dominated by poppies, but now 
covered in rubber trees, sugar cane, and other cash crops. 
We also saw efforts in the Kokang, Wa, and Burmese zones to 
develop some economic alternatives for farmers; whether it be 
a rubber plantation and factory in Wa, a Japanese 
government-sponsored buckwheat growing program in Kokang, or 
a 1000-acre "model" training farm near Lashio, in 
Burmese-controlled northern Shan State. 
7. (SBU) One controversial aspect of the substitution 
programs is the forced relocation of poppy farmers to new 
terrain.  In both Namtik (Wa region) and Laukaing (Kokang 
region), local leaders were proud of recent efforts to move 
600 and 200 households respectively from hillside farming 
areas to lowland areas.  In both cases the leaders said they 
had given housing and farming assistance to the transplants, 
but they gave no details and we had no chance to talk 
directly with the farmers. 
 
Politics: China's Burmese Protectorate 
 
8. (U) The dominance, vice influence, of China in the whole 
area was startling.  Particularly in the Wa and Kokang ethnic 
zones, there was very little economic or cultural Burmese 
influence.  Because of difficult terrain and road conditions, 
these areas were far more accessible to China's Yunnan 
Province than to the main trade routes inside Burma.  In 
Laukaing (still well inside the Burmese border), kyat was not 
accepted (only PRC yuan), Burmese was not widely spoken, and 
there were no Burmese products in sight. 
 
9. (U) The economic reliance of the region on China is 
pervasive, and indicative of the importance of China to 
Burmese consumers around the country.  As mentioned, the 
success of the crop substitution programs in Wa and Kokang 
rests, in part, on the ability to establish reliable, 
accessible, and untaxed markets on the Chinese side of the 
border.  Even in other regions of Burma, though, the 
consumption of cheap Chinese consumer goods is a way of life 
from Rangoon to the remotest outpost.  An Embassy official 
recently visiting Tamu on the Indian border noted the 
prevalence of Chinese products versus Indian products, 
despite relative proximity of the area to India. 
 
10. (U) The importance of China is not limited to economics 
and trade, though.  During our Shan trip, there was much 
focus on cross-border cooperation for narcotics control. 
Burmese police and military officials credited improved drug 
interdiction cooperation, and some prisoner exchanges, to 
regular consultations with their Chinese counterparts. 
 
Economics: One Word for You...Wolframite 
 
11. (SBU) The level of development in the towns of the Wa and 
Kokang regions, the quality of the ethnic militias' weapons 
and uniforms, and the newness and quality of the ethnic 
leadership's vehicles, indicated diverse and significant 
sources of income that cannot be explained solely by the 
success of the new cash crops.  Much of this is assumed to 
come from narcotics trafficking.  On the legitimate side, the 
Wa leaders mentioned they had local mining concessions 
(producing wolframite and some coal, which was bought by 
China) and some jade claims to the northwest in Kachin State. 
 Wa and Kokang businesspeople are also involved in various 
manufacturing ventures as well as large construction and 
public works projects across the country .  Popular locally 
owned and operated brothels and casinos were widely available 
in the larger towns of the Wa and Kokang regions. 
 
12. (SBU) The main crossing for border trade was in Muse, 
which is connected to Mandalay via Lashio along a very good 
tollway built and operated by Asia World (a company founded 
in the 1990s by a former Kokang leader, and suspected 
narcotrafficker, Lo Hsing-han).  There are at least four 
checkpoints along this route where trucks must stop and be 
searched by Customs officials.  At the checkpoint closest to 
the border, Customs officials say that they check 30-40 
outgoing trucks per day and 35-50 incoming.  Though the 
inspections appeared diligent while the delegation was there, 
Rangoon-based border traders report that the inspection 
process primarily involves paying a pre-arranged fee to the 
chief inspector.  These traders complain that without some 
"facilitation" each of the checkpoints can hold up a shipment 
anywhere from one day to one week. 
 
Comment: Meet You Halfway 
 
13. (SBU) It is clear that without more and better economic 
development programs, including crop substitution, it will be 
difficult for dirt poor locals to be enticed away from drug 
production and trafficking.  Although our visit was very 
short, it appears that the local ethnic officials -- who seem 
to be able to spend significant funds on luxury items and the 
development of very modern entertainment facilities -- may 
not be contributing all they should to improving the 
standards of living of their people.  This phenomenon is not 
limited to the Wa and Kokang.  In other areas, such as 
eastern Kachin State, where ethnic cease-fire groups have 
been given lucrative economic autonomy by the government, 
little seems to trickle down to the average person.  This is 
something that should be pondered when considering additional 
international assistance for these regions. 
McMullen