YANGON — Visitors flying into this buzzing tropical metropolis step into a modern glass-and-steel airport that symbolises both Myanmar's aspirations to rejoin the wider world after years of isolation and the country's troubled past.
The company that built the terminal, Asia World, was started by one of the country's premier drug kingpins, a warlord whose militia peddled heroin extracted from the opium fields of the mountainous hinterlands.
It is nearly impossible to visit Myanmar today and not encounter the company's other projects: roads, hydroelectric dams, the country's biggest ports and one of its most luxurious hotels, the Sule Shangri-La in downtown Yangon.
There is no evidence to suggest the company has any current ties to drug trafficking, but as Myanmar strives to modernise after decades of dictatorial rule, Asia World's role in that effort provides a prominent example of how the drug trade is inextricably intertwined with the country's new economy and lies at the root of many of its efforts to rebuild.
"The seed capital of the Burmese economy is heroin," said Ronald Findlay, a Columbia University economist who was born in colonial Burma, which the military government renamed Myanmar in 1989. "If that's an exaggeration, it's not a huge one."
Junction Square, one of the biggest and most modern malls in Yangon, was developed by Shwe Taung Group, which the US alleges has connections with the narcotics trade. (Adam Dean/The New York Times)
According to interviews with real estate brokers, economists, and current and former law enforcement agents, illicit drug profits have been a major source of investment in rebuilding the country, and companies linked to the drug trade are building new roads and bridges and reshaping the skyline of Yangon.
Until recently, Yangon was a low-rise city frozen in time, where dangerously potholed sidewalks bordered decrepit colonial buildings. Today cranes swing in nearly every corner of the city, and billboards promote the opulence of soon-to-be high-rise condominiums.
While the new infrastructure may be welcome, the drug economy threatens the country's transition to democracy, one of the Obama administration's signal foreign policy accomplishments.
The drug trade, analysts say, reinforces corruption, bolsters the power of the military and threatens to return Myanmar to a pariah state instead of the democratic ally the administration hopes for.
Since Myanmar began opening up to the world four years ago, heroin trafficking has surged. The United Nations estimates that opium poppy cultivation has nearly tripled over the past six years. Myanmar has become the world's second-largest producer of heroin, as well as the region's leading supplier of methamphetamine.
$2 billion a year
Sean Turnell, an scholar at Australia's Macquarie University and one of the leading experts on the country's economy, estimates that Myanmar's drug tycoons have annual revenues of around US$2 billion.
Yet in a country where many business deals and real estate transactions are still done in cash and less than 15% of adults have a bank account, it is nearly impossible to trace where all that money goes.
"There is no document trail," Turnell said. Following the drug money, he said, "is like nailing jelly to a wall."
Its impact, however, is clear. Real estate agents and economists say the drug trade has helped fuel the vertiginous rise in property prices in Myanmar's major cities.
"Almost everyone involved in this business is laundering money," said U Sai Khung Noung, managing director of a real estate company in Yangon that bears his name.
He calculates that average prices for apartments in Yangon rose 600% over the past decade to an average of $250 per square foot — the equivalent of 90,000 baht per square metre — higher than the average price for a new condominium in much wealthier Bangkok.
Illegal drugs are not the only source of black-market cash. During military rule, which ended in 2011, illegal trade in teak, jade and precious gems also created huge off-the-books fortunes.
The Kempinski Hotel in Nay Pyi Daw, which last year hosted US President Barack Obama, was built by Jewellery Luck, which was tied to a large heroin seizure six years ago. (Adam Dean/The New York Times)
Starting in 2007, when the government slashed real estate taxes to 15% from a prohibitive 50%, traffickers seized the opportunity to convert their cash to real estate.
Cash in rice sacks
U Khin Maung Aye, a real estate agent in Yangon, said a home buyer brought him a down payment, the equivalent of $200,000, in cash stuffed into rice sacks, not uncommon for home purchases.
"It took two men to pick up each bag," Khin Maung Aye said. "I couldn't carry it myself."
The buyer was later arrested on drug trafficking charges and sentenced to 20 years in prison, the police said.
But such arrests are relatively rare in a country with weak law enforcement and where vast swathes of the country are under the control of ethnic militias, not the central government.
The government says it is trying to crack down on the drug trade and money laundering, but officials say law enforcement is hampered by the legacy of a dictatorship under which the educational system was destroyed, millions of Myanmar's most talented citizens fled the country, and the economy and banking system were rendered dysfunctional.
U Ye Htut, the head of the Information Ministry, said the government had introduced regulations and checks to trace dirty money.
"There is positive movement on this issue," he said in an interview. "There is more transparency for anti-money-laundering issues here and more accountability. It can now be debated publicly."
But a government adviser, U Tin Maung Than, a director of the Myanmar Development Resource Institute, a research organisation, says the government does not have the wherewithal to distinguish good from bad money.
"There is no effective mechanism or capacity to crack down on money laundering and corruption," he said.
Because most of the economy is informal — unregulated and all cash — Tin Maung Than said, "if we cracked down on informal-sector businesses and black money, we would not have enough space in prisons in Myanmar."
"Almost every business here is in the informal sector," he said.
Although regulations exist on paper to trace ill-gotten money, real estate agents say the government's unofficial policy appears to be don't ask, don't tell.
"If you pay the tax, they don't ask you where the money comes from," said Sai Khung Noung, the real estate director. "If the government doesn't check this, how am I supposed to know where the money comes from?"
The Asia World trail
For Asia World, one of the country's pre-eminent builders of infrastructure, the heroin money trail is no secret.
Founded by Lo Hsing Han, a drug lord once described by the United States as the "kingpin of the heroin traffic in Southeast Asia", Asia World led the way in converting heroin proceeds into legitimate businesses.
Lo, who died in 2013, hailed from an ethnic Chinese group, the Kokang, who occupy an impoverished region in northern Myanmar that for years had only two main businesses: tea and opium.
Farmers pick vegetables in a field adjacent to Golden City, a planned 33-storey condominium complex that will be the tallest in Yangon. (Adam Dean/The New York Times)
His drug business was tolerated because the ruling military junta found him useful in negotiating with ethnic rebels.
A 2007 US diplomatic cable made public by WikiLeaks said Lo had been given a heroin "concession" by the government in exchange for helping to arrange ceasefire agreements with rebels.
Lo and his son, Steven Law, were two of the military's most important business partners and were awarded contracts to build roads, provincial seaports and other large infrastructure projects.
In response to questions hand-delivered to Asia World's Yangon headquarters, an inconspicuous seven-story building a few blocks from the Irrawaddy River, an assistant to Law said on Friday that he had received the letter and "he replied he does not want to spend time answering it".
John Whalen, former head of the Myanmar office of the US Drug Enforcement Administration, says the rise of Asia World was followed by the appearance of other companies with unexplained wealth, many of them with connections to the impoverished areas along the borders with Thailand and China, where the drug trade flourishes.
"We started seeing a lot of these companies cropping up out of nowhere with a lot of money to invest," he said.
"There was no indication of the source of their funds. We still see that with all of the construction that's going on today."
Among those companies is the Shwe Taung Group, which built and operates one of the biggest and most modern shopping malls in Yangon, Junction Square. The company's website boasts of its building housing developments, office towers, condominiums, hospitals, school and university buildings, television and radio production complexes, "and a lot more".
The company's chairman, Aik Htun, was cited by the US Treasury Department as "having connections with the narcotics trade". He was also a founder, director and co-owner of the now-defunct Asia Wealth Bank, which was the target of Treasury Department sanctions in 2003 because it posed "an unacceptable risk of money laundering and other financial crimes" and was "linked to narcotics traffickers".
After the United States imposed sanctions on Asia Wealth Bank and the Burmese authorities withdrew its license, Aik Htun changed the name of his corporate holdings, which were part of the same group as Asia Wealth Bank, to the Shwe Taung Group.
Aik Htun did not answer questions hand-delivered to his secretary at the company's headquarters.
One of the largest real estate developers in the country, Jewellery Luck, was tied to a large heroin seizure six years ago.
The police found 37 packs of heroin concealed in a shipment of timber the company was sending to a customer in Taiwan. Photos from the police investigation file documented how the heroin packs, each the size of a hardcover book, were carefully hidden in cavities carved out of the wooden planks.
The police arrested five people and seized an additional 100 kilogrammes of heroin, with a street value of millions of dollars, stashed in a house in Yangon.
A company executive, U Tin Tun Oo, whose father heads the company, said the heroin had been planted by the customers, who removed the wood for inspection before shipping and inserted the heroin before returning it.
No company employees were charged, Tin Tun Oo said, and he denied that the company had profited from heroin trafficking.
"No such money comes from drugs," he said in an interview. "Not a cent."
'Big guys' never charged
Whalen, the former DEA agent, said company officials probably would have been charged had the seizure taken place in the United States.
"It was clear that the company was deeply involved," he said. "As with most cases in Myanmar, the big guys didn't get charged."
Jewellery Luck is building two large condominium projects in Yangon, including one advertised as the tallest condominium in the country, a 33-storey complex overlooking the golden spire of the city's premier landmark, Shwedagon Pagoda. Sales are cash only.
Jewellery Luck owns half of the recently completed Kempinski Hotel in Nay Pyi Daw, the capital, where Barack Obama stayed during a summit meeting in November.
He was the first guest to occupy the hotel's largest suite, a luxurious villa with four bedrooms and its own private dining room, swimming pool and gym.
At Jewellery Luck's headquarters in Yangon, a framed photograph sits on a conference room table showing Tin Tun Oo and other company executives with Obama, smiling.
Local residents look across from their home to the Asia World Port Terminal in Yangon. Asia World was founded by Lo Hsing Han, a drug lord once described by the US as the "kingpin of the heroin traffic in Southeast Asia". (Adam Dean/The New York Times)