Poppy economy in the mountains of Myanmar's Shan state Reuters

The recent death of Burmese drug lord Lo Hsing Han highlights the Southeast Asian nation's deep involvement with narcotics trafficking. Lo, once dubbed by the U.S. government as the "godfather of heroin," died over the weekend at the age of 80. Having metamorphosed into a “respectable” businessman later in life, Lo was colluded with the brutal military dictatorship that ruled Burma (now called Myanmar) for 50 years until the emergence of a nominally civilian government two years ago.

According to the Associated Press, Lo's body lay in a glass coffin in the family home in a private ceremony which was attended by senior government figures and business leaders, underscoring the former gangster's significant influence in the long-isolated country.

In the realm of global drug trafficking, Lo was a giant – he and his son Stephen Law operated their heroin business through a front corporation called Asia World. Lo used his ill-gotten millions to win contracts from the military junta to undertake huge infrastructure projects, including highways, seaports, hydropower plants, gas pipelines and airports. By 2008, the U.S. Treasury placed both Lo and his son on their financial sanctions list.

According to reports, Lo initially engaged in drug dealing in the 1960s when then-military dictator Ne Win granted him the right to traffic heroin and opium in exchange for leading a militia that fought Communist rebels in the restive Kokang region in Burma’s northeastern Shan state. But later, Lo entered into a bizarre trajectory. By the 1970s, he had switched sides and joined the rebels, leading to his arrest in 1973 by Thai police and subsequent transfer to Burmese authorities. He faced the death penalty in Burma, accused of treason for having joined a Thai-based insurgency called the Shan State Army. The death sentence was subsequently commuted to a life term. In 1980, he was released under a general amnesty.

Lo, who was himself of ethnic Han Chinese origin, was particularly associated with smuggling “China white” heroin to Europe and the U.S., netting him untold millions, while he ingratiated himself with Burmese military and government authorities. The government even used Lo’s services as a kind of “peace emissary” between the state and various ethnic rebel groups across the north of the country. Lo eventually became a fabulously wealthy business tycoon, enjoying not only protection from the Burmese government, but also legitimate and illegitimate financial ties with entities as far away as Singapore and Taiwan.

But Lo was only one part of Burma’s vast illegal narcotics empire. According to the United Nations Office on Drugs and Crime, Myanmar is the world's second-largest producer of opium (the source of heroin), behind only Afghanistan. In fact, the UN estimates that some 300,000 households there are presently engaged in poppy cultivation. In 2012, Burmese poppy farmers produced about 690 tons of opium (valued at $359 million), about one-fifth of the production recorded in Afghanistan. In addition, in 2011, Burmese authorities seized 5.9 million methamphetamine pills, double the number from prior years.

The Golden Triangle (Burma, Laos, Vietnam, Thailand) produced much of the world’s opium, reaching a peak in the 1990s. While Thailand has eliminated many of its poppy fields since then, opium production in Burma has seen a resurgence -- rising from 43,600 hectares under cultivation in 2011 to 51,000 hectares last year, the UN said.

In a broader context, Burma's kaleidoscope of drug trafficking entities is intimately linked with the government as well as the insurgencies they have been fighting for decades. For poverty-stricken farmers in rural Burma, opium provides a high-yield and very profitable crop that can easily be traded for cash, food, goods, guns or medicine.

This past May, the UNODC stated that insurgents in Burma’s border regions are using profits from increased poppy production and the manufacture of methamphetamine to fund their activities. This rebound in drug production has forced the Burmese government to postpone their stated goal of eliminating all narcotics manufacturing from within its borders within five years.

"It's instability in the northern districts in the country, up in what's known as the Golden Triangle," Jeremy Douglas, Southeast Asia and Pacific regional representative at the UNODC, told Radio Australia. "It's fueling some poverty and there are a lot of farmers that their only recourse to livelihood. So it's a traditional way of making an income for the people there.” Douglas added that ethnic minorities in Burma depend on the drug trade for income, singling out the opium and methamphetamine trade in the Shan state, Lo Hsing Han’s old stomping grounds.

The U.N., in tandem with various Southeast Asian states, warned that the spiraling drug boom in Burma presents a grave threat to public and regional security. Zaw Win, Burma's deputy police chief, told U.N. delegates that the “methamphetamine problem is growing rapidly" and that "more and more international drug syndicates are becoming involved.”

It is unclear if the gradual move towards democratization in Burma will have any impact on reducing the drug trade in the lawless hinterlands of the nation. Part of the problem is that the so-called state “authorities” (including politicians and soldiers) are themselves deeply involved in drug trafficking, with little motivation to curtail their lucrative businesses.

In the remote and highly unstable Shan state, 49 out of 55 townships are engaged in poppy cultivation (accounting for a whopping 90 percent of the country’s total opium harvest), according to a report in Time magazine. Khuensai Jaiyen, editor of the Shan Herald Agency for News, told Time that authorities only punish drug addicts and small-time dealers, leaving the major players alone. “The big fish are handled by the Burmese army,” he said. “I went up to the mountains last week and was told that everyone who holds a gun is involved [with drugs]. The PMA [people’s militia armies] are set up by the Burmese army to fight the resistance, and in return they have been given license to deal drugs.”

Even more alarming, seven MPs for the ruling Union Solidarity and Development Party of President Thein Sein are actually prominent drug lords, SHAN asserted. ”They persuaded locals to vote for them by promising to allow poppy growing,” Jaiyen told Democratic Voice of Burma. These MPs, all of whom hail from Shan state, include Lui Guoxi, who has been described as a “key operator” in a drug networks run by the ethnic Kokang militia.

Khunsei told DVB that “poppy growing has increased in the region since these individuals won in the elections.”