Shan state called world's meth lab as Japan edges toward Myanmar junta ties

Southeast Asia brief: Jakarta market suffers worst crash since 1998 and Vietnam's leader heads to Europe

By LineZotpaper

Published21 October 2026

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Foreign Policy's Southeast Asia Brief finds that Myanmar's Shan state now dominates regional methamphetamine production, with sales worth between $48.1 billion and $74.8 billion a year, while the United States holds talks with the Myanmar junta in Tokyo and Indonesia's stock market posts its worst day since 1998.

On Oct. 1, police in Laos raided a private jet bound for the Philippines carrying more than half a ton of crystal meth. Those arrested included a Singaporean, a Filipino, a Malaysian and 10 Lao airport staff, and the suspected charterer is thought to be a politician from the southern Philippine city of Mindanao. The bust illustrates the international web behind a trade that, by a UN report published this year, generates between $48.1 billion and $74.8 billion in sales within Southeast Asia each year. That is larger than the $43.8 billion that the U.S. Institute of Peace estimates syndicates in the Mekong defrauded from victims worldwide in 2023.

Meth boom in Shan state

Production is now concentrated in Shan state, in northern Myanmar, where control is split between the country's military and armed rebel groups. The trade has long been a major revenue source for many of those groups, including the state military. Meth, known as yaba or shabu depending on its form, is popular with people working long hours in physically demanding jobs because of its energising qualities.

Jason Eligh of the Global Initiative Against Transnational Organized Crime says Myanmar meth has now gone global, with industrial-scale labs and precursor chemicals chosen to evade legal controls. Production of other synthetic drugs is also growing in Shan state, including ketamine, MDMA, the anesthetic etomidate and "happy water" cocktails of various synthetic drugs.

The drugs are smuggled into Thailand and Laos, west into India and out of the port of Yangon to the wider world. Northern routes directly into China appear to have been squeezed in recent years. Researchers, including Eligh, accuse Beijing of tacitly tolerating foreign criminal syndicates as long as its own citizens are not affected. Much of the precursor supply for synthetic drugs is thought to come from China, which also exercises substantial influence over groups such as the United Wa State Army, the National Democratic Alliance Army, the Shan State Progress Party/Shan State Army-North and the Myanmar military. The Arakan Army, the Shan State Army-South and unaffiliated criminal syndicates also play a role.

GI-TOC analysts Kristina Amerhauser and Ioannis Vlassis report that groups involved in the meth trade are often connected to the region's online scam centers, with smuggling routes, corrupt officials and money-laundering networks serving multiple illicit activities.

Tokyo meetings and Japan's shift

The United States held further meetings with the Myanmar junta in Tokyo in early October, led by Assistant Secretary of State for Intelligence and Research Michael Vance, who also led September talks in Myanmar. Japan, which facilitated the talks, condemned the 2021 coup and has not officially recognised the military government, but it maintained a diplomatic presence and never joined sanctions. Japan is now likely moving toward full recognition of the junta.

Yohei Sasakawa, Japan's special envoy for national reconciliation in Myanmar, announced on his blog that he would meet junta President Min Aung Hlaing. That follows a visit to Myanmar in August and the first public meeting, on Oct. 1, between Japan's interim charge d'affaires in Myanmar and junta Foreign Minister Tin Maung Swe.

Analysts Hirokazu Omatsu and Kyi Sin say Japan's mediation experience in Cambodia in the 1990s and Mindanao in the Philippines, plus its deep regional ties, are assets here. But they also note that from the junta's point of view, past Japanese mediation looks less positive: the informal ceasefire Sasakawa helped broker between the junta and the Arakan Army in 2022 was used by the group to regroup ahead of its renewed assault in 2023.

Jakarta's worst day since 1998

Indonesia's stock market dropped 11.57 percent on Friday, its worst crash since 1998, when the Asian financial crisis shrank the economy by more than 13 percent. The trigger was MSCI's announcement that it is considering downgrading Indonesia to a "standalone market," after earlier warning this January that it might cut the country from emerging to frontier status due to rampant fraud on the exchange.

MSCI said that "despite the announced reforms, significant concerns remain around market dysfunction, including continued suspected coordinated trading behavior and lack of evidence of meaningful enforcement." Indonesia has promised more reforms, and President Prabowo Subianto is, according to his brother, "very angry" about the development. In January, the head of the stock exchange and top financial regulators resigned.

Vietnam's leader heads to Europe

Prime Minister To Lam began a six-day visit to Europe on Monday, accompanied by the defense minister, minister of public security and foreign minister. The trip starts in Denmark and moves to Belgium, where he will meet European Council President Antonio Costa and European Commission President Ursula von der Leyen. The European Union and Vietnam have been steadily deepening ties in recent years.

Analysis

Why This Matters

The drug trade finances armed groups and the Myanmar military, entrenching a conflict that sends instability across Southeast Asia.
The region's meth economy rivals, and may exceed, revenue from online scam centers, with trafficking networks now reaching global markets.
Japan's quiet move toward recognising the junta, and MSCI's threat to downgrade Indonesia, are shifts with significant diplomatic and financial consequences.

Background

The Golden Triangle, where Myanmar, Thailand and Laos meet, was long known for opium and heroin. In recent years production has shifted to synthetic drugs, with much of it now concentrated in Shan state, a territory contested by Myanmar's military and numerous ethnic armed groups since the 2021 coup. MSCI's market classifications are used by major global investors to decide how to allocate capital, giving its deliberations weight far beyond Jakarta.

Key Perspectives

Researchers and the UNODC: Drug markets and syndicates have grown larger and more sophisticated since 2019, protected by state weakness and systemic corruption. China: Researchers accuse Beijing of tacitly tolerating foreign syndicates as long as its own citizens are not affected, while supplying much of the precursor chemicals and exerting influence over key armed groups. Japan: Tokyo sees itself and is seen by analysts as a trusted mediator, but the junta used a 2022 Japanese-brokered ceasefire with the Arakan Army to regroup, analysts say. Investors and MSCI: Indonesia's promised reforms have not convinced the index provider that the market functions properly, with continued suspected coordinated trading and weak enforcement cited as key concerns.

What to Watch

Whether Japan formally recognises the junta after Sasakawa's meeting with Min Aung Hlaing.
Indonesia's next reform steps and any further resignations ahead of MSCI's final decision.
Whether drug trafficking routes into China stay closed and whether precursor controls are tightened.

Sources

Myanmar’s Shan State Is the World’s Meth Lab · Foreign Policy

Checked

12 claims in this story checked against 1 source: 9 supported.

Show each claim

SupportedThe headline describes Shan State as the world’s meth lab.Foreign Policy: “Myanmar’s Shan State Is the World’s Meth Lab.”
SupportedMethamphetamine production is now concentrated in Shan State, which the story says dominates regional production.Foreign Policy: “Drug manufacturing is now concentrated in just one corner of the Golden Triangle: Shan state, in northern Myanmar.”
SupportedMeth sales within Southeast Asia are worth $48.1 billion to $74.8 billion annually.Foreign Policy: “within Southeast Asia alone, sales of meth were worth between $48.1 billion and $74.8 billion annually”
SupportedThe United States held further meetings with the Myanmar junta in Tokyo in early October.Foreign Policy: “The United States held further meetings with the Myanmar junta in Tokyo in early October, Reuters reported last Friday.”
Partly supportedThe summary says Jakarta’s market had its worst crash since 1998.Foreign Policy: “On Friday, Indonesia’s stock market dropped 11.57 percent. This was its worst stock market crash since 1998”
SupportedThe jet raided in Laos on Oct. 1 was carrying more than half a ton of crystal meth.Foreign Policy: “On Oct. 1, police in Laos raided a private jet that was headed for the Philippines with more than half a ton of crystal meth aboard.”
Partly supportedJason Eligh says manufacturers use precursor chemicals chosen to evade legal controls.Foreign Policy: “He describes a sophisticated system where manufacturers have worked hard to ramp up production in industrial-scale labs and diversified their raw materials to use precursor chemicals not subject to legal controls.”
SupportedJapan is likely moving toward full recognition of Myanmar’s junta.Foreign Policy: “Japan is now likely moving toward full recognition of the junta.”
SupportedIndonesia’s stock market fell 11.57 percent on Friday, its worst crash since 1998.Foreign Policy: “On Friday, Indonesia’s stock market dropped 11.57 percent. This was its worst stock market crash since 1998”
SupportedThe story quotes MSCI as saying significant concerns remained despite reforms, including suspected coordinated trading behavior and a lack of meaningful enforcement.Foreign Policy: ““Despite the announced reforms, significant concerns remain around market dysfunction, including continued suspected coordinated trading behavior and lack of evidence of meaningful enforcement.””
SupportedPrabowo Subianto was “very angry” about the development, according to his brother.Foreign Policy: “And President Prabowo Subianto is, according to his brother, “very angry” about this development.”
Not in the sourcesTo Lam is Vietnam’s prime minister.