Although KMT armies control about 90 percent of Burma's opium trade, they have not maintained any major bases inside the Shan States since 1961. After five thousand Burmese army troops and twenty thousand Communist Chinese troops launched a "surprise assault" on KMT headquarters at Mong Pa Liao, Kengtung State, in January 1961, most of the ten thousand KMT defenders fled across the Mekong into northwestern Laos and took refuge at Nam Tha City. Five tons of U.S. ammunition were discovered at Mong Pa Liao, and on February 16 the Burmese air force shot down an American-made Liberator bomber making supply drops to KMT holdouts inside Burma. (226) Apparently embarrassed by these incidents, the U.S. State Department offered to assist in the repatriation of KMT troops to Taiwan, and on March 14 the evacuation began. About forty-two hundred KMT regulars were flown from Nam Tha City to Ban Houei Sai, ferried across the Mekong, and trucked to Chiangrai, where they boarded flights for Taiwan. On April 12 the airlift came to an end, and Taiwan disclaimed any responsibility for the "few" who remained. (227)
Actually, some two thousand to three thousand KMT regulars had been left behind in Laos and they were hired by the CIA to strengthen the rightist position in the area. According to William Young, these troops were placed under the nominal command of General Phourni Nosavan and became the "Bataillon Speciale I I 1." They remained at Nam Tha until the rightist garrison began to collapse in mid 1962, and then they moved across the Mekong River into Thailand. With the full knowledge and consent of the Thai government, the KMTestablished two new bases on the top of jungle-covered mountains just a few miles from the Burmese border and resumed their involvement in the opium trade. (228)
Instead of hampering their commercial activities, the move to Thailand actually increased the KMT's overall importance in the Golden Triangle's opium trade. Not only did the KMT maintain their hold on Burma's opium, but they increased their share of the traffic in northern Thailand. In 1959 the Thai government had outlawed the growing and smoking of opium, and many Thai hill traders, fearful of police action, were in the process of quitting the opium trade. Most small towns and villages in the foothills of northern Thailand that had prospered as opium-trading centers for the last twelve years experienced a microrecession as their local opium merchants were forced out of business. While the lack of reliable data and official obfuscation makes it difficult to describe this transition for the whole of northern Thailand, an Australian anthropologist has provided us with a portrait of the rise and fall of a Thai opium-trading village named Ban Wat. (229)
Situated about three miles from the base of Thailand's western mountain range, with easy access to two mountain trails leading upward into the opium-growing villages, Ban Wat was an ideal base of operations for wandering mountain traders. Moreover, the village was only fifteen miles from Chiangmai, Thailand's northernmost rail terminus, so it was also accessible to merchants and brokers coming up from Bangkok.
Ban Wat's merchants first became involved in the opium trade in the 1920s, when four or five Meo villages were built in the nearby mountain districts. However, the Meo population was quite small, and their poppy cultivation was still secondary to subsistence rice production. Most of Ban Wat's traders were buying such small quantities of opium from the Meo that they sold it directly to individual addicts in the nearby valley towns. No big brokers came to Ban Wat from Bangkok or Chiangmai, though one Ban Wat trader occasionally bothered to smuggle a bit of opium down to Bangkok on the train. (230)
Once the Thai government decided to encourage poppy cultivation in 1947, however, the opium trade began to boom, and the village experienced unprecedented prosperity, becoming one of the largest opium markets in northern Thailand. The edict drew many Meo farmers into the nearby mountains, giving Ban Wat traders access to a large supply. Much of Ban Wat's active male population became involved in the opium trade as porters, mule skinners, or independent merchants. During the harvesting and planting season the Meo needed rice to feed themselves. The Ban Wat traders purchased rice in the Chiangmai market and sold it to the Meo on credit. When the opium harvest began, the traders returned to the Meo villages to collect their debts and also to trade silver, salt, rice, and manufactured goods for Meo opium.
While the abolition of legalized opium trading in 1959 has in no way hindered the continued expansion of Thailand's production, it was a disaster for Ban Wat. At the height of the opium boom there were twenty major opium traders operating out of Ban Wat; by 1968 there was only one. Two local merchants went broke when the police confiscated their opium, and another was ruined when his Meo customers moved to another province without paying their debts. These examples served to chasten Ban Wat's merchant community, and many traders quit the opium trade. (231)
The vacuum was not filled by other Thai traders, but by the KMT armies and an auxiliary of Yunnanese mountain traders. When the KMT and its civilian adherents were forced completely out of Burma in 1961, the entire commercial apparatus moved its headquarters into northern Thailand. (232) In 1965 a census of the most important Yunnanese villages in northern Thailand showed a total population of sixty-six hundred. (233) As the Thai traders were gradually forced out of business after 1959, the KMT and its civilian auxiliaries were uniquely qualified centrally organized military to take over the opium trade. With their structure, the KNIT was in an ideal position to keep track of migrating Meo clans and make sure that they paid their debts in full. With their military power, the KNIT could protect the enormous capital tied up in the merchant caravans from bandits and keep the exactions of the Thai police to a minimum.
The Yunnanese traders were the vanguard of the KMT's commercial conquest, infiltrating the mountain villages and imposing a form of debt slavery on hill tribe opium farmers. They opened permanent stores in most of the large opium-producing villages and sold such tantalizing items as flashlights, canned goods, silver ornaments, cloth, salt, and shoes. A 1962 report by the Thai Ministry of the Interior described the impact of this "commercial revolution":
"The increasing demand for merchandise deriving from outside has given a corresponding impetus to the raising of cash crops. There can be no doubt that the cultivation of poppy and the production of raw opium is by far the most profitable economic activity known to the hill peoples at present.... The shopkeepers and travelling merchants in the hills compete with each other to get hold of the product, readily granting credit for later sales of opium." (234)
Toward the end of the harvest season, when the Yunnanese merchants have finished buying up most of the opium in their area, armed KNIT caravans go from village to village collecting it. American missionaries who have seen the KMT on the march describe it as a disconcerting spectacle. As soon as the caravan's approach is signaled, all the women and children flee into the forest, leaving the men to protect the village. Once the opium is loaded onto the KMT's mules, the caravan rides on and the people come back out of the forest. The Ministry of the Interior's 1962 report described the KMT-Yunnanese logistics in some detail:
The key men of the opium traffic in the hills of Northern Thailand are the traders who come from outside the tribal societies.... On the basis of our observations in numerous villages of the 4 tribes we studied we have proof that the overwhelming majority of them are Haw [Yunnanesel....
Usually the Haw traders know each other personally, even if living in hill villages 200 km. [125 miles) and more apart. Most we encountered regard the village of Ban Yang, near Amphur Fang, as their central place [near KMT Third Army headquarters]. Quite a few of them will return to this place, after the closing of the trading season....
There seems to be a fair understanding among all the Haw in the hills and a remarkable coherence or even silent organization.
The Haw traders keep close contacts with the armed bands [KM'fl that dwell in fortified camps along the Burmese frontier. It is reported that they (the KMTJ give armed convoy to opium caravans along the jungle trails to the next reloading places. (235)
The fortified camps mentioned in the Ministry of the Interior's report above are the KNIT Fifth Army headquarters on Mae Salong mountain, about thirty miles northwest of Chiangrai, and the KNIT Third Army headquarters at Tam Ngop, a rugged mountain redoubt fifty miles west of Chiangrai. Although KNIT forces had always maintained a unified command structure in Burma, it established these two separate headquarters after moving to Thailand; this was symptomatic of deep internal divisions. For reasons never fully explained, Taiwan ordered its senior commander home in 1961 and subsequently cut back financial support for the remaining troops. Once external discipline was removed, personal rivalries between the generals broke the KNIT into three separate commands: Gen. Tuan Shi-wen formed the Fifth Army with eighteen hundred men; Gen. Ly Wen-huan became commander of the Third Army, a lesser force of fourteen hundred men; and Gen. Ma Ching-kuo and the four hundred intelligence operatives under his command broke away to form the First Independent Unit. (236) Since Gen. Ma Ching-kuo's First Independent Unit remained under the overall supervision of President Chiang Kai-shek's son, Chiang Chingkuo, in Taiwan, financial support for its intelligence operations inside China and Burma was continued. (237) As a result, its commander General Ma could afford to remain above the bitter rivalry between General Tuan and General Ly, and came to act as mediator between the two. (238)
After Taiwan cut off their money, Generals Tuan and Ly were forced to rely exclusively on the opium traffic to finance their military operations. "Necessity knows no law," General Tuan told a British journalist in 1967. "That is why we deal with opium. We have to continue to fight the evil of Communism, and to fight you must have an army, and an army must have guns, and to buy guns you must have money. In these mountains the only money is opium." (239) To minimize the possibility of violence between their troops, the two generals apparently agreed to a division of the spoils and used the Salween River to demarcate their respective spheres of influence inside the Shan States; General Tuan sends his caravans into Kengtung and the southern Wa States east of the Salween, while General Ly confines his caravans to the west bank of the river. (240)
While the SNA's local commanders were little more than petty smugglers, General Tuan and General Ly have become the robber barons of one of Southeast Asia's major agro-businesses. Their purchasing network covers most of the Shan States' sixty thousand square miles, and their caravans haul approximately 90 percent of Burma's opium exports from the Shan highlands to entrepots in northern Thailand. To manage this vast enterprise, the KMT generals have developed a formidable private communications network inside the Shan States and imposed a semblance of order on the once chaotic bill trade. On the western bank of the Salween General Ly has organized a string of seven radio posts that stretch for almost 250 miles from Third Army headquarters at Tam Ngop in northern Thailand to Lashio in the northern Shan States. (241) On the eastern bank, General Tuan maintains a network of eleven radio posts supplemented by the First Independent Unit's four forward listening posts along the Burma-China border. (242)
Each radio post is guarded by eighty to one hundred KMT soldiers who double as opium brokers and purchasing agents; as the planting season begins, they canvass the surrounding countryside paying advances to village headmen, negotiating with Shan rebels, and buying options from local opium traders. By the time the KMT caravans begin rolling north from Tam Ngop and Mae Salong in October or November, each of the radio posts has transmitted an advance report on the size and value of the harvest in its area to their respective KMT headquarters. Thus, KMT commanders are in a position to evaluate the size of the upcoming harvest in each district and plan a rough itinerary for the caravans. (243)
The enormous size of the KMT caravans makes this advance planning an absolute necessity. While most Shan rebel caravans rarely have more than fifty pack animals, the smallest KMT caravan has a hundred mules, and some have as many as six hundred. (244) The commander of a Shan rebel army active in the area west of Lashio reports that most KMT Third Army caravans that pass through his area average about four hundred mules. (245) Since an ordinary pack animal can carry about fifty kilos of raw opium on one of these long trips, a single caravan of this size can bring back as much as twenty tons of raw opium. Despite the large number of Shan rebels and government militia prowling the mountains, KMT caravans can afford to travel, with a minimum of armed guards (usually about three hundred troops, or only one man for every one or two mules) because they carry portable field radios and can signal their scattered outposts for help if attacked. Scouts are sent out well ahead of the column to look for possible trouble. Since most of the mule drivers and guards are vigorous young tribesmen recruited from northern Thailand, KMT caravans are able to move fast enough to avoid ambush. Moreover, the KMT carry an impressive arsenal of 60 mm. mortars, .50 caliber machine guns, 75 mm. recoilless rifles, and semiautomatic carbines, which is usually ample deterrence for both poorly armed Shan rebels and crack Burmese army units.
The caravans begin moving south in October or November and stopping at large hill tribe villages, market towns, and KMT outposts to pick up waiting shipments of opium. Although there are KMT caravans plodding across the Shan highlands throughout most of the year, most caravans seem to be going north from October through March (which includes the harvest season) and riding south from March through August. General Ly's Third Army caravans usually go as far north as Lashio District, about 250 miles from Tam Ngop, where they pick up opium brought down from Kachin State and northern Shan districts by itinerant merchants. (246) General Tuan's Fifth Army caravans used to go all the way to Ving Ngun, about 170 miles north of Mae Salong, until 1969, when the Burmese Communist party began operating in the southern Wa States. Since then KMT caravans have been relying on itinerant merchants to bring Kokang and Wa states opium out of these Communist-controlled areas. (247)
When the KMT caravans begin to head back to Thailand, they are often joined by smaller Shan rebel or merchant caravans, who travel with them for protection. Predatory bands of Shan rebels, government militia (KKY), and Burmese army troops prowl the hills. According to one Shan rebel leader, a caravan has to have an absolute minimum of fifty armed men to survive, but with two hundred armed men it is completely safe unless something unusual happens. Since the smaller groups cannot afford a sufficient quantity of automatic weapons to protect themselves adequately (in mid 1971 an M-16 cost $250 to $300 in Chiangmai), many prefer to ride with the KMT even though they have to pay a protection fee of $9 per kilo of opium (a high fee considering that a kilo of opium retailed for $60 in Chiangmai in 1967). (248)
As a service to the Thai government, the KMT Third and Fifth armies act as a border patrol force along the rugged northern frontier and use their authority to collect a "duty" of $4.50 on every kilo of opium entering Thailand. (249) In 1966-1967 the CIA reported that KMT forces patrolled a seventy-five-mile stretch of borderland in Chiangmai and Chiangrai provinces (250) but in mid 1971 Shan rebel leaders claimed that KMT revenue collectors covered the entire northern border all the way from Mae Sai to Mae Hong Son. Although the rugged mountain terrain and maze of narrow horse trails would frustrate the best ordinary customs service, very few Shan caravans can ever enter Thailand without paying tax to the KMT. With their comprehensive radio and intelligence network, the KMT spot most caravans soon after they begin moving south and usually have a reception committee waiting when one crosses into Thailand. (251) (See Map 11, page 335.)
Not having to rely on opium for funds like the Third and Fifth armies, the First Independent Unit gives top priority to its military mission of cross-border espionage, and regards opium smuggling as a complementary but secondary activity. Most importantly from Taiwan's perspective, the First Independent Unit has helped perpetuate the myth of Generalissimo Chiang Kai-shek's imminent "return to the mainland" by launching repeated sabotage raids into southern China. (252)
General Tuan's Fifth Army has provided considerable support for General Ma's intelligence operations, and on at least one occasion his troops participated in a full-scale raid into southern China. In exchange for such assistance, General Tuan's troops were allowed to use the First Independent Unit's listening posts as opium-trading centers. (253) While Gen. Tuan is rather tight-lipped about his involvement in the opium trade, he is extremely proud of his vanguard position in the anti-Communist crusade. Describing himself as the "watchdog at the northern gate," General Tuan likes to regale his visitors with stories about his exploits battling Mao Tse-tung during the 1930s, fighting the Japanese during World War 11, and raiding Yunnan Province in more recent years. Although the sixty-one-year-old general spends most of his time in Chiangmai enjoying the vast personal fortune he has amassed from the opium business, he still likes to think of himself as a diehard guerrilla fighter and launches an occasional raid into China to polish up his image. (254)
Since General Ma was the only one of the three generals who enjoyed Taiwan's full support, he emerged as the senior KNIT commander in the Golden Triangle region. Although a number of serious disputes had poisoned relations between General Tuan and General Ly, General Ma had remained on good terms with both. At the urging of high command on Taiwan, General Ma began acting as a mediator shortly after the KNIT moved to Thailand, but with little success. Taiwan was hoping to reestablish a unified command under General Ma, but Generals Tuan and Ly saw little to be gained from giving up their profitable autonomy. (255) Although the battle at Ban Khwan would heal this rift, for the moment, the situation remained static.