Myanmar's Shan state is the epicentre of the global methamphetamine supply and the export of the illegal drug is about to get even easier, warns a new report from the Brussels-based International Crisis Group (ICG).

In Shan state, a centre of conflict and illicit drug production since 1950, the trade in heroin and methamphetamine tablets is controlled partly by Myanmar's army, the Tatmadaw, and partly by multiple armed militias, some with the patronage of the Tatmadaw.

"Good infrastructure, proximity to precursor supplies from China and safe haven provided by pro-government militias and in rebel-held enclaves have also made it a major global source of high purity crystal meth," says the report titled Fire And Ice: Conflict And Drugs In Myanmar's Shan State.

The report is only the latest in a string of studies and warnings in recent years, over the proliferation of meth from Shan state, whose drug industry has seen only growth.

There have been record seizures of meth in the last two years beyond the immediate region - 1.2 tonnes in Western Australia, 0.9 tonnes in Melbourne, 1.6 tonnes in Indonesia, 1.2 tonnes in Malaysia.

Experts estimate seizure rates at below 10 per cent of total trade, suggesting a total annual production significantly in excess of 250 tonnes, the ICG says. In the Mekong sub-region, the trade's total value is estimated at over US$40 billion (S$54 billion) a year.

The report says: "Despite massive seizures, prices of crystal meth have remained stable, a clear indication that they are a small proportion of total volumes."

And the industry will gain momentum after the recently inked multibillion-dollar China-Myanmar Economic corridor, which will lead to better roads and a high-speed rail from Kunming, Yunnan, to Kyaukpyu on the Rakhine state seaboard linking south China to the Bay of Bengal. "In the recent history of the Golden Triangle, increased trade and improved infrastructure have expanded rather than narrowed opportunities for illicit profiteering," the report says.

The trade in ice, along with amphetamine tablets and heroin, has become so large and profitable that it dwarfs the formal economy of Shan state, fuels criminality and corruption and hinders efforts to end the state's long-running ethnic conflicts, the report says.

In January last year, Myanmar police raided an abandoned house in northern Shan state, seizing meth pills, heroin and caffeine powder worth an estimated US$54 million at domestic prices.

The site was not far from the main road to the Chinese border at Muse - a major overland trade route. That the place was "abandoned" strongly suggests those using it were tipped off, the ICG says. The militia which controls the area has maintained a ceasefire with the Tatmadaw for nearly 28 years. The status of militia and border guard forces aligned with the Tatmadaw gives them considerable impunity, and gives the Tatmadaw a degree of deniability.

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The authorities in countries in the region are often part of the corruption chain. China, where most chemicals needed to make meth come from, has almost never intercepted shipments crossing its border with Myanmar, the report says.

While ICG has urged Myanmar to redouble its drug control and anti-graft efforts as well as pursue a comprehensive peace settlement for the state, this is easier said than done. There is little incentive not to make and sell drugs, analysts say.

"The recommendation calling for the Tatmadaw to reform relations with militias and border guard forces, and eventually seeing them disbanded, is pretty ambitious," Mr Jeremy Douglas, Bangkok-based regional representative of the United Nations Office on Drugs and Crime, tells The Straits Times.

"For related reforms to be successful, they would need to be accompanied by incentives significant enough that groups would cease involvement in the illicit economy," he says, adding: "I can't think of what could be offered in the near term that would replace such massive revenue streams."