The Impact of the Conflict Economy: The Scars of Northern Shan

Photo – AFP

On February 28, 2026, ISP-Myanmar held its twelveth 30 Minutes with the ISP event, titled “The Impact of the Conflict Economy: The Scars of Northern Shan.” The original Burmese version and the English translation of the event’s recap memo were published on April 23, 2026. This publication is part of research conducted under ISP Myanmar’s Conflict Economy Studies.

▪️Concept Note

“On the other side of the mountain, 
People do not know what lies there.
So many to see, so many stories left untold.
Just piling up in abundance.”

The Other Side of the Mountain 
Written by Sai Kham Leik, Sung by Sai Htee Saing
From the album Thabawa [Nature] (1973)

Following the two phases of the Three Brotherhood Alliance’s (3BHA) Operation 1027, the political, economic, and social landscape of the Northern Shan region was fundamentally transformed. The Myanmar regime suffered humiliating battlefield defeats, losing vast territory in the process. Following temporary, begrudging bilateral ceasefires brokered under pressure from neighboring China, and subsequent territorial conquests by Ethnic Armed Organizations (EAOs), a war economy—or more accurately, a conflict economy—has significantly expanded across Shan State.

The defining characteristic of this economy is that its activities, networks, and profits are inextricably linked to Myanmar’s raging civil war. The extraction of natural resources, mining operations, illegal trade networks, and smuggling—including weapons and narcotics—form its core components. These illicit industries generate massive financial revenues and profits for the armed actors involved, while simultaneously perpetuating instability. Generating billions of dollars annually, these enterprises fuel the civil war rather than formal governance or public services.

The only victims in this scenario are the local residents and the broader public of Myanmar. Driven by survival, ordinary people are forced into desperate measures to earn a living, while lucrative business opportunities are strictly monopolized by those with close ties to the armed groups. The general public is left voiceless, with no right to speak out. No one is available to listen to their complaints or grievances. In extreme cases, they endure severe human rights violations. People have been arrested and disappeared, and there is generally no safe environment for affected communities to protest or voice opposition. Consequently, the region is seeing a surge in crime and the complete collapse of the rule of law. The public is also bearing the brunt of severe environmental destruction and pollution.

The EAOs were born of grievance — fighting to defend the lands, rivers, forests, peoples, and cultural traditions of Myanmar’s highlands. These were not merely political causes; they were the very foundations of identity, purchased at enormous cost. Yet the conflict economy has wrought a bitter irony. Entangled in a vast system of extraction and exploitation, these same organizations now appear to be dismantling the very identity they once took up arms to protect.

ISP-Myanmar recently conducted research on conflict economies and their impacts in the Karen and Northern Shan States. One key finding we wish to highlight is the severe impact this conflict economy has on local communities. Just as lives and homes are destroyed by war, the people have also lost invaluable prospects for development and peaceful stability. Taking Northern Shan as an example, this year has seen aggressive, unregulated resource extraction in the Lashio and Muse regions. The Kyaukme area is suffering from environmental degradation and heavily polluted water. Areas like Tangyan and Hopong are now facing an influx of relocated online scam syndicates (Kyar Phyant). In towns such as Hseni, locals face arbitrary confiscations of land and property, as well as aggressive encroachment by powerful economic interests. So fragmented is the authority across these territories that residents no longer know which door to knock on.

How are the people struggling to cope during this horrific social catastrophe and era of exploitation? Some simply chase the money. To survive, some willingly work with scam syndicates, while others are forced into illegal smuggling and criminal enterprises. They endure the confiscation of their homes and properties, as well as ongoing human rights abuses. They are forced to live and survive by accepting this as the “new normal.” The financial revenues generated by the conflict economy have not resulted in better public services or improved governance systems. Meanwhile, the very identity and cultural values cherished by the indigenous people are rapidly fading away.

When looking at how people respond to such severe decline, the “Exit, Voice, and Loyalty” framework proposed by renowned political scientist Albert O. Hirschman (1970) provides an interesting lens. When people face such dire situations, they initially voice their dissatisfaction and protest (“Voice”). When that fails to bring change, they simply abandon the region and leave (“Exit”). If they cannot leave, they are forced to silently endure and adapt to the system (“Loyalty”). Like vegetables thrown into a jar of pickles, they turn sour alongside everything else—doing whatever it takes, chasing the money, and simply surviving.

In this episode of 30 Minutes with the ISP, our emerging researchers examined the human cost of conflict economy systems across northern Shan State.

Greetings and a warm welcome to all the Gabyin members joining us for another episode of 30 Minutes with the ISP. Thank you for taking the time to attend today. I’m Su Linn Han, and I’ll be your host for today’s program. Today, we will be discussing the topic titled: “The Impacts of Conflict Economy: Northern Shan’s Scars and the Struggle for Survival.” Our panelists today are emerging researchers from ISP-Myanmar: Htet Shein, Yee Mon, and Nann Kyi. Following the presentations, we will open the floor for questions and comments from the Gabyin members joining us today. You are welcome to ask questions live, or you can send your questions and comments via the Chat box and Q&A buttons. Due to the program constraints, if we can’t address every question during this live session, we’ll answer them via email afterward. Alright, let’s get started with our discussion. Htet Shein, the floor is yours.

Hello everyone. First of all, thank you all for taking the time to join today’s 30 Minutes with the ISP program. Since 2025, we at ISP-Myanmar have been conducting research into the conflict economy in Myanmar. We examined who is extracting high-value natural resources—such as gold, rare earth elements, and coal in areas with high levels of conflict and instability, and how they are profiting. We also studied who controls the border trade and illicit activities, ranging from the narcotics and arms trade to Kyar Phyant online scam operations. Specifically, we focused on the Northern Shan and Karen regions. Today, we would like to discuss the current state of the conflict economy in the Northern Shan region. We also plan to cover the Karen region in our upcoming episodes. We will be dividing today’s presentation into three parts. In the first part, we will discuss the consequences the public is enduring as a result of the conflict economy in Northern Shan. In the second part, we will look at how the public responds. And in the last part, we will discuss why this is happening. 

Before we dive into that, I’d like to briefly outline Northern Shan’s conflict economy landscape. The region contains many economically significant infrastructure sites. Based on our research, various armed groups fully control at least 322 sites.

As shown in the chart, the TNLA controls the majority, followed by the junta in second, and the MNDAA in third. If we filter those 322 sites for their significant economic, security, and strategic location value, it comes down to 47 highly significant sites. The picture changes here. As you can see in the chart, the MNDAA actually controls the largest share of these highly critical sites at 42 percent, while the junta regime holds 25 percent.

Regarding natural resources, there are at least 31 active mining sites in Northern Shan.  Notably, 35 percent of these sites are located within TNLA-controlled territory. These are just a few key data points regarding the region’s conflict economy. Now, Yee Mon will discuss the consequences this conflict economy is having on Northern Shan’s population.

Htet Shein just gave us a brief overview of the major projects and the background data driving the conflict economy in Northern Shan. I’d like to discuss the direct impacts of this economy across three main areas: the local economy, natural environment, and social conditions. In terms of the economy, the expansion of the conflict economy has severely disrupted traditional businesses. Shan State is traditionally known for its tea and sugarcane plantations. But today, they cannot operate at full capacity. For instance, the young and able-bodied workforce in Hsipaw’s tea plantations has largely migrated to other states, cities, or neighboring countries like Thailand and China, looking for better work and pay. As for the youth who remain in the country, many are turning to Kyar Phyant online scams and casinos—jobs that offer quick and easy money. While these illicit activities were once heavily stigmatized and frowned upon, the current polycrisis has normalized them, making them seem like regular jobs. It has gone beyond mere conformity; people have their backs against the wall, with nowhere else to turn.

Additionally, reports indicate that China’s border gates in Northern Shan have reopened. But, as you can see on the map, various armed groups have established control along the main Muse-Mandalay trade route. We spoke with local residents, and they noted that compared to pre-conflict levels, trade is currently operating at only a quarter or a fifth of its former capacity. In reality, people still face major challenges along these trade routes, such as a high number of toll gates, sky-high tax rates, and the need to negotiate with multiple armed groups. Furthermore, tax rates within the towns themselves have risen. In Namkham, for instance, steep taxes have prevented shops from reopening and forced businesses to suspend operations ever since 2025. On top of that, high fees collected at town entrances and exits have made even daily travel increasingly difficult for local residents.

The second part is the environmental impact. The Northern Shan region produces at least a dozen mineral types. As you can see on our map, we have identified the estimated locations of these mines alongside the territories controlled by various armed groups. The primary outputs are gold, coal, and lead. To operate these mines, respective companies—primarily from China—pay taxes to the armed groups controlling the territory. For example, Chinese companies are operating silica mining projects in Namhkan. There are also coal mining operations around Kyaukme and Hseni, as well as quartz mining in Tangyan township. However, despite the extensive mining activity, the majority of local residents rarely see any profits. Instead, they bear the full brunt of the resulting environmental degradation.
For instance, when companies come in to rent or buy land, the locals are often completely unaware of the severe environmental damage that will inevitably follow. I am talking about drastic water and air pollution. Shan State, which was once home to lush pine forests, has simply been turned into mining sites. Around Kyaukme, resource extraction has caused widespread water contamination. Mountain streams have changed color, with the water turning dark and toxic. In Tangyan township, residents fear that quartz mining will pollute and deplete the water resources. Local people depend on these water resources for their agricultural livelihoods. So, how have the locals responded to this? Just this month, we saw protests erupted against gold mining in the Man Sei area. Similarly, last year, protests against silica mining in TNLA-controlled Namhkan township took place.

The third point is the social impact. The conflict economy has altered the local social fabric. Following Operation 1027, the daily lives of residents in Northern Shan have undergone massive changes. Following the shift in the controlling armed group, we have seen a surge in drug trafficking. Consequently, local drug consumption has spiked, and casinos have proliferated. Chinese business owners are also increasingly moving into MNDAA-controlled Hseni township. This surge has significantly amplified Chinese influence in the area. In Hseni, Chinese is increasingly becoming the primary spoken and written language. From local markets to the gate sign of the Hseni Saopha’s Palace (Haw), everything is now written in Chinese language. As a result, locals fear this is quietly eroding their local culture, heritage, and identity. Even though still living on their native soil, the sweeping changes brought by the conflict have left people feeling like strangers in their own land. 

In short, despite the change in governing authorities, the local population continues to grapple with severe hardships and crises. To discuss how the people of Shan State are confronting and coping with these deep scars, I will now hand over to Nann Kyi. Nann Kyi, please go ahead.

Yee Mon just discussed the harsh realities the local population in Northern Shan currently faces. I would like to pick up from there and discuss exactly how the locals are responding to these challenges. Normally, when people face unbearable socioeconomic hardships, they seek to make their voices heard through established platforms. For instance, they might turn to parliamentary representatives, the courts, public protest, and media to pressure those in power. Right now, however, we are seeing that these platforms—especially formal institutions—simply no longer work. Furthermore, it remains deeply questionable whether the armed groups’ administrative and legal frameworks genuinely serve the local population. Given this reality, we examined alternative ways the public is adapting and responding, and we identified four main types of responses.

The first response we see is direct confrontation. People take to the streets to protest their hardships openly. This is rare because it is highly risky. But when locals lose their farmlands, gold mines, and their entire livelihoods, desperation drives them to protest. For example, this month (February 2026), 36 Lashio residents protested the MNDAA’s gold mining operations. They were detained and beaten, and only released 15 days later. Despite all this, the mining continued uninterrupted. This highlights just how dangerous this approach is for civilians.

The second response is quiet compliance and adaptation—essentially going with the flow to survive. Basically, it’s the ‘if you can’t beat them, join them’ approach. I see this as people simply prioritizing their basic survival. Living in territories with multiple armed actors means prioritizing survival by paying taxes to every group. For instance, locals might farm or mine in EAO-controlled areas and sell their goods in junta-controlled areas. As they travel and trade, they encounter various armed groups; when they do, they just pay whatever is asked without resisting. We are seeing this kind of response where people are forced to continuously adapt and compromise just to survive.

In the third type of response, people choose neither the high-risk path of direct confrontation nor the path of quiet adaptation. Instead, they choose to leave. As we mentioned, if direct confrontation of protesting is too risky, people either try to weather the storm or relocate to cities they believe are safer, such as Mandalay or Taunggyi. Among those relocating, some are internally displaced persons (IDPs) actively fleeing the armed clashes, while others are choosing to leave simply because they see absolutely no other way out of their daily hardships. For example, recently, we have seen various armed groups aggressively competing to conscript new recruits. When this forced conscription happens, young people flee the region. With livelihoods no longer viable under these conditions, abandoning their home region has become a common response.

The fourth and final response is silent documentation. We see some people focus on keeping records of exactly what is happening and what has occurred. In particular, some civil society organizations (CSOs) remain active in Northern Shan today. Despite facing severe security risks and their own socioeconomic hardships, they choose to stay in the region. Even if they cannot immediately speak out about what the local population is enduring or deliver immediate justice, there are still people striving to document what has happened. So, those are the four main ways the public is responding to the harsh consequences of the conflict economy in Northern Shan State. Next, Htet Shein will discuss exactly why people face these consequences. 

To recap what we have discussed so far, the conflict economy is booming in Northern Shan. And there are gaps in interest between the armed groups and the local population. The public does not get to enjoy any of the profit from this conflict economy; instead, they suffer all of its negative consequences. I would like to discuss two main reasons for this. The first point is the gap between policy and reality. Armed groups that control these territories consistently prioritize foreign investment over the welfare of their own populations. Take, for example, the economic development policy laid out by the MNDAA in 2025. We can see that their strategy for driving the economy in their territory is entirely centered around China’s Yunnan Province. They envision fueling the region’s economic growth primarily through cross-border trade and investments flowing in from Yunnan. Consequently, the MNDAA is highly focused on proving to foreign investors that their territory is stable and a secure place to invest. The fallout from this, as Yee Mon mentioned earlier, is that locals are being pressured to rent out their family farmlands to large corporations or to see their lands converted into massive commercial plantations. The local population has been forced to flee from the war, but now, even when the fighting stops, they will have no homes or farms to return to. Their properties have already been leased out to big business owners—and those leases were certainly not authorized by the locals themselves. When the economic system revolves around foreign investment, the governing armed groups and the local public inevitably pull in opposite directions.

My second point is about natural resources, specifically resource control and exploitation. If you look closely at where armed groups are clashing in Northern Shan, you will see that these conflicts are heavily concentrated around the mining sites. They are fighting to outcompete each other for control over these resource-rich areas so they can extract the minerals and collect taxes from the mining operations. As a result, instead of managing these mining operations with solid policies that benefit the local community, they prioritize competing to extract as much as possible and sell it as fast as possible. Caught in this competition, locals’ properties are swallowed up, and the people are left as collateral damage.

In conclusion, the armed groups prioritize the profit of the conflict economy above all else. They are entirely focused on appeasing foreign investors and racing to mine and sell resources faster than their rivals. Improving local socioeconomic conditions, however, has yet to be a priority. As this gap in interests continues to widen, it is the local public that bears the brunt of the negative impacts. This shows the lack of convergence between the governing armed groups and the local people. What we have covered today are the severe consequences the public is enduring due to the conflict economy in Northern Shan, how the people are trying to respond to these impacts, and exactly why this landscape persists.

Thank you to our panelists for your insightful presentations. That concludes the presentation session of our program. We will now move on to the Q&A session. We are opening the floor to accept questions and comments from the participants joining us today. Beyond questions, we would also love to hear your thoughts and feedback. Please use the “Raise Hand” button if you would like to share your perspective. It looks like we have a question submitted in the chatbox. Let me read it out for everyone.

What do you think needs to be done to minimize the damages and hardships currently taking place?

Frankly, to answer the question of an immediate change, I honestly think it’s unlikely in the short term. This is partly because the region remains highly unstable, conflicts among armed groups are ongoing, and key trade routes are still not operational — leaving little room for any sudden shifts. As for the question of whether there is a viable solution to improve things, we believe that establishing safe platforms where the public can freely voice their concerns could help mitigate the public’s suffering. However, for this to become a reality, either formal institutions need to start functioning properly, or the ethnic armed organizations (EAOs) controlling these areas must open the doors of their legislative and administrative mechanisms to genuinely listen to the voices and needs of the people.

Thank you for your insight, Nann Kyi. We will now continue to take live questions and comments. We would love to hear the perspectives of our participants on today’s topic. I invite you all to use the ‘Raise Hand’ button to freely share your thoughts. Alright, is there anyone who would like to raise their hand to ask a question or share a comment? Okay, we currently have a question submitted in the chatbox. I would like to read it out loud.

Under the regime or the EAOs, the local residents always seem to be on the receiving end of the suffering. Are you suggesting that there is no difference between them?

What is absolutely certain is that the regime has zero public support. This is exactly why the public threw their full support behind the armed groups when Operation 1027 began in Northern Shan. Because they were fighting a highly oppressive regime, their rapid consecutive victories earned them overwhelming public support at the time. But the situation today has shifted from the active combat phase. Now, these armed groups have assumed the responsibilities of governance, administration, public service delivery, and establishing the rule of law in this region.

So, to answer whether the junta and these armed groups are indifferent to one another, we have to look at the armed groups’ capacity and performance in the aforementioned sectors. How are their administrative services actually impacting the local population?  The only people who can make that judgment are the local residents themselves, who are bearing the direct consequences. There is no need for anyone else to make a judgment on whether there is a difference or not. I’d like to conclude by saying that the local residents will see these for themselves and draw their own conclusions.

Thank you, Htet Shein, for your insights. I will now continue to invite live questions and comments. Are there any participants who would like to share and exchange their views on today’s discussion? You can use the ‘Raise Hand’ button to ask a question. I’d also like to invite you to share your thoughts and opinions on today’s topic. Okay, I see a question from a participant in the chatbox. Let me read this question out loud for everyone.

Is it even right to save people who went there with the intention of scamming others? No matter the circumstances, shouldn’t one never engage in dishonest work?

I assume the question is referring to the Kyar Phyant  scam operations. People go to work in these centers, and as noted earlier, these jobs have become normalized. The real question, however, is what drives them there in the first place. As we discussed earlier, people are largely driven to work there because of the dire domestic economic conditions and severe financial hardships. If regular office jobs and opportunities were available, I think no one would willingly choose work that sacrifices both moral integrity and physical security. To answer your question, the focus should not be on judging their morality, but on understanding what drives them there. Only then can we properly address this social crisis. 

Thank you, Yee Mon, for taking that question. Given our time constraints for today’s program, we will be wrapping up the Q&A session here. Before we close, is there anything else our panelists would like to add to today’s discussion?

To summarize everything we have discussed today, I would like to highlight three main points.

First, following Operation 1027, there has been a major shift in territorial control and governance in Northern Shan. Simultaneously, the conflict economy in this region has gained massive momentum. As this profit-centric conflict economy booms, it is the local population that is absorbing all the negative socioeconomic, cultural, and environmental impacts. While the armed groups reap the financial rewards of this system, the locals are watching their traditional socioeconomic balance collapse; they are burdened with heavier taxes and live in constant anxiety over their physical security. The rapid expansion of foreign businesses and investments has intensified the locals’ fear that their unique identity, language, and cultural heritage are under severe threat. Meanwhile, armed groups strip these resource-rich areas bare, leaving communities with nothing but ash and toxic sludge.

Second, I want to draw attention to the lack of choices available to the public. As we mentioned earlier, the local population has no formal platforms to voice their grievances caused by this economy. Only when the situation becomes completely unbearable, they take massive risks to choose direct confrontation. Yet, there is no guarantee that speaking out will yield the results they desire. With survival as the only priority, people have only two choices:  adapt to the fractured system or leave their hometowns behind.

Third, we must clearly recognize the root cause of why the public is bearing the brunt of this conflict economy. Driven by the need to build financial strength, the armed groups are entirely focused on mining as fast as possible and selling as much as possible in disputed resource territories. They are catering almost exclusively to international investors, creating an environment designed purely for profit extraction. This approach completely blinds them to the interests and traditional ways of life of the local people. These actions do not just destroy material livelihoods; they actively erode the locals’ languages, customs, and core values.

To conclude, while the governing authorities in Northern Shan may have changed, the reality for the locals remains grim. The locals are simply jumping out of the frying pan and into the fire. Left bruised and battered by both past and present rulers, they are still just struggling to survive, taking it one day at a time. Thank you.

Thank you for those concluding remarks, Htet Shein. In addition to the data and insights presented today, you can freely access and explore our other research findings on the ISP-Myanmar website at www.ispmyanmar.com, as well as across our social media platforms. I would like to extend a very special thank you to each and every member of our Gabyin members who took the time to attend this 30 Minutes with the ISP. With that, we would like to conclude our program for today.