Sept 4, 2009 (DVB), Police in the conflict-torn Kokang region in northeastern Burma have seized over 150,000 methamphetamine pills following fighting with an armed ethnic group, state media said today.

The drugs were found alongside weaponry and drug-making equipment in a Kokang village in Shan state, which borders Laos and China.

The region has been the site of heavy fighting in recent days between Burmese troops and a Kokang ceasefire group that caused some 37,000 civilians to flee into China.

Burma's state-run New Light of Myanmar newspaper reported today that 154,000 methamphetamine (or 'yaba') pills had been seized along with equipment and chemicals used to make the drug.

Some of the equipment was found in a house belonging to the son of a rebel leader, Reuters reported.

Although the fighting was short-lived, tension remains in Shan state, with Burmese troops moving in on the Wa region home to the United Wa State Army (UWSA), an ally of the Kokang group.

According to the New Light of Myanmar, 9304 refugees had by this morning returned to their homes in Kokang and "the administrative machinery has returned to normal".

Shan state is Burma's main drug producing region, responsible for the world's second highest opium production rates after Helmand province in Afghanistan.

The manufacturing of methamphetamine and other synthetic drugs has increased in recent years as production of opium declines.

Its role in the drugs trade has made Shan state a site of frequent conflict between government troops and armed ethnic groups vying for control of the region.

The latest flare-up in hostilities marks the end of a 20-year truce between ceasefire groups in Shan state and the government.

The Kokang fighting was sparked by pressure from the ruling junta on ceasefire groups in the region to transform into border guard forces.

The government has also asked groups to form political parties in lieu of the 2010 elections, although the majority have rejected the approach.

Reporting by Francis Wade