I. Summary

Australia is a committed partner in international efforts to combat illicit drugs, and gives high priority to drug-related issues, both internationally and domestically. Australia manages the diverse legal, health, social and economic consequences of drug use through comprehensive and consistent policies of demand and supply reduction and circumscribed harm reduction initiatives. Australia is party to the 1988 UN Drug Convention.

II. Status of Country

Australia is primarily a consumer nation for illicit narcotics; however, clandestine laboratories producing methamphetamine and MDMA (Ecstasy) continue to be seized throughout the country. Although, these laboratories are increasing in number and sophistication, it appears that the narcotics produced at these sites are consumed domestically and there is no evidence indicating that narcotics destined for the U.S. are produced in Australia or transit Australia. While domestically produced marijuana remains the most abused drug in Australia, the use of methamphetamine, primarily crystal methamphetamine (crystal meth), and MDMA (Ecstasy) continues to rise. The 2006 UN World Drug Report indicates that Australia has one of the highest rates of MDMA and methamphetamine abuse in the world. Arrests for possession of crystal meth in Australia have risen over 250 percent in the last ten years. Law enforcement and health officials have expressed concern about the dramatic increase in the abuse of crystal meth throughout Australia. In addition to the increased use of crystal meth, cocaine use also appears to be increasing throughout Australia in recent years. The use of cocaine, which previously had been limited to more affluent individuals, appears to be spreading into all segments of society. The use of heroin in Australia has declined significantly since the late 1990's and 2000, but law enforcement and health officials continue to aggressively target heroin traffickers and work to address the issues surrounding the abuse of heroin.

III. Country Actions Against Drugs in 2006

Policy Initiatives. The Australian Government continues to vigorously pursue polices that attempt to both prevent and treat illegal drug use. Launched in 1997, Prime Minister Howard's National Illicit Drug Strategy outlines a program to address drug issues. Australia has committed more than US$750 million (AU$1 billion) to the Strategy. (NOTE: Throughout this report, figures are in U.S. dollars, calculated at an exchange rate of A$1 equals U.S. $0.75)

Since 2002, following the Australian Government's creation of the Australian Crime Commission, state and federal investigators have increased their cooperation, bolstered their enforcement responses to serious crimes such as drug trafficking, and improved prosecution at the appropriate state or federal level. The Australian government committed an additional $187.4 million in 2003 to its program to reduce the supply of, and demand for, illicit drugs. The government is supporting private industry's attempt to develop a pseudoephedrine product that cannot be used as a precursor chemical for methamphetamine. There is an ongoing campaign to prevent illegal sales of pseudoephedrine in Australia. In August 2005, the Australian Minister of Justice announced the implementation of the National Strategy to Prevent Diversion of Precursor Chemicals. On January 1, 2006 as part of this strategy, legislation tightening the access to pseudoephedrine on a national level went into effect. The Australian government has committed $4.1 million to prevent the diversion of legitimate chemicals like pseudoephedrine into the manufacture of illicit drugs. There is also an on-going initiative involving state jurisdictions to establish a computer system to permit the pharmacists around the country to track the purchases of pseudoephedrine products.

The Australian government continues to implement extensive multi-faceted programs to combat drug trafficking and use in Australia. Throughout 2006, Australian law enforcement officials continued to seize large amounts of MDMA, crystal meth and cocaine smuggled into Australia. These seizures are consistent with the reported increased use of these drugs throughout the country. Law enforcement officials continue to report increases in the seizures of clandestine laboratories producing methamphetamine and MDMA. Many of these laboratories are more sophisticated and have greater production capacity than the laboratories seized in the past. In order to circumvent Australian governmental efforts to control the availability of the precursor chemical pseudoephedrine, criminal organizations continue to attempt bulk importations of the chemical into Australia. In June 2006, a multi-agency investigation involving law enforcement agencies from Australia and Indonesia led to the dismantlement of a syndicate that had allegedly smuggled more than 380 kg of pseudoephedrine into Australia. In 2006, Australian law enforcement officials made three significant seizures of illicit narcotics smuggled into the country from Canada. These seizures included approximately 46 kg of crystal meth secreted in the hull of a boat, approximately 350 kg of MDMA secreted in barrels containing ink toner and approximately 135 kg of cocaine and 33 kg of MDMA secreted within computer monitors.

Law Enforcement Efforts. Australian law enforcement agencies continued their aggressive counternarcotics and anti-money laundering efforts in 2006. Responsibility for these activities is divided primarily between the Australian Federal Police (AFP), the Australian Customs Service (ACS), the Australian Crime Commission (ACC) and the Therapeutic Goods Administration (TGA), along with state/territorial police services throughout the country. In 2006, the AFP received funding to increase its, international deployment group from 570 to over 1000 individuals. Some of these individuals will be used to increase the AFP Overseas Liaison Network in order to better focus on transnational crime, including drug trafficking, terrorist activities and immigrant smuggling. The AFP currently maintains more than 86 officers in 26 countries to assist in narcotics investigation. AFP Liaison Officers, particularly those in the Pacific Islands and throughout Asia, also assist local law enforcement agencies in training and institution building. The AFP and other Australian law enforcement agencies continue to have close working relationships with U.S. agencies including the DEA, the FBI and BICE.

Corruption. The Australian Government and state/territorial governments remain vigilant in their efforts to prevent narcotics-related corruption. There is no indication of any senior official of the government facilitating the production or distribution of illicit drugs or aiding in the laundering of proceeds from such activities. Although some state police officers have been investigated and convicted for drug-related corruption, including several members of the Victoria Police Drug Squad, corruption is not common or widespread.

Agreements and Treaties. The U.S. and Australia cooperate extensively in law enforcement matters, including drug prevention and prosecution, under a bilateral mutual legal assistance treaty and an extradition treaty. The USG has a Customs Mutual Assistance Agreement (CMAA) with Australia. Australia is a party to the 1988 UN Drug Convention, the 1971 UN Convention on Psychotropic Substances, and the 1961 UN Single Convention as amended by its 1972 Protocol. Australia is a party to the UN Convention against Transnational Organized Crime and its protocols against migrant smuggling and trafficking in persons. Australia also is a party to the UN Corruption Convention.

Cultivation/Production. Cannabis is the only significant illicit drug cultivated in Australia. The use of hydroponics growth sites has been increasing throughout the country in recent years with well-organized syndicates operating multiple growth sites. The cannabis grown in Australia is primarily destined for the domestic market and there is no evidence that Australian marijuana reaches the U.S. in any significant quantity. Australia has a well-established and controlled licit opium crop (13,000 hectares) on Tasmania. Although recent significant seizures of foreign produced methamphetamine have revealed a change in trafficking patterns, a large amount of the amphetamine and methamphetamine consumed in Australia is produced in domestic clandestine laboratories. As previously mentioned, many of these laboratories are more sophisticated and possess greater production capacity than laboratories seized in the past.

Drug Flow/Transit. Asian organized crime groups continue to be the primary suppliers of heroin into Australia, and also are heavily involved in the trafficking of crystal meth into Australia. This is consistent with regional trends in which many drug trafficking organizations are moving away from crop-based drugs, such as heroin, into the large-scale production and distribution of synthetic drugs, such as MDMA and crystal meth. MDMA consumed in Australia is primarily produced in Europe, but there have been significant seizures, which originated in Asia and Canada. It should be noted that many of the clandestine laboratories producing MDMA seized in Australia are very sophisticated and possess the capacity for large-scale production of MDMA. South American cocaine trafficking organizations continue to target Australia utilizing a variety of means to smuggle cocaine into the country - from personal couriers to cocaine secreted within legitimate cargo shipments. African based trafficking organizations are also involved in the smuggling of cocaine into Australia. Couriers attempting to smuggle cocaine, heroin, MDMA and crystal meth into Australia are intercepted at the international airports on a regular basis.

Domestic Programs. The Federal Government has continued to pursue an aggressive policy to prevent and treat drug use. The Prime Minister's National Illicit Drug Campaign committed the equivalent of $4 million to drug prevention programs in schools and $40 million for compulsory education and a treatment system for drug offenders. Under Australian law, the federal government has responsibility for national health and crime issues, while the states and territories have responsibility for the delivery of health and welfare services. The Ministerial Council on Drug Strategy brings together federal, state and territory ministers responsible for health and law enforcement to determine national policies and programs to reduce the harm caused by drugs in Australia. Although the Federal Government opposes supervised heroin injecting rooms, the legal authority to provide injecting rooms rests with the health and law enforcement agencies in the states and territories. In May 2001, the State of New South Wales passed legislation to permit the licensing and operation of an injecting center, which provides for medically supervised heroin injections, for a trial period of 18 months. This trial period has been extended to October 2007. The Australian Capital Territory has passed similar legislation but has not opened an injection center.

IV. U.S. Policy Initiatives and Programs

U.S. Policy Initiatives. U.S. counternarcotics activities in Australia feature strong ongoing U.S.-Australian collaboration in investigating, disrupting, and dismantling international illicit drug trafficking organizations. The U.S. and Australia have a Memorandum of Understanding in place, which outlines these objectives. U.S. and Australian law enforcement agencies, also, have agreements in place concerning the conduct of bilateral investigations and the open exchange of intelligence information concerning narcotics trafficking organizations.

The Road Ahead. Australia shows no sign of lessening its commitment to the international fight against drug trafficking. Australian counternarcotics efforts throughout Asia and the Pacific Islands continue to be extremely robust. The U.S. can expect continuing strong bilateral relations with Australia on counternarcotics issues. The two countries will continue to work closely in support of the UN Drug and Crime Program and other multi-lateral fora.

Burma

I. Summary

Burma continued to cut opium poppy cultivation this year, but remains vulnerable to periodic spikes in opium production. Burma's reduction in opium cultivation has been accompanied by significant increases in the production and trafficking of synthetic drugs. While Burma remains the second largest opium poppy grower in the world after Afghanistan, its share of world opium poppy cultivation has fallen from 63 percent in 1998 to 11 percent in 2006. This large proportional decrease is due to a significant decrease of opium poppy cultivation in Burma and a large increase in cultivation in Afghanistan. Aided by Burma's decline, the Golden Triangle region in Southeast Asia no longer reigns as the world's largest opium poppy cultivating region. Its share of the world opium cultivation fell from 66 percent in 1998 to only 12 percent in 2006.

Over a longer time horizon of the last eight years, Burma's opium cultivation has declined dramatically. The UN Office on Drugs and Crime (UNODC) estimates a decrease from 130,000 hectares in 1998 to 21,000 hectares in 2006, an 83 percent decrease. Cultivation during the past year dropped from 40,000 hectares to 21,000 hectares. The most significant decline was observed in the Wa region following the United Wa State Army's (UWSA) pledge to end opium poppy cultivation in its primary territory, UWSA Region 2. UWSA controlled territory accounted for over 30 percent of the acreage of national opium poppy cultivation in 2005, but almost no poppy cultivation was reported in the Wa region in 2006.

The trend of continuing decline in opium poppy cultivation is welcome, but it also points to new challenges. Burma has not provided most opium farmers with access to alternative development opportunities. Furthermore, some opium farmers may be tempted to increase production to take advantage of higher prices generated by opium's relative scarcity, and continuing strong demand. Increased yields in remaining poppy fields (particularly in Southern Shan State) may partially offset the affects of decreased cultivation. Favorable weather conditions in 2006 and improved cultivation practices contributed to higher yields. Higher yields in some areas may also signal more sophisticated criminal activity, greater cross border networking, and the transfer of new and improved cultivation techniques.

Burma's declining poppy cultivation has been accompanied by a sharp increase in production and export of synthetic drugs, threatening to turn the Golden Triangle into an "Ice Triangle." Burma plays a leading role in the regional traffic of amphetamine-type stimulants (ATS). Drug gangs based in the Burma-China and Burma-Thailand border areas, many of whose members are ethnic Chinese, produce several hundred million methamphetamine tablets annually for markets in Thailand, China, and India as well as for onward distribution. There are also indications that groups in Burma increased production and trafficking of crystal methamphetamine or "Ice" - a higher purity and more potent form of methamphetamine than the tablets.

In addition to information-sharing and regular cooperation with the U.S. Drug Enforcement Administration (DEA) and Australian Federal Police (AFP) on narcotics investigations, the Government of Burma (GOB) has increased its law enforcement cooperation with Thai, Chinese and Indian counternarcotics authorities, especially through renditions, deportations, and extraditions of suspected drug traffickers.

During the 2006 drug certification process, the U.S. determined that Burma was one of only two countries in the world (the other being Venezuela) that had "failed demonstrably" to meet international counternarcotics obligations. Major concerns include: unsatisfactory efforts by Burma to deal with the burgeoning ATS production and trafficking problem; failure to take action to bring members of the United Wa State Army (UWSA) to justice following the unsealing of a U.S. indictment against them in January 2005; failure to investigate and prosecute senior military officials for drug-related corruption; and failure to expand demand-reduction, prevention and drug-treatment programs to reduce drug-use and control the spread of HIV/AIDS. Burma is a party to 1988 UN Drug Convention.

II. Status of Country

Burma is the world's second largest producer of illicit opium. Eradication efforts and enforcement of poppy-free zones combined to reduce cultivation levels between1998-2006, especially in Wa territory. However, a small resurgence of cultivation occurred in 2006, particularly in eastern and southern Shan State, where improved weather conditions and new cultivation practices increased opium production levels, leading to a slight overall increase in cultivation and production in Burma.

According to the UNODC, opium prices in the Golden Triangle have increased over the past years. Burmese village-level opium prices or farm-gate prices have increased from $153 per kg in 2004 to $187 in 2005 and $230 in 2006. In Burma, opium sales contribute about half of the annual household cash income of farmers who cultivate opium, which they use to cover food shortages. Forty-three percent of the average yearly income ($437) of opium cultivating households was derived from opium sales in 2006. In 2006, the UNODC opium yield survey estimated there were approximately 21,000 hectares planted with opium poppies. In 2005 the U.S. estimated opium production in Burma at approximately 380 metric tons, a 14 percent increase over 2004. The UNODC's opium yield survey, using a different methodology, concluded that cultivation had actually declined 26 percent and production had declined 19 percent. Nonetheless, both surveys estimated a 2006 yield average of 9.2 kg per hectare, well below the peak level of 15.6 kg per hectare recorded in 1996. Both surveys also concluded that Burma experienced a significant downward trend over the past decade, with poppy cultivation and opium production declining by roughly 80 percent. The UNODC estimated opium production in Burma to be 315 metric tons in 2006 (somewhat less than in 2005), and the yield average to be 14.7 kg per hectare (significantly higher than in 2005).

Declining poppy cultivation has been accompanied by a sharp increase in the production and export of synthetic drugs. According to GOB figures for the first six months of 2006, ATS seizures totaled about 16.27 million tablets, an almost tenfold increase from 2005. Opium, heroin, and ATS are produced predominantly in the border regions of Shan State and in areas controlled by ethnic minority groups. Between 1989 and 1997, the Burmese government negotiated a series of cease-fire agreements with several armed ethnic minorities, offering limited autonomy and continued tolerance of narcotics production and trafficking activities in return for peace. In June 2005, the United Wa State Army (UWSA) announced implementation in Wa territory of a long-delayed ban on opium production and trafficking. While the cultivation of opium poppies decreased in the Wa territory during 2006, according to many reports Wa leadership replaced opium cultivation with the manufacture and trafficking of ATS pills and possibly "Ice" in their territory, predominantly by ethnic Chinese gangs.

Although the government has not succeeded in convincing the UWSA to stop its illicit drug production or trafficking, Burmese police Anti-narcotic Task Forces stepped up pressure against Wa traffickers in 2005 and 2006. In addition, the UWSA itself undertook limited enforcement actions. In May 2006, UWSA units found two clandestine laboratories operating in the Eastern Shan state (territory occupied and controlled by the UWSA-South). The UWSA units dismantled the two heroin refineries, which were operating in their area of control. When the UWSA units entered the lab sites, a firefight ensued, with eight people fatally wounded, four arrested, and 25 kg of heroin and 500,000 methamphetamine tablets seized by the raiding UWSA units. In June 2006, the UWSA passed custody of the contraband substances to Government of Burma (GOB) officials. The prisoners remain in the custody of the UWSA. These UWSA actions likely were motivated more towards eliminating the competition in their area than by a desire to stop drug trafficking. In Burma, opium addiction remains high in places of historic or current opium production, ranging from 0.60 percent of the total adult population in Shan State to 0.72 percent in Kachin State and up to 0.83 percent in the Wa region, the main area of opium production through 2006.

III. Country Actions Against Drugs in 2006

Policy Initiatives. Burma's official 15-year counternarcotics plan, launched in 1999, calls for the eradication of all narcotics production and trafficking by the year 2014, one year ahead of an ASEAN-wide plan of action that calls for the region to be drug-free by 2015. To meet this goal the GOB has initiated the plan in stages using eradication efforts combined with planned alternative development programs in individual townships, predominantly in Shan State. The government initiated its second five-year phase in 2004. Ground surveys by the Joint GOB-UNODC Illicit Crop Monitoring Program indicate a steady decline in poppy cultivation and opium production due to enforcement, some alternative livelihood measures, which include crop substitution, discovery and closure of clandestine refineries, interdiction of illicit traffic, and annual poppy eradication programs. The UNODC estimates that the GOB eradicated 3,970 hectares of opium poppy in 2006.

The most significant multilateral effort in support of Burma's counternarcotics efforts is the UNODC presence in northeastern Shan State. The UNODC's "Wa Project" was initially a five-year, $12.1 million supply-reduction program designed to encourage alternative development in territory controlled by the UWSA. In order to meet basic human needs and ensure the sustainability of the UWSA opium ban announced in 2005, the UNODC extended the project until 2007, increased the total budget to $16.8 million, and broadened the scope from 16 villages to the entire Wa Special Region No. 2. Major donors that have supported the Wa Project include the United States, (however, the USG halted funding after the Wa made death threats against DEA agents) Japan and Germany, while the UK and Australia recently made additional contributions.

As part of the 15-year counternarcotics plan, in 2002 the Burmese Central Committee for Drug Abuse Control (CCDAC) initiated the "New Destiny" project, which calls for the complete eradication of poppy cultivation and its replacement with substitute crops. The GOB has claimed that since the implementation in April 2002 of New Destiny in high-density areas of poppy cultivation (in Shan State, Kachin State, and Kayah State), poppy farmers have surrendered on their own volition over 163,720 kg of poppy seeds, which were then destroyed. This destruction prevented poppy from being cultivated on 40,573 hectares with a potential production of 40.01 metric tons of heroin. The GOB, under its 1993 Narcotics Drugs and Psychotropic Substances Law, has issued notifications in subsequent years controlling 124 narcotic drugs, 113 psychotropic substances, and 25 precursor chemicals. Burma enacted a "Mutual Assistance in Criminal Matters Law" in 2004.

Law Enforcement Measures. The CCDAC, which leads all drug-enforcement efforts in Burma, is comprised of personnel from the police, customs, military intelligence, and army. The CCDAC, effectively under the control of the Ministry of Home Affairs, coordinates 25 drug-enforcement task forces around the country, with most located in major cities and along key transit routes near Burma's borders with China, India, and Thailand. As is the case with most Burmese government entities, the CCDAC suffers badly from a lack of adequate resources to support its law-enforcement mission. There are 25 Anti-Narcotics Units located around Burma under the command of the Burmese Police, the lead counternarcotics law enforcement agency. The Burmese Army and Customs Department support the Police in this role. In 2005, CCDAC established two new anti-narcotic task forces in Rangoon and Mandalay, supplementing existing task forces in both cities. The GOB also established a Financial Investigation Team (FIT), based in Mandalay, to serve as a clearinghouse for northern Burma. This new team, established with assistance from DEA and the AFP, complements an existing FIT based in Rangoon.

Burma is actively engaged in drug-abuse control with its neighbors China, India, and Thailand. Since 1997, Burma and Thailand have had 11 cross-border law enforcement cooperation meetings. The most significant result of this cooperation has been the repatriation by Burmese police of drug suspects wanted by Thai authorities: two in 2004, one in 2005 and one in 2006. According to the GOB, Thailand has contributed over $1.6 million to support an opium crop substitution and infrastructure project in southeastern Shan State. Burma-China cross border law enforcement cooperation has also increased, resulting in successful operations and the handover of several Chinese fugitives who had fled to Burma. A joint operation by Burmese and Chinese police resulted in the seizure of 496 kg of heroin in Eastern Shan State in September 2005. While not formally funding alternative development programs, the Chinese government has encouraged investment in many projects in the Wa area, particularly in commercial enterprises such as tea plantations, rubber plantations, and pig farms and has assisted in marketing those products in China through relaxation of duties and taxes.

The last formal Burma/China meeting was held at Pyin-Oo Lwin, Burma, on December 12, 2005. After Burma and India signed an agreement on drug control cooperation in 1993, the two countries have held cross border Law Enforcement meetings on a biannual basis, the last being held September 11, 2004, in Calcutta.

Since the 2005 U.S. federal indictments against the seven UWSA leaders, the GOB has to date taken no direct action against any of the seven indicted UWSA leaders, although authorities have taken action against other, lower ranking members of the UWSA syndicate.

Narcotics Seizures. Heroin, opium, and methamphetamine seizures have all increased since 2005. Summary statistics provided by Burmese drug officials indicate that during the first six months of 2006, Burmese police, army, and the Customs Service together seized 1,406.69 kg of raw opium, 154 kg of heroin, 22.03 kg of marijuana, and just over 16.27 million methamphetamine tablets. In January 2006, Chinese police located a wanted Burmese national and major heroin financier, Yang Ah Hong, in Shanghai and handed him over to Burmese Police. In February 2006, Burmese Police Officers from the Anti-Narcotic Task Force (ANTF) in Tachilek arrested two Burmese nationals after a search of a truck belonging to one of the suspects revealed 100,000 methamphetamine tablets and 1,100 Ecstasy tablets. In March 2006, acting on information received from sources, officers from ANTF Tachilek stopped a Toyota pick-up truck at the entrance of the city limits of Lashio, Burma, and found approximately 48 kg of heroin concealed in a false compartment under the bed of the truck. The driver was arrested. In May 2006, a joint DEA Rangoon, Thai Office of Narcotics Control Board (ONCB) and Burmese CCDAC ANTF operation resulted in the arrest of 16 subjects in Eastern Shan State, and the seizure of approximately 340 kg of heroin, 65.2 kg of opium, 1.08 kg of opium gum and 140 gallons of opium in solution. This operation also resulted in the seizure of two active heroin refineries. The ANTF also discovered and destroyed seven heroin refineries in 2006. In May 2006, ANTF officers arrested two Burmese citizens, a husband and wife, at Switlwe Port, Eastern Shan State, in possession of 48 blocks of heroin (approximately 16 kg). Also in May 2006, the CCDAC conducted an operation at Rangoon international airport, which resulted in the seizure of approximately 3.65 kg of heroin and the arrest of two subjects. On May 28, 2006, police in Eastern Shan state seized 688,000 tablets of methamphetamine and arrested two suspects. In June 2006, police in Mandalay arrested four Burmese nationals and seized 15 kg of ketamine. In October 2006, Police in the Taunggyi ANTF seized 385 vials of ketamine. Each vial was marked as containing 500 milligrams of ketamine hydrochloride.

However, Burma's efforts to combat the production and trafficking of ATS have been unsatisfactory. While seizures are made, they are not at levels commensurate with the burgeoning ATS problem.

Corruption. Burma signed but has not ratified the UN Corruption Convention. Burma does not yet have a legislature or effective constitution; and has no laws on record specifically related to corruption. There is little reliable evidence that senior officials in the Burmese Government are directly involved in the drug trade. However, lower level government officials, particularly army and police personnel posted in border areas, are widely believed to be involved in facilitating the drug trade. Some officials have been prosecuted for drug abuse and/or narcotics-related corruption. In 2006, long prison terms were handed down for several officials of Customs and the Border Trade Committee. The Director General of Burmese Customs was sentenced to 66 years imprisonment and his personal assistant was sentenced to seven years in jail. In 2006, several directors and assistant managers of the Ministry of Trade assigned to the Border Trade Committee in Muse Township, Kutkhaing, were also sentenced to prison terms ranging from seven to forty years based on charges of involvement in illegal trading. However, Burma has failed to indict any military official above the rank of colonel for drug-related corruption.

Agreements and Treaties. Burma is a party to the 1961 UN Single Convention on Narcotic Drugs (and became a member of the 1972 Protocol to the Single Convention in 2003), the 1971 UN Convention on Psychotropic Substances, and the 1988 UN Drug Convention.

Cultivation and Production. According to the UNODC opium yield estimate, in 2006 the total land area under poppy cultivation was 21,500 hectares, a 34 percent decrease from the previous year. The UNODC also estimated that the potential production of opium increased by one percent, from 312 metric tons in 2005 to 315 metric tons in 2006. Despite the decrease in total land under poppy cultivation, the slight increase in potential opium production indicated in the UNODC estimate may reflect improved agricultural methods and more favorable weather conditions in opium poppy growing areas, such as Shan State.

Burma as yet has failed to establish a reliable mechanism for the measurement of ATS production. Moreover, while the U.S. and UNODC undertake estimates of poppy cultivation and production, Burma once again declined to participate in a joint crop survey with the U.S.

Drug Flow/Transit. Most ATS and heroin in Burma is produced in small, mobile labs located near Burma's borders with China and Thailand, primarily in territories controlled by active or former insurgent groups. A growing amount of methamphetamine is reportedly produced in labs co-located with heroin refineries in areas controlled by the United Wa State Army (UWSA), the Shan State Army-South (SSA-S), and groups in the ethnic Chinese Kokang autonomous region. Ethnic Chinese criminal gangs dominate the drug syndicates operating in these three areas. Heroin and methamphetamine produced by these groups are trafficked overland (or via the Mekong River) primarily through China, Thailand, India, and, to a lesser extent, Laos, Bangladesh, and within Burma. Heroin seizures in 2005 and 2006 and subsequent investigations revealed the increased use by international syndicates of the Rangoon International Airport and Rangoon port for trafficking of drugs to the global narcotics market.

Demand Reduction. The overall level of drug abuse is low in Burma compared with neighboring countries, in part because most Burmese are too poor to afford a drug habit. Traditionally, some farmers use opium as a painkiller and an anti-depressant, in part because they lack access to other medicine or adequate healthcare facilities. There has been a growing shift in Burma away from opium smoking toward injecting heroin, a habit that creates more addicts and poses greater public health risks. Deteriorating economic conditions will likely stifle substantial growth in overall drug consumption, but the trend toward injecting narcotics is of significant concern. The GOB maintains that there are only about 65,000 registered addicts in Burma, but surveys conducted by UNODC, among others, suggest that the addict population could be as high as 300,000. NGOs and community leaders report increasing use of heroin and synthetic drugs, particularly among disaffected youth in urban areas and by workers in mining communities in ethnic minority regions. The UNODC estimated that in 2004 there were at least 15,000 regular ATS users in Burma, and a joint UNODC/UNAIDS/WHO study estimated that there are between 30,000 and 130,000 injecting drug users.

There is also a growing HIV/AIDS epidemic tied to intravenous drug use. According to a UNODC regional center, an estimated 26 to 30 percent of officially reported HIV cases are attributable to intravenous drug use, one of the highest rates in the world. Infection rates are highest in Burma's ethnic regions, and specifically among mining communities in those areas where opium, heroin, and ATS are more readily available.

Burmese demand reduction programs are in part coercive and in part voluntary. Addicts are required to register with the GOB and can be prosecuted if they fail to register and accept treatment. Altogether, more than 21,000 addicts were prosecuted between 1994 and 2002 for failing to register. (The GOB has not provided data since 2002.) Demand reduction programs and facilities are limited, however. There are six major drug treatment centers under the Ministry of Health, 49 other smaller detoxification centers, and eight rehabilitation centers, which, together, have provided treatment to about 60,000 addicts over the past decade. As a pilot model, in 2003 UNODC established community-based treatment programs in Northern Shan State as an alternative to official GOB treatment centers. About 1,700 addicts have participated in this treatment over the past three years. Since 2006, an additional 8,028 addicts have sought medical treatment and support from UNODC-sponsored drop-in centers and outreach workers who are active throughout northeastern Shan State. The GOB also conducts a variety of narcotics awareness programs through the public school system. In addition, the government has established several demand reduction programs in cooperation with NGOs. These include programs coordinated with CARE Myanmar, World Concern, and Population Services International (PSI), all of which focus on addressing injected drug use as a key factor in halting the spread of HIV/AIDS.

However, while maintaining these programs at pre-existing levels, Burma has failed to expand demand-reduction, prevention, and drug-treatment programs to reduce drug use and control the spread of HIV/AIDS. The Global Fund for AIDS, TB, and Malaria had approved grants totaling $98.5 million for Burma but withdrew in late 2005 due to the government's onerous restrictions and lack of full cooperation.

IV. U.S. Policy Initiatives and Programs

Policy and Programs. As a result of the 1988 suspension of direct USG counternarcotics assistance to Burma, the USG only engages the Burmese government in regard to narcotics control on a very limited level. DEA, through the U.S. Embassy in Rangoon, shares drug-related intelligence with the GOB and conducts joint drug-enforcement investigations with Burmese counternarcotics authorities. In 2006, these joint investigations led to significant seizures, arrests, and convictions of drug traffickers and producers. The U.S. conducted opium yield surveys in the mountainous regions of Shan State from 1993 until 2004, with assistance provided by Burmese counterparts. These surveys gave both governments a more accurate understanding of the scope, magnitude, and changing geographic distribution of Burma's opium crop. As in 2005, the GOB refused in 2006 to allow another joint opium yield survey. A USG remote sensing estimate indicated that opium cultivation in Burma continues its long-term decline. Bilateral counternarcotics projects are limited to one small U.S.-supported crop substitution project in Shan State. No U.S. counternarcotics funding directly benefits or passes through the GOB.

The Road Ahead. The Burmese government has made significant gains in recent years in reducing opium poppy cultivation and opium production, and has cooperated with UNODC and major regional partners (particularly China and Thailand) in this struggle. Although large-scale and long-term international aid - including development assistance and law-enforcement aid - could play a vital role in further curbing drug production and trafficking in Burma, the ruling military regime's ongoing political repression and barriers to outside assistance have limited international support of all kinds, including support for Burma's law enforcement efforts. Furthermore, in order to be sustainable, a true opium replacement strategy must combine an extensive range of counternarcotics actions, including crop eradication, effective law enforcement, alternative development options, and support for former poppy farmers. The GOB must foster closer cooperation with the ethnic groups involved in drug production and trafficking, especially the Wa, tackle corruption effectively, and enforce counternarcotics laws to eliminate poppy cultivation and opium production.

The USG believes that the GOB must further eliminate poppy cultivation and opium production; prosecute drug-related corruption, especially by corrupt government and military officials who facilitate or condone drug trafficking and money laundering; take action against high-level drug traffickers and their organizations; strictly enforce its money-laundering legislation; and expand prevention and drug-treatment programs to reduce drug use and control the rapid spread of HIV/AIDS. The GOB must take effective new steps to address the explosion of ATS that has flooded the region by gaining closer support and cooperation from ethnic groups, especially the Wa, who facilitate the manufacture and distribution of ATS, primarily by ethnic Chinese gangs. The GOB must close production labs and prevent the illicit import of precursor chemicals needed to produce synthetic drugs. Finally, the GOB must stem the troubling growth of a domestic market for the consumption of ATS.

Cambodia

I. Summary

The number of drug-related investigations, arrests and seizures in Cambodia continued to increase in 2006. This reflects a significant escalation in drug activity and perhaps some increase in law enforcement capacity. The government is concerned at the increasing use of amphetamine-type stimulants (ATS) such as methamphetamines and Ecstasy (MDMA) among all socio-economic levels. The government's principal counternarcotics policymaking and law enforcement bodies, the National Authority for Combating Drugs (NACD) and the Anti-Drug Department of the National Police cooperate closely with DEA, regional counterparts, and the United Nations Office on Drugs and Crime (UNODC). Cambodia is a party to the 1988 UN Drug Convention.

II. Status of Country

Cambodia has experienced a significant increase in recent years in the amount of ATS transiting from the Golden Triangle. The World Health Organization (WHO) estimates that as many as 150,000 methamphetamine tablets enter Cambodia each day. Many of these are consumed domestically (as many as 50,000 per day in Phnom Penh alone), though some are also thought to be re-exported to Thailand and Vietnam. In addition, Cambodian drug control authorities and foreign experts have reported the existence of ATS laboratories in northwestern and southeastern Cambodia. There have also been reports of mobile groups harvesting cinnamomum trees in Cambodia's Cardamom Mountains and extracting chemicals, which can be used as precursors for ATS production. Cocaine use by wealthy Cambodians and foreigners in Cambodia is a relatively small but worrisome new phenomenon. Cocaine consumed in Southeast Asia originates in South America, particularly Peru and Colombia, and transits via human couriers ("swallowers") on commercial air flights to regional narcotics distribution hubs in Bangkok, Hong Kong, Beijing, and Guangzhou. Recent reports indicate that Cambodia may be taking on a small but increasing role as a new trafficking route, with cocaine coming by air from Kuala Lumpur or Singapore, transiting via Phnom Penh, and arriving in Bangkok. Cambodia is not a producer of opiates; however, it serves as a transit route for heroin from Burma and Laos to international drug markets such as Vietnam, Mainland China, Taiwan, Hong Kong, and Australia. Heroin and methamphetamine enter Cambodia primarily through the northern provinces of Stung Treng and Preah Vihear, an area bordering Laos and Thailand. Larger shipments of heroin, methamphetamine and marijuana exit Cambodia concealed in shipping containers, speedboats and ocean-going vessels. Smaller quantities are also smuggled through Phnom Penh International Airport concealed in small briefcases, shoes, and on the bodies of individual travelers. Cannabis cultivation continues despite a government eradication campaign, and there have been reports of continued military and/or police involvement in large-scale cultivations in remote areas. Only small amounts of Cambodian cannabis reach the United States.

III. Country Actions Against Drugs in 2006

Policy Initiatives. Cambodian law enforcement agencies suffer from limited resources, lack of training, and poor coordination. The NACD, which was reorganized in 1999 and again in June 2006, has the potential to become an effective policy and coordination unit. With the backing of the Cambodian government, the UNODC launched in April 2001 a four-year project entitled "Strengthening the Secretariat of the National Authority for Combating Drugs (NACD) and the National Drug Control Program for Cambodia". This project seeks, inter alia, to establish the NACD as a functional government body able to undertake drug control planning, coordination, and operations. The project expired at the end of 2006 and is to be replaced by a similar, but less ambitious, capacity building project of one-year duration in 2007.

Accomplishments. The NACD is implementing Cambodia's first 5-year national plan on narcotics control (2005-2010), which focuses on demand reduction, supply reduction, drug law enforcement, and expansion of international cooperation. In 2006, the NACD trained 205 police officers, gendarmes, customs officials, seaport officials, and border liaison officials in drug identification and law enforcement. This training complements donor-provided training to increase local law enforcement capacity to test seized substances for use as evidence in criminal trials. The Cambodian government continued its work to strengthen previously weak legal penalties for drug-related offenses. The new law, drafted with help from the Anti-Drug Department of the National Police, provides for a maximum penalty of $1 million fine and life imprisonment for drug traffickers, and would allow proceeds from the sale of seized assets to be used towards law enforcement and drug awareness and prevention efforts. However, some observers worry that the law is too complex for the relatively weak Cambodian judiciary to use effectively.

Law Enforcement Efforts. According to NACD reports, (exclusive of synthetic drugs) 439 people (mostly Cambodians) were arrested for various drug-related offenses in the first nine months of 2006, compared to 705 in the first eleven months of 2005. The number of arrests and amount of heroin seized during the first nine months of 2006 exceed the total number of heroin-related arrests and quantity seized during all of 2005. Total seizures of heroin from January through September 2006 were 13.4 kg, compared to 11.06 kg in 2005. Police arrested 18 people in heroin-related cases in January to September 2006 (compared to 10 arrests in 2005), including six Taiwanese individuals apprehended at Phnom Penh airport with more than 10 kg of heroin hidden in their bodies and bags. While methamphetamine trafficking is believed to be on the rise, the number of methamphetamine pills confiscated in 2005 and the first nine months of 2006 remain far below 2004 levels. Police arrested 465 people in methamphetamine-related cases in January to September 2006 and seized 322,761 methamphetamine pills, and 3,722 grams of methamphetamine, and 485 small dose packets.

Corruption. The Cambodian government does not, as a matter of government policy, encourage or facilitate illicit production or distribution of drugs or controlled substances, or launder proceeds from their transactions. Nonetheless, corruption remains pervasive in Cambodia, making Cambodia highly vulnerable to penetration by drug traffickers and foreign crime syndicates. Senior Cambodian government officials assert that they want to combat trafficking and production; however, corruption, abysmally low salaries for civil servants, and an acute shortage of trained personnel severely limit sustained advances in effective law enforcement. The judicial system is weak, and there have been numerous cases of defendants in important criminal cases having charges against them dropped after paying relatively small fines. In July 2006, Heng Pov, the former chief of the Anti-Drug Police, fled Cambodia and alleged that high-ranking government officials and well-connected businessmen were involved in drug trafficking but were not prosecuted due to government pressure. It is difficult to assess the credibility of these claims. At the Consultative Group (CG) meeting in December 2004, a group of donor countries jointly proposed a new benchmark for Cambodian government reform: forwarding an anticorruption law, which meets international best practices to the National Assembly. The government agreed to meet this benchmark by the next CG meeting, which was held in March 2006. Unfortunately, the government failed to meet this deadline and, as of October 2006, has still not completed the law. An informal donor working group, including the U.S., has worked closely with the government to produce a draft that meets international best practices. In addition, at each quarterly meeting of the Government-Donor Coordinating Committee, the international community has highlighted the government's still un-met commitment and outlined the international best practices to be included in the Cambodian draft corruption law. Cambodia has not signed the UN Convention against Corruption.

Agreements and Treaties. Cambodia is a party to the 1988 UN Drug Convention, the 1971 UN Convention on Psychotropic Substances, and the 1961 UN Single Convention as amended by the 1972 Protocol. Cambodia is a party to the UN Convention against Transnational Organized Crime and its protocols against migrant smuggling and illegal manufacturing and trafficking in firearms.

Cultivation/Production. Cannabis cultivation continues despite a government eradication campaign. During the first nine months of 2006, 144 square meters of cannabis plantations were destroyed and eight people linked to these plantations were arrested. This eradication campaign has either reached a plateau of success or is being pursued less vigorously than in past years (for example, while 218 square meters were reported destroyed during 2005, 14,000 square meters were reported destroyed during 2004, and 6,000 square meters were reported destroyed in during 2003).

Drug Flow/Transit. Cambodia shares porous borders with Thailand, Laos, and Vietnam and lies near the major trafficking routes for Southeast Asian heroin. Drugs enter Cambodia by both primary and secondary roads and rivers across the northern border. Many narcotics transit through Cambodia via road or river networks and enter Thailand and Vietnam. Enforcement of the border region with Laos on the Mekong River, which is permeated with islands and mangroves, is nearly impossible due to lack of boats and fuel among law enforcement forces. At the same time, recent improvement in National Road 7 and other roads is increasing the ease with which traffickers can use Cambodia's rapidly developing road network--a trend likely to continue as further road and bridge projects are implemented. Large quantities of heroin and cannabis, along with small amounts of ATS, are believed to exit Cambodia via locations along the Gulf--including the deep-water port of Sihanoukville--as well as the river port of Phnom Penh. Airports in Phnom Penh and Siem Reap suffer from lax customs and immigration controls. Some illegal narcotics transit these airports en route to foreign destinations. In May 2006, police and customs officials arrested three Taiwanese nationals, two of whom were carrying a total of more than 7 kg of heroin, which they intended to smuggle to Taiwan on commercial flights. In September 2006, the Anti-Drug Police arrested four South Americans who had swallowed a total of more than 4 kg of cocaine and smuggled it into Cambodia on commercial flights.

Domestic Programs (Demand Reduction). A nine-month report of the NACD, covering the period from January to September 2006, states the total number of drug users and addicts was 6,500, a figure provided by the Royal Government of Cambodia's (RGC) Anti-Drug Department. NGOs and other specialists working on this issue argue that the number of drug users in Cambodia is probably far higher and is growing each year. A study conducted by the Joint United Nations Program on HIV/AIDS (UNAIDS) in 2005 estimated that at the end of 2004, there were 20,000 amphetamine users, 2,500 heroin users, and 1,750 intravenous drug users in Cambodia. With the assistance of the UNODC, UNICEF, WHO, CDC, the Japanese International Cooperation Agency (JICA) and NGOs, the NACD is attempting to boost awareness about drug abuse among Cambodians--especially Cambodian youth--through the use of pamphlets, posters, and public service announcements. A UNODC treatment and rehabilitation project, funded by Japan and initiated in October 2006, provides services to addicts and works to increase the capacity of health and human services to deal effectively with drug treatment issues. This project will work at four sites in three provinces, most likely in Phnom Penh, Battambang, and Banteay Meanchey. Several local NGOs, including Mith Samlanh, Punloeu Komar Kampuchea, Cambodian Children and Handicap Development (CCHDO), Goutte d' Eau, Cambodian Children Against Starvation Association (CCASVA) and Street Children Assistance for Development Program (SCADP), have taken active roles in helping to rehabilitate drug victims across the country.

IV. U.S. Policy Initiatives and Programs

Policy Initiatives. For the first time in over three decades, there is relative political stability in Cambodia. However, Cambodia is plagued by many of the institutional weaknesses common to the world's most vulnerable developing countries. The challenges for Cambodia include: nurturing the growth of democratic institutions and the protection of human rights; providing humanitarian assistance and promoting sound economic growth policies to alleviate the debilitating poverty that engenders corruption; and building human and institutional capacity in law enforcement sectors to enable the government to deal more effectively with narcotics traffickers. One unique challenge, which Cambodia faces, is the loss of many of its best trained professionals in the Khmer Rouge period (1975-1979), as well as during the subsequent Vietnamese occupation. Performance in the area of law enforcement and administration of justice must be viewed in the context of Cambodia's profound underdevelopment. Even with the active support of the international community, there will be continuing gaps in performance for the foreseeable future.

Bilateral Cooperation. U.S. restrictions on assistance to the central government of Cambodia, in place from the political disturbances of 1997 until the present reporting period, hampered U.S.-Cambodia bilateral counternarcotics cooperation. However, U.S.-Cambodia bilateral counternarcotics cooperation should improve in FY07 as a result of the lifting of certain restrictions on military assistance to Cambodia. Cambodia regularly hosts visits from Bangkok-based DEA personnel, and Cambodian authorities cooperate actively with DEA, including in the areas of joint operations and operational intelligence sharing. In January and March 2006, immigration, customs, and police officials attended Basic Counternarcotics and Airport Interdiction courses funded by the State Department and taught by DEA Special Agents. DOD conducted Joint Interagency Task Force-West (JIATF-West) training missions in Koh Kong in February 2006, and in Stung Treng province in June 2006. The three-week programs increased the ability of Cambodian police, military, and immigration officials to interdict transnational threats, including narcotics. In 2006, JIATF-West and DEA partnered to incorporate DEA trainers into the JIATF-West training missions, bringing together military interdiction and law enforcement skills into a coherent package. Through a USAID cooperative agreement, Khmer HIV/AIDS NGO Alliance (KHANA) is supporting more than 80 local organizations engaged in HIV/AIDS prevention throughout the country. In 2006, some of these organizations included drug-related HIV/AIDS transmission issues in their programs. Outreach efforts targeted at intravenous drug users will continue, as such drug use is the quickest and most efficient means of HIV transmission.

The Road Ahead. Cambodia is making progress toward more effective institutional law enforcement against illegal narcotics trafficking; however, its capacity to implement an effective, systematic approach to counternarcotics operations remains low. Instruction for mid-level Cambodia law enforcement officers at the International Law Enforcement Academy in Bangkok (ILEA) and for military, police, and immigration officers by JIATF-West has partially addressed Cambodia's dire training needs. However, after training, these officers return to an environment of scarce resources and pervasive corruption. As part of the JIATF-West program, Cambodian officials can be trained in land and maritime navigation and boat maintenance, but equipment to perform these tasks is often shoddy or completely lacking. As noted above ("Bilateral Cooperation"), the USG in FY07 lifted certain restrictions on military assistance to Cambodia. The RGC is establishing a foreign military sales case for $670,000 of excess defense articles. The acquisition of basic soldier and unit equipment (such as uniforms, boots, first aid pouches, compasses, cots, and tents) for the Army border battalions will facilitate an increased ability to conduct patrols along the borders. The JIATF-West training events in FY07 will consist of two events in Stung Treng province and one event in the Battambang/Banteay Meanchey area, and will again include DEA trainers in addition to military personnel. JIATF-West has also embarked on a training infrastructure renovation project, which will renovate several law enforcement and military facilities in Sisophon town and the provinces of Preah Vihear and Stung Treng. Renovation will serve both to facilitate future JIATF-West training and also to build the capacity of Cambodian law enforcement and military authorities. In addition, the U.S.-based drug treatment organization Daytop International will conduct three training sessions for Cambodian government, non-government, and private sector drug prevention and treatment professionals. These training sessions, which will be funded by the State Department and will last approximately two weeks each, are scheduled to start in December 2006. USAID is collaborating with WHO and NGO partners to collect data on numbers and behaviors of intravenous drug users and is supporting intravenous drug use and HIV outreach services in Phnom Penh and Siem Reap as a first step in addressing the growing problem of illicit drug use. The U.S. will also encourage the Cambodian Government to sign and ratify the UN Convention against Corruption and begin to implement its commitments.

China

I. Summary

The People's Republic of China is a major factor in the regional drug market, serving as a transit country and an important producer/exporter of Amphetamine Type Stimulants (ATS). China continues to have a domestic heroin problem along with an upsurge in the consumption of synthetic drugs such as Ecstasy and crystal methamphetamine, known locally as "ice." Chinese authorities view drug trafficking and abuse as a major threat to its national security, its economy, and its national and regional stability, but corruption in far-flung drug producing and drug transit regions of China limits what dedicated enforcement officials can accomplish. Authorities continue to take steps to integrate China into regional and global counternarcotics efforts. Cooperation with U.S. counternarcotics officials has steadily improved over the past year. A successful joint operation in 2005/2006 dismantled a Colombian drug organization operating in Southern China. China is a party to the 1988 UN Drug Convention.

II. Status of Country

Mainland China is situated adjacent to both the major narcotics producing areas in Asia, Southeast Asia's "Golden Triangle" and Southwest Asia's "Golden Crescent." While the "Golden Triangle" area poses a longstanding problem, Chinese officials note that the "Golden Crescent" is the source of increasing amounts of illicit drugs trafficked into Western China, particularly Xinjiang Province. China's 97-kilometer border with Afghanistan is remote, but Chinese authorities are increasingly concerned that opium from Afghanistan can find its way into China through other countries. Beijing claims that there are no heroin refineries in China. China is a major producer of licit ephedrine and pseudoephedrine used in the manufacture of methamphetamine. There is a widespread belief among Asian law enforcement agencies that large-scale methamphetamine producers in other Asian countries are using China-produced ephedrine and pseudoephedrine, and there are numerous examples from criminal investigations to confirm this suspicion. Diverted Chinese precursor chemicals may sustain synthetic drug production in other countries as far away as Mexico, Belgium and the Netherlands. Although China recently enacted enhanced precursor chemical control laws and is fully engaged in multilateral and bilateral efforts to stop diversion from its chemical production sector, it has not matched the size of its large chemical industry with sufficient resources to effectively ensure against diversion.

As for drug abuse within China, according to the Chinese Government, drug abuse continues to rise. There were, by the end of 2005 (the most current statistics available), 1,160,000 registered drug users, down 440,000 from 2004, but officials acknowledge the actual number of addicts is higher, and there have been published reports that China might have as many as 15 million drug abusers. The majority of registered drug addicts, 78.3 percent (700,000 people), are heroin users. Youth between the ages of 17-35 comprise the largest percentage of addicts.

As China's economy has grown and its society has opened up over the last decade, the country's youth have come to enjoy increasing levels of disposable income and freedom. This has been associated with a dramatic increase in drug abuse among the country's youth in large and mid-sized cities. The number of abusers of new drugs is increasing and drugs such as crystal methamphetamine, Ecstasy, ketamine, and triazolam have become more popular. Synthetic drug use has surpassed that of traditional drugs in Northeast China's three provinces of Heilongjiang, Jilin, and Liaoning. Nightclubs and karaoke bars have become hotbeds for such recreational drugs.

With a large and developed chemical industry, China is one of the world's largest producers of precursor chemicals, including acetic anhydride, potassium permanganate, piperonylmethylketone (Ecstasy), pseudoephedrine, ephedrine, and ephedra. China monitors all 22 of the chemicals on the tables included in the 1988 UN Drug Convention. China continues to be a strong partner of the United States and other concerned countries in implementing a system of pre-export notification of dual-use precursor chemicals. According to the PRC's National Narcotics Control Commission (NNCC), China seized over 157 metric tons of precursor chemicals in 2005, prevented 3,250 metric tons of precursor chemicals from being exported abroad, and dismantled 34 labs. Nevertheless, diverted Chinese-source precursor chemicals are regularly encountered abroad during the course of criminal investigations.

III. Country Actions Against Drugs in 2006

Policy Initiatives. China takes active measures to combat the use and trafficking of narcotics and dangerous drugs. China's Ministry of Public Security (MPS) is in the midst of its National People's War on Illicit Drugs, begun in 2005 at the initiative of Chinese President Hu Jintao. MPS has designated five campaigns as part of this effort: drug prevention and education; drug treatment and rehabilitation; drug source blocking and interdiction; "strike hard" drug law enforcement; and strict control and administration, designed to inhibit the diversion of precursor chemicals and other drugs. In November 2005, China passed an Administrative Law on Precursor Chemicals as well as an Administrative Regulation on Narcotic Drugs and Psychotropic Substances. In the same month, China issued Provisional Administrative Regulations on the Export of Precursor Chemicals to Special Countries, strengthening the regulation of exports of 58 types of precursor chemicals to countries in the "Golden Triangle." In June 2004, MPS Bureau of Narcotics Control implemented a nationwide drug-related information gathering, sharing and storing network allowing data comparison alerts, and improved overall coordination in counternarcotics operations.

China continues to participate in UNODC demand reduction and crop substitution efforts in areas along China's southern borders and worked closely with Burma to implement an alternative crops program. With UNODC support, NNCC conducted training in cross-border drug enforcement cooperation, ATS data collection, and combating ATS crimes in Southern China. China routinely participates in counternarcotics education programs sponsored by the International Law Enforcement Academy (ILEA), located in Bangkok, Thailand.

Accomplishments. China's biggest success in 2005/2006 was the dismantlement of a Colombian drug trafficking organization in Southern China in cooperation with U.S. DEA. DEA, Hong Kong, and mainland Chinese agencies jointly tracked a drug trafficking organization as it moved cocaine from Colombia to China. In March 2006, China's Customs Anti-Smuggling Bureau made several arrests and seized 136 kg of cocaine in Zhongshan City in Guangdong Province. China continues to cooperate with regional and international partners to stem drug trafficking. China has eradicated opium poppy cultivation in China and Chinese authorities continue efforts to destroy illicit drug laboratories within China's borders.

Law Enforcement Efforts. The Chinese Government has continued its aggressive counternarcotics campaign. The coordination between China's Beijing-based counternarcotics efforts and those at the provincial level has grown substantially with increased training and exchange programs. Special interagency organizations were set up in 18 key provinces and cities to actively oversee and carry out the National People's War on Illicit Drugs.

According to the NNCC 2006 Report, Yunnan Province (bordering Burma and Laos) and Guangxi Autonomous Region (bordering Vietnam) conducted stepped up counternarcotics efforts in 2005. Yunnan authorities solved more than 10,000 criminal narcotics cases and seized 5.19 tons of heroin, 124 kg of morphine, 2.62 tons of methamphetamine and 2.05 tons of opium and arrested 13,500 suspects. Solved cases and seizures increased by 8.7 percent and 1.3 percent respectively. Yunnan forestry authorities seized 2.97 tons of poppy shells and the State Postal Administration in Yunnan helped solve more than 30 drug-related cases. Guangxi Autonomous Region solved 159 cases involving heroin from Vietnam, an increase of 115 cases over 2004, and seized 66.8 kg of heroin, up 124 percent over 2004. Both regions mounted special operations to combat drug-related money laundering. In 2005, Xinjiang Autonomous Region uncovered nine cases involving drugs coming from the "Golden Crescent" by air, with 14 foreign couriers arrested and 14.5 kg of heroin seized, a dramatic increase over 2004.

Altogether in 2005, Chinese law enforcement agencies arrested 46,359 drug suspects, prosecuted 33,750 drug cases involving 46,013 persons, and solved 45,400 drug criminal cases, including 1,794 cases involving seizures from one to ten kg and 342 cases with seizures of more than ten kg. China also dismantled 1,550 drug trafficking gangs, arrested 58,000 suspects, and seized 6.9 tons of heroin, 5.5 tons of methamphetamine, 2.3 tons of opium, 2.34 million "Ecstasy" tablets, 2.6 tons of ketamine, and 941 kg of cannabis. Authorities solved 34 precursor cases, arrested 44 suspects, and seized 50.4 tons of precursor chemicals. Chinese authorities seized drug-related funds amounting to 47.92 million RMB, 140 thousand U.S. dollars, and 410,000 Hong Kong dollars.

Prior to 2003, narcotics enforcement was handled by one organization and focused primarily on heroin. The NNCC reorganized its enforcement operations in 2003 and established separate heroin and ATS enforcement groups at both the ministerial and provincial levels in order to better focus on ATS enforcement.

In 2005, China continued to strengthen its cooperation with United States law enforcement agencies. This included major DEA successes, such as the joint efforts against the Colombian drug organization. MPS continues to provide strategic and concrete information to its DEA counterparts to actively target drug rings. MPS has allowed DEA to interview witnesses in carrying out case investigations and has allowed DEA to jointly conduct other investigative activity to help identify drug rings. In addition, MPS routinely facilitates the travel of U.S. law enforcement personnel based at the U.S. Embassy in Beijing.

China has actively participated in an international cooperative effort with its neighbors in the Golden Triangle to reduce poppy cultivation in Laos and Burma in recent years, resulting in a 27 percent decrease in the total area of production since 1995. Nevertheless, according to the NNCC's 2006 report, Burma remains the major source of opium entering China.

The Chinese Government successfully conducted joint counternarcotics operations with neighboring countries. NNCC reports that after an 11-month investigation, police forces from five countries arrested 70 suspects in September 2005 and finally dismantled an international drug trafficking group headed by Han Hongwan and covering China, Burma, and Thailand.

Corruption. China has a very serious corruption problem. Anticorruption campaigns have led to arrests of many lower-level government personnel and some more senior-level officials. Most corruption activities in China involve abuse of power, embezzlement, and misappropriation of government funds, but payoffs to "look the other way" when questionable commercial activities occur are another major source of official corruption in China. While narcotics-related official corruption exists in China, it is seldom reported in the press.

MPS takes allegations of drug-related corruption seriously, launching investigations as appropriate. Most cases appear to have involved lower-level district and county officials. There is no specific evidence indicating senior-level corruption in drug trafficking. Nevertheless, the quantity of drugs trafficked within China raise suspicions that official corruption is a factor in trafficking in certain provinces bordering drug producing regions, such as Yunnan, and in Guangdong and Fujian, where narcotics trafficking and other forms of transnational crimes are prevalent. Official corruption cannot be discounted among the factors enabling organized criminal networks to operate in certain regions of China, despite the best efforts of authorities at the central government level. China is engaged in an anticorruption dialogue with the United States through the U.S.-China Joint Liaison Group on Law Enforcement Cooperation (JLG). As a matter of government policy or practice, China does not encourage or facilitate the laundering of proceeds from official drug transactions, nor are there any indications that senior Chinese officials engage in laundering the proceeds from illegal drug transactions. Narcotics-related corruption does not appear to have adversely affected ongoing law enforcement cases in which United States agencies have been involved.

As part of its efforts to stem the flow of corrupt Chinese officials who embezzle public funds and flee abroad to evade punishment, China ratified the United Nations Convention Against Corruption in January 2006, shortly after the Convention entered into force in December 2005.

Agreements and Treaties. China actively cooperates with other countries to fight against drug trafficking and has signed over 30 mutual legal assistance agreements with 24 countries. China has signed 58 bilateral treaties on legal assistance and extradition with 40 countries. China is a party to the 1988 UN Drug Convention, as well as to the 1961 UN Single Convention and its 1972 Protocol and the 1971 Convention on Psychotropic Substances. The United States and China cooperate in law enforcement efforts under a mutual legal assistance agreement signed in 2000. There is no extradition treaty between the United States and China. In January 2003, the United States and China reached agreement on the Customs Mutual Assistance Agreement (CMAA.). In February 2005, NNCC and DEA signed a memorandum of intent to establish a bilateral drug intelligence working group to enhance cooperation and the exchange of information. They jointly sponsored a drug-related money laundering workshop in August 2006. China continues to cooperate with international chemical control initiatives, "Operation Purple" and "Operation Topaz," and strictly regulates the import and export of precursor chemicals. China continued its participation in the ASEAN and China Cooperative Operations in Response to Dangerous Drugs (ACCORD).

Cultivation/Production. The PRC has effectively eradicated the cultivation of drug-related crops within China. China's mountainous and forested regions where illegal cultivation can occur are subject to aerial surveillance, field surveys, and drug eradication. Chinese officials state that there are no heroin refineries in China.

China is a main source for natural ephedra, which is used in the production of ephedrine. China is also one of the world's largest producers of licit synthetic pseudoephedrine. China has a large pharmaceutical industry and ephedra is used for legitimate medicinal purposes. The Chinese central government, supplemented by stricter controls in critical provinces such as Yunnan and Zhejiang, makes efforts to control exports of this key precursor. Despite these efforts, there is a widespread belief among law enforcement authorities in Asia that large-scale production of methamphetamines, most notably in super and mega-labs, in the Asia Pacific Rim, use China-produced ephedrine and pseudoephedrine. Large-scale seizure of chemicals diverted from China is almost commonplace in law enforcement investigations around the world.

The Chinese Government continues to make shutting down illicit drug laboratories a top priority. China dismantled 34 labs in 2005.

Drug Flow/Transit. China continues to be used as a transshipment route for drugs produced in the "Golden Triangle" to the international market, despite counternarcotics cooperation with neighbors such as Vietnam, Thailand and Burma. China shares a 2000-kilometer border with Burma, much of which lies in remote and mountainous areas, providing smugglers unrestricted crossing into China. In addition, there are many official crossings on the Burma/China border that also provide access. Transit of drugs through Yunnan and Guangxi to Guangdong for storage, distribution, or repackaging has been especially widespread. Traffickers continue to use Guangzhou, Shenzhen, and Zhuhai in Guangdong Province as transit/transshipment points for heroin and crystal methamphetamine leaving China. Chinese authorities report that much of Burma's heroin travels through China en route to the international market. It is estimated 78 percent (8,468 kg) of the total amount of heroin (10,837 kg) seized in China during 2004 was produced in the Golden Triangle area and entered China from the Muse and Kohkang areas of Northern Burma. In 2005, Chinese authorities seized a total of 6.9 tons of heroin nationwide.

Chinese authorities acknowledge that Western China is experiencing significant problems as well. Chinese officials are becoming increasingly concerned about the growing source of opium from the Golden Crescent and have seen a steady increase in the flow of heroin from that region. They report that drugs such as opium and heroin are being smuggled into Xinjiang Province for distribution throughout China. MPS and DEA report that Pakistan serves as a key trafficking route for heroin from Afghanistan into China. In 2005, Pakistan reportedly solved 22 cases involving drugs intended for China. China itself reported nine cases of drugs smuggled by air into China from Pakistan.

Domestic Programs (Demand Reduction). MPS figures indicate there were 1,160,000 registered drug addicts in China in 2005, down 440,000 from 2004. Officials acknowledge that the actual number of addicts is higher, with some published reports speaking of 15 million drug abusers. An estimated 700,000 people, or 78.3 percent, of registered drug abusers are addicted to heroin.

As part of its National People's War on Illicit Drugs, China takes a multi-agency approach to educating people about drug prevention. This effort involved producing a film, "Memory of Black and White," on drug prevention and education; creating a drug enforcement hero character, Wu Guanlin, and promoting him and his deeds in five provinces; disseminating thousands of drug control fliers and pictures for prominent display on TV, buses, and in public spaces; designating five well-known public figures as "image ambassadors"; setting up training courses in schools in key provinces that reach millions of students; mobilizing 1,000 college students to go to villages during holidays to publicize drug control; antidrug training in discos and pubs, targeting high-risk groups and promoting drug awareness; special courses in re-education-through-labor camps; periodic placement of pieces in newspapers, magazines, and TV news programs including Focus Talk, Face to Face, Dialogue, etc. China continued to give high priority to controlling the spread of HIV/AIDS in 2005. MPS also stepped up campaigns targeting young people in its fight against banned narcotics and created more drug-free residence communities and villages for rehabilitating addicts.

IV. U.S. Policy Initiatives and Programs

Bilateral Cooperation. Counternarcotics cooperation between China and the United States continues to develop in a positive way. The information shared by China is leading to progress in attacking drug-smuggling rings that have an impact on the U.S. and is yielding significant operational results.

Road Ahead. The most significant problem in bilateral counternarcotics cooperation remains the lack of progress toward concluding a bilateral Letter of Agreement (LOA) enabling the U.S. Government to extend counternarcotics assistance to China. Reaching agreement on the LOA is a major U.S. goal that, if achieved, would greatly increase counternarcotics cooperation between the two countries. While China has provided the DEA on a case-by-case basis with some samples of drugs seized in the PRC intended for U.S. markets, the U.S. Government would welcome routinely receiving samples of all drugs seized by Chinese authorities. Despite these issues, bilateral enforcement cooperation remains on track and is expected to continue to improve over the coming year.

Hong Kong

I. Summary

Hong Kong is not a major transit/transshipment point for illicit drugs destined for the international market because of its efficient law enforcement efforts, the availability of alternate transport routes, and the development of port facilities elsewhere in southern China. Some traffickers continue to operate out of Hong Kong to arrange shipments from nearby drug-producing countries via Hong Kong and other international markets, including to the United States. The Government of the Hong Kong Special Administrative Region (HKSAR) actively combats drug trafficking and abuse through legislation and law enforcement, preventive education and publicity, treatment and rehabilitation, as well as research and external cooperation. The 1988 UN Drug Convention, to which the People's Republic of China (PRC) is a party, also applies to Hong Kong.

II. Status of Hong Kong

Hong Kong's position as a key port city in close proximity to the Golden Triangle and mainland China historically made it a natural transit/transshipment point for drugs moving from Southeast Asia to the international market, including to the United States. In recent years, Hong Kong's role as a major transit/transshipment point has diminished due to law enforcement efforts and the availability of alternate routes in southern China. Despite the diminished role, some drugs continue to transit Hong Kong to the United States and the international market. Some drug-traffickers continue to use Hong Kong as their financial base of operations, including investors involved in international drug trafficking activity who reside in Hong Kong. Drug trafficking groups operating in Hong Kong are primarily transnational in nature.

Hong Kong law enforcement officials maintain very cooperative liaison relationships with their U.S. counterparts in the fight against drugs. According to HKSAR authorities, drugs seized in Hong Kong are smuggled mostly for local consumption and to a lesser extent for further distribution in the international market, including the United States. Hong Kong continued to experience an overall decrease in drug abuse in 2006. According to the Hong Kong Central Registry of Drug Abuse (CRDA), in the first six months of 2006 the total number of drug abusers continued to fall to 7941, a drop of 11.5 percent from 8969 during the same period in 2005. Ketamine (an livestock anesthetic abused by youth as a hallucinogen) was the most commonly abused psychotropic substance and the number of its abusers rose by 20.9 percent in the first half of 2006. (Hong Kong is one of the centers of abuse of Ketamine in Asia.) There was also a slight increase in the number of young drug abusers under age 21, rising from 1,396 to 1,451. Heroin remains the most popular drug of adult drug users and the number of overall heroin users slightly decreased in the first six months of 2006 when compared to the same period in 2005.

In 2006, the Hong Kong Government again gave a high priority to tackling psychotropic substance abuse. The Hong Kong Government has identified the continuing prevalence of psychotropic substance abuse and the growing trend of young people experimenting with drugs as their major area of concern in the battle against drug abuse and trafficking.

III. Actions Against Drugs in 2006

Policy Initiatives. Although there were no major policy changes in 2005 and 2006, the Hong Kong Government continued to work with existing counternarcotics policies and strategies in drug-prevention efforts. Minor policy changes included the replacement of the Action Committee Against Narcotics on Research by the Research Advisory Group (RAG). Apart from monitoring research, the RAG provides advice on interpreting drug abuse statistical trends and drawing together the latest research findings from both local and overseas narcotics-related studies.

Law Enforcement Efforts. Hong Kong's law enforcement agencies, including the Hong Kong Police and Hong Kong Customs and Excise Department (HKCED), place high priority on meeting the objectives of the 1988 UN Drug Convention. Their counternarcotics efforts focus on the suppression of drug trafficking and the control of precursor chemicals. The Hong Kong Police have adopted a three-level approach to combat narcotics distribution: at the headquarters level, the focus is on high-level traffickers and international trafficking; the regional police force focuses on trafficking across police district boundaries; and the district level police force has responsibility for eradicating street-level distribution. In 2006 Hong Kong Police stepped up license checking on entertainment premises in order to deter youngsters from visiting venues where drugs are more easily available. HKCED's Chemical Control Group, in cooperation with the U.S. DEA office in Hong Kong, closely monitors the usage of precursor chemicals and tracks the export of suspicious precursor chemical shipments to worldwide destinations with significant results impacting on several regions including the United States. HKCED continued to aggressively combat drug trafficking in 2006 and carried out numerous significant drug seizures, including the collective seizure with the U.S. DEA and Chinese Customs authorities of 142 kg of cocaine. Concurrent with the cocaine seizure, HKCED arrested eight defendants, three of whom are Colombian nationals. Results from this investigation corroborate increasing intelligence information that Colombian trafficking organizations are establishing closer working ties with Chinese traffickers and becoming actively involved in joint smuggling ventures of cocaine to the Asia region. Hong Kong police also made large narcotics seizures in the first nine months of 2006 to include record seizures of 151,200 and 550 kg of ketamine in January, February and September respectively.

Corruption. As a matter of government policy, the HKSAR government does not encourage or facilitate illicit production or distribution of narcotic or psychotropic drugs or other controlled substances, or the laundering of proceeds from illegal drug transactions. Similarly, no senior government official is alleged to have participated in such activities.

Hong Kong has a comprehensive anticorruption ordinance that is effectively enforced by the Independent Commission Against Corruption (ICAC), which reports directly to the Chief Executive. In addition, the UN Convention Against Corruption, which the PRC ratified on January 13, 2006, is applicable to Hong Kong.

Agreements and Treaties/International Cooperation. Hong Kong has "mutual legal assistance in criminal matters agreements" with the United States and many other countries. Hong Kong signed surrender of fugitive offenders' agreements with Finland, Germany and Korea in 2006 to bring the total number of countries with which Hong Kong has such agreements or treaties to 16, including the U.S. Hong Kong has also signed transfer of sentenced persons' agreements with eight countries, including the U.S. Hong Kong law enforcement agencies enjoy a close and cooperative working relationship with their mainland counterparts and counterparts in many countries. Last year Hong Kong's Joint Financial Intelligence Unit (JFIU) entered into a Memoranda of Understanding in respect to intelligence sharing with the financial intelligence units of Australia, Korea, Japan, Singapore and Canada. Hong Kong's reversion to China in 1997, and particularly adjustment to the unique "one country, two systems" environment in which Hong Kong currently operates, caused Hong Kong's law enforcement and customs operations around the time of reversion (July 1997) to operate less efficiently with their mainland counterparts than they do now. In the last few years, liaison information sharing and data-networking functions, such as customs information, have been formalized and have been successful in increasing the levels of inter-system cooperation and efficiency. Because intermittent drug trafficking through Hong Kong involving mainland China has been increasing, foreign law enforcement agencies in Hong Kong such as the U.S. DEA have also benefited from the increased level of PRC-Hong Kong cooperation. One example has been a strong emphasis on cooperative training seminars. In June 2006, an innovative cross-boundary intelligence sharing workshop hosted by the U.S. DEA and HKCED included officials from Mainland Chinese Customs and highlighted the open exchange of intelligence and the increasing level of cooperation among the participating agencies. The 1988 UN Drug Convention, 1961 UN Single Convention as amended by the 1972 Protocol, and the 1971 UN Convention Against Psychotropic Substances are all applicable to Hong Kong.

Cultivation and Production. Although Hong Kong police detected and destroyed several minor drug production and cultivation enterprises in 2006 including four small-scale crack cocaine production labs and three cannabis cultivation sites, Hong Kong is generally not considered a producer of illicit drugs.

Drug Flow/Transit. Some drugs continue to flow through Hong Kong for the overseas market, to destinations including Australia, Japan, Taiwan, and the United States. Traffickers use land routes through mainland China to smuggle heroin into Hong Kong. The heavy volume of vehicle and passenger traffic at the land boundary between PRC and Hong Kong continues to pose difficulties in the fight against the trafficking of drugs into Hong Kong. In an effort to curb Hong Kong's role as a transit/transshipment point for illicit drugs, the HKSAR maintains a database of information on all cargoes, cross-border vehicles, and shipping. The air cargo clearance system, the land border system and the customs control system are all capable of quickly processing information on all import and export cargoes, cross-border vehicles and vessels. The local Chinese population primarily dominates the Hong Kong drug trade. Contrary to common belief, there is not a significant and direct connection between Hong Kong narcotics activity and Hong Kong triads at the wholesale and manufacturing level. Therefore, drug investigations are not focused on known triad societies, but rather on the particular trafficking syndicates or individuals involved. In 2005 and 2006, the trafficking destined for mainland China by Southeast Asians became more prominent. As a result, seizures of ketamine have continued to spiral upwards and shipments of multi-kilo loads of ketamine have been intercepted. For example, a recent joint investigation between the U.S. DEA and Taiwanese authorities netted the seizure of 240 kg of ketamine believed to have originated from India and bound for Taiwan.

Domestic Programs. The Hong Kong Government uses a "five-pronged" approach to confront domestic drug problems, covering legislation and law enforcement; preventive education and publicity; treatment and rehabilitation; research; and external co-operation. In 2006, the Hong Kong Government's preventative education policy efforts continued to focus on youth and parents. The Hong Kong Government has provided a comprehensive drug prevention program throughout Hong Kong's education system. In 2006 the Hong Kong Police Narcotics Division stepped up publicity efforts to teach Hong Kong adolescents about the detrimental effects of commonly abused drugs like ketamine by using Announcements in the Public Interest through TV and radio broadcasts. The Hong Kong Government's Narcotics Bureau also partners with youth organizations and groups such as Junior Police Call, the Hong Kong Red Cross, and the Scout Association of Hong Kong to promote an anti-counternarcotics message to youths. In June 2004, the Hong Kong Government formally opened the Drug Information Centre (DIC), funded by the Hong Kong Jockey Club. The DIC is the first exhibition center in Hong Kong dedicated to counternarcotics education. Since the DIC's opening, it has received more than 73,000 visitors for various drug-prevention education activities. The Government also continued to commission nongovernmental organizations to assist in educating primary and secondary school children by sponsoring antidrug education programs in local schools and conducting antidrug seminars with parents, teachers, social workers and persons from various uniform groups. In July 2005, the Advisory Group on Professional Training for Anti-drug Workers was formed to educate social workers and peer counselors and provide them with certified antidrug training on treatment and rehabilitation.

The Hong Kong Government also continued to implement a comprehensive drug treatment and rehabilitation program in 2006. The fourth Three-year Plan on Drug Treatment and Rehabilitation Services was released in March 2006. The plan sets out the overall direction for enhancing Hong Kong's treatment and rehabilitation services and increases focus on early intervention efforts and focus programs that reach out to substance abusers. The Department of Health and the Social Welfare Department continued to operate seven residential drug treatment centers and five counseling centers for psychotropic substance abusers and the Department of Health continued its operation of a methadone treatment program. The Correctional Services Department continued to provide compulsory treatment for convicted persons with drug abuse problems.

IV. U.S. Policy Initiatives and Programs

Policy Initiatives. The U.S. Government and the HKSAR continue to promote sharing of proceeds from joint counternarcotics investigations. In May 2003, Hong Kong began participating in the U.S. Container Security Initiative (CSI), which U.S. law enforcement believes will increase the potential for identifying shipments of narcotics, even though its focus is on terrorism and weapons of mass destruction. Hong Kong is also an active participant in the International Law Enforcement Academy (ILEA) in Bangkok, Thailand. From 2003 to October 2005, Hong Kong Customs, Hong Kong Department of Health and the U.S. DEA launched a joint operation codenamed "Cold Remedy" to monitor the movement of precursor chemicals that are used in the production of methamphetamine and other drugs from Hong Kong to high-risk countries. The operation effectively decreased the frequency of these shipments and, through the high level of information exchange and timely international tracking, indicated strong cooperation between Hong Kong Government officials and their U.S. counterparts. To further strengthen international cooperation against trafficking of precursors used in the production of amphetamine and other amphetamine-type stimulants (ATS) drugs, Hong Kong secured an agreement with the U.S., Mexico and Panama to impose stringent controls on such shipments. Since the agreement's implementation in April 2005, no shipment of such products to Mexico or any other high-risk countries has been detected. Another cooperative chemical initiative was implemented in February 2006 and codenamed Amethyst Asia. This new program is designed much like Cold Remedy in which the U.S. DEA and Hong Kong Government monitor and track potassium permanganate shipments sourced from countries or territories in Asia, which transit through Hong Kong, and are destined to high risk countries. Potassium permanganate is a precursor chemical used in the manufacture of cocaine.

The Road Ahead. The Hong Kong Government has proven to be a valuable partner in the fight against drug trafficking and abuse. Hong Kong law enforcement agencies, among the most effective in the region, continue to cooperate closely with U.S. counterparts. The U.S. Government will continue to encourage Hong Kong to maintain its active role in counternarcotics efforts.

Indonesia

I. Summary

Although Indonesia is not a major drug producing, consuming, or transit country, Indonesia continues to have a rapidly growing problem in all three areas. The Indonesian National Police (INP) has participated in several international donor-initiated training programs and continues to commit increased resources to counternarcotics efforts. The INP has received both specialized investigative training and equipment, including vehicles, software, safety and tactical equipment, to support its efforts against crime and drugs. INP efforts are firmly based on counternarcotics legislation and international agreements. The INP relies heavily on assistance from major international donors, including the U.S. Indonesia is a party to the 1988 UN Drug Convention.

II. Status of Country

According to Government of Indonesia (GOI) statistics, Indonesia is facing an increase in drug abuse among its citizenry. Specifically, according to the Indonesian National Narcotics Board (BNN) approximately 3.2 million people (1.5 percent of Indonesia's total population) are drug abusers. Furthermore, according to GOI statistics, on average 15,000 people, die from drug abuse every year. Of the drug users in Indonesia, 56 percent are drug addicts using hypodermic needles. A statistical comparison of the number of drug trafficking and abuse cases indicates that between 2001 and 2005, there was a 76 percent increase. Similarly, the BNN reports that during the same period the number of suspects in drug trafficking and abuse cases has increased 75 percent. In an effort to curb the rising drug abuse problem the Indonesian government has imposed tougher punishments. Nevertheless, all major groups of illegal drugs are readily available in Indonesia, including, methamphetamine, in its crystalline or tablet forms, Ecstasy (MDMA), heroin, cocaine, and marijuana.

Historically, MDMA Ecstasy has been smuggled into Indonesia from sources of supply in the Netherlands. However, in recent years Indonesia has been experiencing an increase in large scale, domestic MDMA and methamphetamine production, which is one of the most significant drug trafficking threats to Indonesia. Since 2002, Indonesian/Chinese MDMA and methamphetamine production syndicates have established numerous large-scale clandestine MDMA and methamphetamine laboratories capable of producing multi-hundred pound quantities utilizing precursor chemicals from the Peoples Republic of China (PRC). In addition, MDMA and methamphetamine produced in the PRC is smuggled to Indonesia in multi-hundred kg quantities, via maritime cargo and fishing vessels, by Chinese organized crime syndicates based in Hong Kong, Taiwan and in mainland China. Specifically, Indonesian authorities cite two of the largest methamphetamine seizures of 2006, 200 kg (February 2006) and 956 kg (August 2006), as originating from the PRC and say they were smuggled via maritime cargo and fishing vessels to Indonesia.

Marijuana is cultivated and trafficked throughout Indonesia; INP also reports that Indonesian trafficking syndicates based out of Jakarta control marijuana trafficking in Indonesia.

Although cocaine seizures continue to occur in major Indonesian airports, the market for cocaine in Indonesia is believed to be very small.

III. Country Actions Against Drugs in 2006

Policy Initiatives. The BNN continues to strive to improve interagency cooperation in drug enforcement, interdiction, and precursor control. In 2005, under the auspices of BNN, the USG sponsored Joint Interagency Counter Drug Operations Center (JIACDOC) was opened in Jakarta, Indonesia. The JIACDOC is supported by an extensive IT infrastructure connecting the center to key provinces throughout Indonesia. The mission of the JIACDOC is to improve coordination and information exchange between various Indonesian law enforcement agencies related to drug enforcement.

Law Enforcement Efforts. The continued lack of modern detection, enforcement and investigative methodologies and technology, as well as the presence of pervasive corruption, are the greatest obstacles to advancing the antidrug efforts. According to the BNN, prosecutions for drug possession, trafficking and manufacturing have increased more than 400 percent during recent years. Specifically, based on GOI figures, the number of prosecutions for drug possession had quadrupled to 14,515 in 2005 from 3,617 in2001. Furthermore, the number of recorded drug crimes, including trafficking has also increased from 4,924 suspects in 2001, to 20,023 in 2005.

The INP Narcotics and Organized Crime Directorate continues to improve in its ability to investigate and dismantle international drug trafficking syndicates, as well as cooperate with other international law enforcement agencies. In addition, the Narcotics Directorate has become increasingly active in the regional targeting conferences designed to coordinate efforts against transnational drug and crime organizations. In 2006, the INP attended the International Drug Enforcement Conference (IDEC) held in Montreal, Canada. INP's Director for Narcotics and Organized Crime was subsequently appointed as the Chairman of the East Asia Regional IDEC Working Group.

The maritime counterdrug effort depends on a myriad of Indonesian law enforcement agencies. Efforts to define the roles of these agencies, including the Navy and the INP Air and Sea Police continue in an effort to avoid duplicative enforcement initiatives.

Corruption. Indonesia has laws against official corruption. Despite these laws, corruption in Indonesia is endemic, and seriously limits the effectiveness of all law enforcement, including narcotics law enforcement. As a mater of government policy and practice, the GOI does not encourage or facilitate the illicit production or distribution of drugs or the laundering of proceeds from illegal transactions. The recently elected administration has made anticorruption efforts one of its top three major policy initiatives along with counterterrorism and counterdrug efforts.

Agreements and Treaties. Indonesia is a party to the 1988 UN Drug Convention, the 1971 UN Convention on Psychotropic Substances, and the 1961 UN Single Convention, as amended by the 1972 Protocol. Indonesia ratified the UN Corruption Convention in September 2006.

Cultivation/Production. Opium is not cultivated or processed in Indonesia. INP reports that the domestic production of MDMA and methamphetamine is the most significant drug production threat in Indonesia. MDMA and methamphetamine are produced in Indonesia, as well as neighboring Malaysia. Specifically, Indonesian/Chinese trafficking syndicates based in both Jakarta and Malaysia (Penang) utilize chemists trained in the Netherlands. Local syndicates rely upon precursor chemical sources of supply in the Peoples Republic of China (PRC). The lax law enforcement, and corruption that is endemic to Indonesia enables regional narcotics production and trafficking syndicates to operate relatively unimpeded by law enforcement

Marijuana is cultivated throughout Indonesia. However due to the equatorial climate of Sumatra, and year round growing conditions, marijuana is most intensively cultivated throughout northern Sumatra. Specifically, large scale (greater than 20 hectares) marijuana cultivation occurs in the remote and sparsely populated regions of the province, often in mountainous topography. Regional marijuana cultivation syndicates are believed to be exploiting INP's equipment limitations by locating cultivation sites in remote and high elevation areas.

Drug Flow/Transit. Indonesia's numerous islands present a ready opportunity to traffickers of synthetic drugs and precursor chemicals to manufacture them. The GOI is not adequately equipped to police and inspect the numerous entirely licit flows of waterborne commerce, and finds it very difficult indeed to distinguish systematically which vessels might be carrying contraband. Most synthetics and precursors for them seem to arrive in Indonesia by boat from their starting point in China.

The INP reports that the majority of heroin seized in Indonesia originates in Southwest Asia. Indonesian authorities report that much of the heroin trade in Indonesia is controlled and directed by West Africans-- Nigerians in particular. Heroin is smuggled by West African and Nepalese trafficking organizations utilizing sources of supply in Karachi, Pakistan and Kabul, Afghanistan via commercial air carriers transiting Bangkok, Thailand, and India en route to Jakarta. In addition to heroin being trafficked to Indonesia, heroin is also transshipped from Indonesia, by couriers traveling via commercial air carrier to Europe, Japan and Australia.

Domestic Programs/Demand Reduction. Indonesia has only a basic drug education program, which is significantly constrained by inadequate resources. Sophisticated treatment availability is also a problem. Sophisticated treatment is really only available, to a limited extent, in the largest Indonesian cities. If the family of a drug abuser has adequate resources, they might seek treatment elsewhere, perhaps in Malaysia or Singapore. General treatment availability in smaller cities and in areas other than Java would probably be at government-operated treatment clinics, and providers would have little experience in delivering either appropriate pharmaceuticals or counseling. With U.S. assistance and collaboration, the GOI National Narcotics Board and the Ulama Council of Indonesia has established demand reduction outreach centers within their madrassahs (religious schools called Pesantraens) throughout Indonesia, permitting a culturally appropriate response to drug abuse.

IV. U.S. Policy Initiatives and Programs

Bilateral Cooperation. Indonesia and the United States maintain excellent law enforcement cooperation on narcotics issues. During 2006, the United States Coast Guard (USCG) conducted basic and advanced boarding officer courses in Indonesia. ICE (Immigration and Customs Enforcement) has also provided Indonesian authorities with advanced money laundering training in 2005 and training in combating cash couriers and trade based money laundering in 2006.

The Road Ahead. In 2007 the U.S. will continue to assist the BNN and its member agencies in realizing the full potential of the Counter Drug Operations Center and Network to standardize and computerize the reporting methods related to narcotics investigations and seizures; to develop a drug intelligence database; and to build an information network designed to connect all of the provinces of Indonesia. This will permit Indonesian law enforcement to contribute to and access the database for investigations. The U.S. and Indonesia will continue to cooperate closely on narcotics control.

Japan

I. Summary

Japan's efforts to fight drug trafficking comply with international standards. Japan cooperates with other countries in intelligence sharing and law enforcement. Methamphetamine abuse remains the biggest challenge to Japanese antinarcotics efforts, but MDMA (Ecstasy) trafficking has also become a persistent problem. Cocaine and marijuana use is relatively smaller in scale but still significant. According to Japanese authorities, all illegal drugs consumed in Japan are imported from overseas, usually by organized crime syndicates and foreign drug trafficking organizations. In spite of bureaucratic obstacles, Japanese law enforcement officials are proactively addressing the problem, and have conducted precedent-setting operations in cooperation with the U.S. Drug Enforcement Administration (DEA) Tokyo. Although drug seizures are down from 2005 levels, continuing short-supply-driven high street prices indicate that law enforcement has been effective. Japan is a party to the 1988 UN Drug Convention.

II. Status of Country

Japan is one of the largest markets for methamphetamine in Asia. A significant source of income for Japanese organized crime syndicates, over 80 percent of all drug arrests in Japan involve methamphetamine. The National Police Agency (NPA) estimates there are 600,000 methamphetamine addicts, and between one and three million casual users nationwide. Authorities unofficially estimate that between four and seven metric tons is trafficked annually into Japan. MDMA has also become a significant problem in Japan; over 50,000 Ecstasy tablets had been seized by police as of September 2006, and officials say that they expect MDMA abuse to increase. Marijuana use has also grown steadily in Japan since 2000. Japan is not a significant producer of narcotics. The Ministry of Health, Labor and Welfare strictly controls some licit cultivation of opium poppies, coca plants, and cannabis for research. According to DEA and the National Police Agency, there is no evidence that methamphetamine or any other synthetic drug is manufactured domestically.

III. Country Actions Against Drugs in 2006

Policy Initiatives. The Headquarters for the Promotion of Measures to Prevent Drug Abuse, which is part of the Prime Minister's Office (Kantei), announced the Five-Year Drug Abuse Prevention Strategy in July 2003. This strategy includes measures to increase cooperation and information-sharing among Japanese agencies as well as with foreign countries, utilize more advanced investigation techniques against organized crime syndicates, and raise awareness about the dangers of drug abuse. The Ministry of Health, Labor and Welfare added 30 more drugs to its list of controlled substances in 2006.

Law Enforcement Efforts. Japanese police are effective at gathering intelligence and making arrests, in spite of operating under a number of legal and operational constraints. Prosecutors do not have the option of plea-bargaining in Japan, which severely limits the amount of information police can extract from the people they arrest. Japan also has laws restricting the use of informants, undercover operations, and telephone intercepts. Officials nevertheless maintain detailed records of Japan-based drug trafficking, organized crime, and international drug trafficking organizations. Japan regularly shares intelligence with foreign counterparts and engages in international drug trafficking investigations. The National Police Agency and Tokyo Metropolitan Police conducted two groundbreaking operations in 2006 with DEA's assistance. Using technically sophisticated methods to attack organized crime drug traffickers, officers seized 30 kg of Nepalese cannabis resin in July and two kg of Peruvian cocaine in September. The decrease in drug seizures in 2006 could be a sign of reduced supply. The closure of several methamphetamine mega-labs in Indonesia, Malaysia, and the Philippines, as well as Japan's increased international cooperation, may be limiting the flow of drugs into the country. The fact that drug prices have risen in the last year strongly suggests that supply on the street is tight. As of September 2006, police had seized 45 kg of methamphetamine, a significant decrease from the 126 kg confiscated during the same period in 2005. Marijuana and cannabis resin seizures as of September 2006 were 154 kg and 57 kg respectively, over a third less than the same period of the previous year. MDMA seizures during January-September fell from 350,000 tablets in 2005 to only 50,000 in 2006. Cocaine, heroin, and opium seizures remained roughly at their 2005 levels.

Corruption. There were no reported cases of Japanese officials being involved in drug-related corruption in Japan in 2006. The government does not encourage or facilitate the illicit production or distribution of narcotics, psychotropic drugs, controlled substances, or the laundering of proceeds from illegal drug transactions.

Agreements and Treaties. Japan abandoned efforts to pass an anticonspiracy bill this year, a major step backward for a country otherwise very progressive on fighting illegal narcotics trafficking. As a result, Japan cannot ratify the UN Convention on Transnational Organized Crime. Japan is a party to the 1988 UN Drug Convention, the 1961 UN Single Convention on Narcotic Drugs, the 1972 Protocol amending the Single Convention, and the 1971 UN Convention on Psychotropic Substances.

An extradition treaty is in force between the U.S. and Japan, and a Mutual Legal Assistance Treaty (MLAT) went into effect in August 2006, Japan's first MLAT with any country. The MLAT allows Japan's Ministry of Justice to share information and cooperate directly with the Department of Justice in connection with investigations, prosecutions and other proceedings in criminal matters.

Cultivation/Production. Japan is not a significant cultivator or producer of controlled substances. The Ministry of Health, Labor, and Welfare's research cultivation program produces a negligible amount of narcotic substances purely for research purposes.

Drug Flow/Transit. Authorities believe that methamphetamine smuggled into Japan originates in the People's Republic of China (PRC), Taiwan, North Korea, Burma, Malaysia, Indonesia and the Philippines. Drugs other than methamphetamine often come from the these same source countries, however airport customs officials have made several recent seizures of cocaine transiting from the United States, and authorities confirm that methamphetamine and marijuana are being imported from Canada as well. Most of the MDMA in Japan originates in either the Netherlands or China.

Domestic Programs/Demand Reduction. Most drug treatment programs are small and are run by private organizations, but the government also supports the rehabilitation of addicts at prefectural (regional) centers. There are a number of government-funded drug awareness campaigns designed to inform the public about the dangers of stimulant use, especially among junior and senior high school students. The Ministry of Health, Labor, and Welfare, along with prefectural governments and private organizations, continues to administer national publicity campaigns and to promote drug education programs at the community level.

IV. U.S. Policy Initiatives and Programs

Policy Initiatives. U.S. goals and objectives include building on the successes of the last year by strengthening law enforcement cooperation related to controlled deliveries and drug-related money-laundering investigations; encouraging more demand reduction programs; supporting increased use of existing anticrime legislation and advanced investigative tools against drug traffickers; and promoting greater involvement from government agencies responsible for financial transaction oversight.

The Road Ahead. DEA Tokyo will work closely with its Japanese counterpa