Australia is a committed partner in international efforts to combat illicit drugs. Domestically, Australian government policies are designed to address fully both the law enforcement needs and the demand reduction sides of the equation. Australian law enforcement agencies work closely with their U.S. counterparts in Australia and the United States, and have a robust and growing law enforcement liaison structure in numerous overseas posts where they also work closely with U.S. counterparts.

II. Status of Country

Cannabis remains the most abused drug in Australia but law enforcement and health officials continue to be concerned about the increased use of crystal methamphetamine and cocaine. The trend towards the use of crystal methamphetamine (‘ice’) is of particular concern to Australian law enforcement, given its destructive effect on users and the public. Law enforcement agencies throughout Australia continue to seize greater amounts of methamphetamine precursor chemicals and have shut down sophisticated clandestine laboratories with increased frequency. MDMA (Ecstasy) is still very prevalent in the major cities throughout Australia, although a recent study indicates use may be falling. Large shipments of MDMA have been seized entering Australia from Europe and Asia, and law enforcement officials continue to encounter sophisticated MDMA production laboratories in the Sydney and Melbourne areas. Cocaine use also appears to be increasing throughout Australia. The number of cocaine seizures has increased, with a majority of the seizures involving couriers and smaller amounts, but there have also been large shipments seized from Canada, Hong Kong and Chile. Cocaine remains the drug of choice in Australia for the affluent due to the high price (US$277/gram to US$92-115,000/kilogram). But its use has been increasing across all socio-economic levels. Australian media are describing crystal methamphetamine as the “new heroin,” a reference to the heroin abuse “epidemic” which swept through Australia in the late 1990’s and early 2000’s. The heroin “epidemic” resulted in a significant increase in heroin overdoses and deaths. A variety of factors contributed to a subsequent decrease in heroin availability and many heroin users began utilizing other drugs. Of note, a recent annual drugs survey reported this downward trend in heroin may not be continuing as many abusers of crystal methamphetamine may be switching back to heroin due to the government’s high profile campaign against crystal methamphetamine.

III. Country Actions Against Drugs In 2007

Policy Initiatives. In an effort to address the increase in the numbers and sophistication of clandestine synthetic drug laboratories, changes in legislation have limited the availability of pseudoephedrine, a precursor chemical for methamphetamine. All products containing pseudoephderine are now stored behind the pharmacy counters, and products with high concentrations of pseudoephedrine also require a doctor’s prescription. In response to this legislation, many organized crime groups have undertaken large scale smuggling of ephedrine and pseudoephedrine products from locations throughout Asia, and most recently Africa. Australian law enforcement officials seize large illicit shipments of pseudoephedrine on a regular basis. With the view that stable governments in the regions are less likely to be utilized by drug trafficking groups in establishing drug production facilities, the Australian Government has strengthened the Australian Federal Police (AFP) capacity to respond to international crises, particularly within the region. The AFP’s International Deployment Group (IDG) has been increased by about 400 personnel, taking the total to 1200. This has been the largest single increase in AFP staff since the force was established in 1979. The extra resources will allow the IDG to establish a 150 member-strong Operational Response Group that is ready to respond at short notice to emerging law and order issues in the region and to undertake stabilization operations. The AFP’s international network currently has 86 officers located in 31 posts in 26 countries worldwide. Many of these posts have close working relationships with area DEA Country Offices.

Law Enforcement Efforts. Responsibility for counternarcotics efforts is divided among the Federal Government, primarily the AFP, the Australian Customs Service (ACS), the Australian Crime Commission (ACC), and the Therapeutic Goods Administration (TGA), in addition to state/territorial police services. Australia also has a large and growing international deployment of AFP overseas liaison officers focusing on transnational crime, including international drug trafficking. Australian law enforcement has made it a priority to identify and dismantle clandestine laboratories whose numbers appear to have stabilized after several years of drastic increases. In the period of July 2006/2007, a total of 333 clandestine labs were seized in Australia. For the period of July 2005/2006, there were 390 clandestine labs seized, and in 2004/2005, 381 clandestine labs seized. Although a majority of the seized laboratories are unsophisticated, small capacity operations, there has been an increase in the number of sophisticated methamphetamine/crystal methamphetamine “superlabs” seized throughout the country. Law enforcement authorities continue to report the seizure of large-scale active and inactive MDMA labs in the country. For July 2006/2007, 17 MDMA labs were seized, up from 7 MDMA labs seized during the July 2005/2006 period. During the 2005/2006 period, some of the MDMA clandestine labs were ‘superlabs’.

Corruption. Australian federal agencies rarely are implicated in corruption and misconduct. The Australian Crime Commission (ACC), the Australian Federal Police (AFP), the internal affairs sections of State Police departments and legislative-established commissions actively investigate and pursue corruption or misconduct charges. Generally, investigations involving public corruption are reported by the media. As a matter of policy, the Government of Australia GOA) does not encourage or facilitate the illicit production or distribution of narcotic or psychotropic drugs or other controlled substances, or the laundering of proceeds from illegal drug transactions. Likewise, no senior official of the federal government is known to engage in, encourage or facilitate such illicit production, or to launder proceeds of illegal drug transactions, to post’s knowledge.

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. In addition, Australia is a party to the 1961 UN Single Convention, as amended by the 1972 Protocol, the 1971 UN Convention on Psychotropic Substances, the 1988 UN Drug Convention, the UN Convention against Transnational Organized Crime and the UN Corruption Convention. Australia also is actively involved in many international organizations that investigate drug trafficking. Australia acts as co-chair of the Asia-Pacific Group on money laundering, is a member of the Financial Action Task Force, INTERPOL, the Heads of Narcotics Law Enforcement Association (HONLEA), the International Narcotics Control Board, the South Pacific Chiefs of Police, the International Drug Enforcement Conference (IDEC) and the Customs Cooperation Council among others.

Cultivation/Production. The licit cultivation and processing of opium poppies in Australia is strictly confined to the Australian state of Tasmania. Tasmania is considered one of the world’s most efficient producers of poppies with the highest yield per hectare of any opiate producing country. With an annual average licit opium production of approximately 2.5 tons per hectare, Tasmania supplies around one half of the world’s legal medicinal opiate market. The Australian poppy industry utilizes the Concentrated Poppy Straw process, which processes the dry poppy plant material ‘poppy straw’ for use in the production of codeine and thebaine. The Australian Federal Government and the Tasmanian State Government share responsibility for control of the poppy industry. During the growing and harvesting season, crops are regularly monitored by the Poppy Advisory and Control Board field officers and any illegal activity is investigated by the Tasmania Police Poppy Task Force. The export to the U.S. of Australia’s narcotic raw material (NRM) is regulated by the ‘80/20 rule’ which reserves 80 percent of the NRM market to traditional suppliers (India and Turkey) while the remaining 20 percent is shared by non-traditional suppliers (Australia, France, Hungary, Poland and currently, Former Yugoslavia). There were approximately 1000 poppy growing licenses granted for the 2006/2007 growing season in which 13,000 hectares were under poppy cultivation. Domestically produced marijuana (cannabis) continues to be Australia’s most abused illicit drug. Cannabis cultivation and distribution is not dominated by any group and appears to be organized on an individual basis. Sophisticated hydroponic cultivation sites of various sizes have been seized throughout the country. Use of hydroponic grow sites continues to be the preferred method of the more advanced marijuana trafficking organizations. There is still no evidence indicating any large exportation of Australian produced marijuana, but there have been instances of small amounts of Australian-produced hydroponic marijuana being transported to Asian nations for use by expatriate communities in those countries.

Drug Flow/Transit. The U.S. Embassy in Canberra continues to receive information indicating MDMA traffickers may be utilizing Australia as a transit point for MDMA shipments to other parts of the world. These reports remain unconfirmed, but the situation continues to be monitored closely by both the DEA and Australian law enforcement organizations.

Domestic Programs/Demand Reduction. The availability of treatment services for drug users remains an integral part of Australia’s National Drug Strategy. There is a wide range of treatment options available throughout Australia, including detoxification, therapeutic communities, residential facilities, outpatient treatment, day programs, and self-help groups. As part of the “Tough on Drug Strategy” launched in 1997, the Australian government has committed substantial resources to reducing the demand for illicit drugs throughout the country. This strategy, coupled with the activities of state/territorial agencies and non-governmental organizations, is aimed at reducing the demand for all types of drugs throughout the country. In 2001, the New South Wales government approved a heroin injection room in the Kings Cross area of Sydney. The Commonwealth of Australia government has opposed the operation of these injection rooms and is pursuing alternative harm reduction methods. To date, this safe injection room remains in operation.

IV. U.S. Policy Initiatives and Programs

Bilateral and Multilateral Cooperation. The United States undertakes a broad and vigorous program of counternarcotics activities in Australia, enjoying close working relationships with Australian counterparts at the policy making and working levels. There is an active collaboration in investigating, disrupting, and dismantling international illicit drug trafficking organizations. The United States and Australia cooperate under the terms of a Memorandum of Understanding that outlines these objectives. U.S. and Australian law enforcement agencies also have agreements in place concerning the conduct of bilateral investigations and the exchange of intelligence information on narcotics traffickers. Both sides continue to pursue closer relations, primarily in the area of information sharing.

The Road Ahead. Australia continues to take a leadership position in the international fight against drug trafficking in its domestic, regional and worldwide activities. The expanded Operational Response Group allows them to have greater participation in regional law and order activities and stabilization efforts. Strong bilateral relations between Australia and the U.S. on counternarcotics issues are confidently expected to continue.

Burma

I. Summary

Burma took many wrong turns in 2007, including in the war on drugs. Both UNODC and U.S. surveys of opium poppy cultivation indicated a significant increase in cultivation and potential production in 2007, while production and export of synthetic drugs (amphetamine-type stimulants, crystal methamphetamine and Ketamine) from Burma continued unabated. The significant downward trend in poppy cultivation observed in Burma since 1998 halted in 2007, with increased cultivation reported in Eastern, Northern and Southern Shan State and Kachin State. Whether this represents a sustained reversal in poppy cultivation in Burma, which remains far below levels of 10 years earlier, remains to be seen. It does indicate, however, that increases in the value of opium are driving poppy cultivation into new regions. An increased number of households in Burma were involved in opium cultivation in 2007. While Burma remains the second largest opium poppy grower in the world after Afghanistan, its share of world opium poppy cultivation fell from 55 percent in 1998 to 5 percent in 2006, and rose slightly in 2007. This large proportional decrease is due to both decreased opium poppy cultivation in Burma and increased cultivation in Afghanistan. The Golden Triangle region in Southeast Asia no longer reigns as the world’s largest opium poppy cultivating region; that dubious honor is now held by Afghanistan.

Despite increased cultivation in 2007, Burma’s opium cultivation declined dramatically between 1998 and 2006. The UN Office on Drugs and Crime (UNODC) estimates a decrease from 130,300 ha (ha) in 1998 to 21,500 ha in 2006, an 83 percent decrease. Cultivation in 2007 increased 29 percent, from 21,500 ha in 2006 to 27,700 ha. The most significant decline over the past decade 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 and 2007. However, there are indications that cultivation has increased in regions closely bordering UWSA Region 2.

Burma has not provided most opium farmers with access to alternative development opportunities. Recent trends indicate that some opium farmers were tempted to increase production to take advantage of higher prices generated by opium’s relative scarcity and continuing strong demand. Increased yields in new and remaining poppy fields (particularly in Southern Shan State), spurred by favorable weather conditions in 2007 and improved cultivation practices, have partially offset the affects of decreased cultivation. Higher yields in some areas may also signal more sophisticated criminal activity, greater cross border networking, and the transfer of new and improved cultivation technologies.

Burma’s overall decline in poppy cultivation since 1998 has been accompanied by a sharp increase in the production and export of synthetic drugs, turning the Golden Triangle into a new “Ice Triangle.” Burma is a significant player in the manufacture and regional trafficking 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 beyond the region. There are also indications that groups in Burma have increased the production and trafficking of crystal methamphetamine or “Ice”—a much higher purity and more potent form of methamphetamine than the tablets.

Through its Central Committee for Drug Abuse Control (CCDAC), the Government of Burma (GOB) cooperates regularly and shares information with the U.S. Drug Enforcement Administration (DEA) and Australian Federal Police (AFP) on narcotics investigations. In recent years, the GOB has also increased its law enforcement cooperation with Thai, Chinese and Indian counternarcotics authorities, especially through renditions, deportations, and extraditions of suspected drug traffickers.

During the 2007 drug certification process, the U.S. determined that Burma was one of only two countries in the world that had “failed demonstrably” to meet its international counternarcotics obligations. Major concerns remain: unsatisfactory efforts by Burma to deal with the burgeoning ATS production and trafficking problem; failure to take concerted 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 prosecutemilitary 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 and 2006, especially in Wa territory. However, in 2007, a significant resurgence of cultivation occurred, particularly in eastern and southern Shan State and Kachin State, where increased cultivation, favorable weather conditions, and new cultivation practices increased opium production levels, led to an estimated 29 percent increase in overall opium poppy cultivation and a 46 percent increase in potential production of dry opium.

According to the UNODC, opium prices in the Golden Triangle have increased in recent years, although prices in Burma remain much lower than the rest of the region due to easier supply. Burmese village-level opium prices or farm-gate prices increased from $153 per kg in 2004 to $187 in 2005, to $230 in 2006 and to $265 per kg in 2007. Burmese opium sales contribute about half of the annual household cash income of farmers who cultivate opium, which they use to pay for food between harvests. Forty-five percent of the average yearly income ($501) of opium cultivating households in Shan State was derived from opium sales in 2007.

In 2007, the UNODC opium yield survey estimated there were approximately 27,700 ha planted with opium poppies, with an average yield of 16.6 kg per hectare (significantly higher than the 2006 average yield of 14.6 kg per hectare). [Independent U.S. opium poppy cultivation surveys also indicated increased poppy cultivation and estimated opium production to approximately 27, 700 ha cultivated and 270 metric tons (MT) produced]. The UNODC’s opium yield survey concluded that cultivation had increased 29 percent in Burma from 2006 levels, with a 46 percent increase in potential production to 460 MT. This represented a 67 percent increase in the total potential value of opium production in Burma, from $72 million in 2006 to $120 million in 2007. Nonetheless, both surveys indicated that opium production is still down 90 percent from its peak production in 1996.

The general decline in poppy cultivation in Burma since 1996 has been accompanied by a sharp increase in the local production and export of synthetic drugs. According to GOB figures for 2007, [the GOB seized approximately 1.5 million methamphetamine tablets, compared to 19.5 million seized in 2006. 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 them limited autonomy and continued tolerance of their 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 and 2007, according to UNODC and U.S. surveys, there are indications from many sources that Wa leaders replaced opium cultivation with the manufacture and trafficking of ATS pills and “Ice” in their territory, working in close collaboration with ethnic Chinese drug gangs.

Although the government has not succeeded in persuading the UWSA to stop its illicit drug production and trafficking, the GOB’s Anti-Narcotic Task Forces continued to pressure Wa traffickers in 2007. UWSA also undertook limited enforcement actions against rivals in Shan State in 2006 and 2007. In May 2006, UWSA units found and dismantled two clandestine laboratories operating in territory occupied and controlled by the UWSA-South in Eastern Shan State. 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 remained 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 1.27 percent of the total adult population in Eastern Shan State to 0.97 percent in Kachin State and an estimated 0.83 percent in the Wa region, the main area of opium production until 2006.

III. Country Actions Against Drugs in 2007

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 entire region to be drug-free by 2015. To meet this goal, the GOB initiated its 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 in areas receiving focused attention, due to the availability of some alternative livelihood measures (including crop substitution), the discovery and closure of clandestine refineries, stronger interdiction of illicit traffic, and annual poppy eradication programs. The UNODC estimates that the GOB eradicated 3,598 ha of opium poppy during the 2007 opium poppy cropping season (ranging between July-March in most regions), compared to 3,970 ha in 2006.

The most significant multilateral effort in support of Burma’s counternarcotics efforts is the UNODC presence in 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 through 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 Japan and Germany, with additional contributions from the UK and Australia. The U.S. previously funded the UNODC Wa project, but halted funding over death threats issued by UWSA leadership against U.S. DEA agents following the January 2005 indictment of seven UWSA leaders in a U.S. district court for their role in producing and smuggling heroin to the U.S.

Law Enforcement Measures. The CCDAC, which leads all drug-enforcement efforts in Burma, is comprised of personnel from the national police, customs, military intelligence, and army. The CCDAC, under the control of the Ministry of Home Affairs, coordinates 27 anti-narcotics task forces throughout Burma. Most are 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 from a severe lack of adequate funding, equipment, and training to support its law-enforcement mission. The Burmese Army and Customs Department support the Police in this role.

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. In 2007, Thailand assigned an officer from the Office of Narcotics Control Board (ONCB) to its mission in Rangoon. Burma-China cross border law enforcement cooperation has increased significantly, resulting in several successful operations and the handover of several Chinese fugitives who had fled to Burma. While not formally funding alternative development programs, the Chinese government has actively encouraged investment in many projects in the Wa area and other border regions, particularly in commercial enterprises such as tea plantations, rubber plantations, and pig farms. China has assisted in marketing those products in China through lower duties and taxes. There are also indications that China conducted its own opium cultivation and production surveys in 2007 in regions of Burma bordering the PRC, although they have not shared data resulting from those surveys with other parties.

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 bi-annual basis, the last being held September 11, 2004, in Calcutta.

The GOB has to date taken no direct action against any of the seven UWSA leaders indicted by U.S. federal court in January 2005, although authorities have taken action against other, lower ranking members of the UWSA syndicate. In 2007, one of the indicted leaders, Pao Yu-hua, died of natural causes and another indicted leader, Ho Chun-t’ing, was captured by Hong Kong Police. Another notorious Burmese drug lord, Khun Sa, who was held under house arrest in Rangoon following his surrender to the GOB in December 1996, died from natural causes in October 2007.

Narcotics Seizures. Summary statistics provided by Burmese drug officials indicate that through September 2007, Burmese police, army, and the Customs Service together seized 1154 kg of raw opium, 354 kg of low quality opium, 73 kg of heroin, 91 kg of marijuana, approximately 1.5 million methamphetamine tablets, 455 kg of methamphetamine powder, 395 kg of methamphetamine ICE, 238 kg of ephedrine, 3,116 kg of powdered precursor chemicals, and 8,723 liters of precursor chemicals.

On January 19, 2007, based on DEA and AFP information, the Lashio CCDAC ANTF dismantled a heroin refinery in the Man Lin Hills near Lashio, Shan State. This operation resulted in the arrest of two defendants and the seizure of approximately 20.3 kg of heroin, 20.3 kg of brown opium, 1.02 kg of opium residue, 1,100 kg of ammonium chloride, 770 kg of sodium chloride, 1,470 liters of ether, 438 liters of hydrochloric acid, 183 liters of chloroform, and various equipment used in the refining of heroin.

On February 14, 2007, based on DEA and AFP information, the Muse CCDAC ANTF dismantled a heroin refinery near Khar Li Khu Village, Mong Ko Township, Burma. This operation resulted in the arrest of 7 individuals, and the seizure of 7 kg of brown opium, 89 kg of ephedrine, 22.75 liters of mineral spirit, 3 kg of sodium hydroxide, 2 liters of hydrochloric acid, 183 liters of chloroform, and various equipment used in the refining of heroin.

On April 21, 2007, the Tachilek ANTF seized a total of approximately 264,000 methamphetamine tablets.

On April 23, 2007, based on DEA and AFP information, CCDAC ANTF seized 224.3 kg of opium, 300 grams of heroin, opium seeds, 7.1 million kyat (approximately $6,000), and 50,000 Chinese Yuan (approximately $6,250) in Pan Se, Nam Kham Township, Burma.

During a May 26, 2007 raid on a heroin refinery in Kokang region, the Muse ANTF captured a Kachin Defense Army (KDA) major. Returning from the refinery, ANTF was ambushed by approximately 60-armed individuals. In the ensuing firefight, the KDA major was rescued and the opposing force escaped with the drugs and money seized at the refinery. Four ANTF officers were killed and two were wounded. The attackers were identified as KDA and were believed to be primarily interested in recovering the KDA major.

On June 7, 2007, based on DEA information, the Taunggyi ANTF seized 195.2 kg of opium from three locations and dismantled a heroin refinery.

Corruption. Burma does not have a legislature or effective constitution; and has no laws on record specifically related to corruption. While there is little evidence that senior officials in the Burmese Government are directly involved in the drug trade, there are credible indications that mid-and-lower level military leaders and government officials, particularly those posted in border and drug producing areas, are closely involved in facilitating the drug trade. The Burmese regime closely monitors travel, communications and activities of its citizens to maintain its pervasive control of the population, so it strains credibility to believe that government officials are not aware of the cultivation, production and trafficking of illegal narcotics in areas it tightly controls. A few officials have been prosecuted for drug abuse and/or narcotics-related corruption. 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 as amended by the 1972 Protocol, the 1971 UN Convention on Psychotropic Substances, and the 1988 UN Drug Convention. Burma is a party to the UN Convention against Transnational Organized Crime and its protocols on migrant smuggling and trafficking in persons, and has signed but has not ratified the UN Corruption Convention.

Cultivation and Production. According to the UNODC opium yield estimate, in 2007 the total land area under poppy cultivation was 27,700 ha, a 29 percent increase from the previous year. The UNODC also estimated that the potential production of opium increased by 46 percent, from 315 MT in 2006 to 460 MT in 2007. The significant increase in potential opium production in 2007 indicated in the UNODC estimates reflect improved agricultural methods and an end to several years of drought, resulting in more favorable growing weather in major opium poppy growing areas, such as Shan State and Kachin State.

Burma as yet has failed to establish any reliable mechanism for the measurement of ATS production. Moreover, while the UNODC undertakes annual estimates of poppy cultivation and production, the U.S. has been unable to conduct its annual joint crop survey with Burma since 2004 due to the GOB’s refusal to cooperate in this important area.

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 inside the ethnic Chinese Kokang autonomous region. Ethnic Chinese criminal gangs dominate the drug syndicates operating in all three of these areas. Heroin and methamphetamine produced by these groups is trafficked overland and via the Mekong River, primarily through China, Thailand, India and Laos and, to a lesser extent, via Bangladesh, and within Burma. There are credible indications that drug traffickers are increasingly using maritime routes from ports in southern Burma to reach trans-shipment points and markets in southern Thailand, Malaysia, Indonesia, and beyond. Heroin seizures in 2005, 2006 and 2007 and subsequent investigations also 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 be able to support a drug habit. Traditionally, some farmers used opium as a painkiller and an anti-depressant, in part because they lack access to other medicine or adequate healthcare. 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. According to several HIV Estimation Workshops conducted in 2007 by the National AIDS Program and the World Health Organization, there are an estimated 60,000 to 90,000 injecting drug users in Burma. Surveys conducted by UNODC and other organizations suggest that the addict population could be as high as 300,000. According to the UNODC, Burma’s opium addiction rate is high, at 0.75 percent. 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; there are surely more now..

The growing HIV/AIDS epidemic has been tied to intravenous drug use. According to the National AIDS Program, one third of officially reported HIV/AIDS cases are attributable to intravenous drug use, one of the highest rates in the world. Information gathered by the National AIDS Program showed that HIV prevalence among injecting drug users was 46.2 percent in 2006 – a figure that remained stable in 2007. 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 any 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 70,000 addicts over the past decade. Prior to 2006, the Ministry of Health treated heroin addicts with tincture of opium. However, based on high levels of relapse, the Ministry of Health in 2006 began to treat heroin addicts with Methadone Maintenance Therapy (MMT) in four drug treatment centers, found in Rangoon, Mandalay, Lashio, and Myitkyina. The Ministry of Health also began dispensing methadone treatment in three additional sites, two in Kachin State and one in Rangoon. By August 2007, the Ministry of Health had treated more than 370 patients using MMT.

As a pilot model, in 2003 UNODC established community-based treatment programs in Northern Shan State as an alternative to official GOB treatment centers. UNODC expanded this program, opening centers in Kachin State. In 2007, UNODC operated 16 drop-in centers. Since 2004, more 2,000 addicts received treatment at UNODC centers. In 2006 and 2007, 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), 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, which had a budget of $98.5 million to fight AIDS, TB, and Malaria in Burma, withdrew in 2005. In 2006, foreign donors established the 3 Diseases Fund (3DF) to provide humanitarian assistance for AIDS, TB, and malaria. The 3DF, with its budget of $100 million over five years, supports the work of local and international NGOs, the United Nations, and the Ministry of Health. In 2007, the 3DF supported HIV/AIDS programs such as HIV surveillance and training on blood safety. The 3DF also provided funds for antiretroviral therapy and the MMT program.

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 has limited engagement with the Burmese government in regard to narcotics control. U.S. 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 and 2007, these joint investigations led to several 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. In 2005, 2006 and again in 2007, the GOB refused to allow another joint opium yield survey. A USG remote sensing estimate conducted indicated a slight increase in opium cultivation in 2007 and a significant increase in potential opium production, mirroring UNODC survey results. 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 must reverse the negative direction of narcotics production in 2007 to restore the significant gains it made over the past decade in reducing opium poppy cultivation and opium production. This will require greater cooperation with UNODC and major regional partners, particularly China and Thailand. Large-scale and long-term international aid—including increased development assistance and law-enforcement aid—could play a major role in reducing drug production and trafficking in Burma. However, the ruling military regime remains reluctant to engage in political dialogue within Burma and with the international community. Its barriers to those offering outside assistance have limited the potential for international support of all kinds, including support for Burma’s counternarcotics 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 and effective law enforcement, with alternative development options, support for former poppy farmers and openness to outside assistance. The GOB must foster closer cooperation with the ethnic groups involved in drug production and trafficking, especially the Wa, refuse to condone continued involvement by ceasefire groups in the narcotics trade, tackle corruption effectively, and enforce its counternarcotics laws more consistently to reach its goals of eradicating all narcotics production and trafficking by 2014.

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; 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. 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 domestic demand for heroin and ATS.

Cambodia

I. Summary

With the recent discovery of a major methamphetamine laboratory, Cambodia now has a confirmed role in illegal drug production, consumption, and trafficking. In recent years, crackdowns on drug trafficking in Thailand and China have pushed traffickers to use other routes, including through Cambodia by land, river, sea, and air. Drug use, particularly of amphetamine-type stimulants (ATS), cuts across socio-economic lines. Recent efforts to improve Cambodia’s counternarcotics performance include: effective law enforcement responses to the methamphetamine lab, a highly successful lab clean up effort, significant increases to the budget of the National Authority for Combating Drugs (NACD), and stiffening penalties for drug use and trafficking. However, continuing concerns about corruption, lack of capacity, and continuing low counternarcotics funding levels—even with the new budget increase—hamper government efforts. The NACD and the Anti-Drug Police cooperate closely with the U.S. Drug Enforcement Administration (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

The April 2007 discovery of a major methamphetamine production lab in Cambodia confirmed suspicions that in recent years the country’s narcotics problem has grown from transit and consumption to production as well. Many experts believe that additional clandestine labs are operating in the country. Mobile groups harvest dysoxylum loureiri trees in environmentally protected areas in the Cardamom Mountains and extract safrole oil. The harvest, sale, and export of safrole oil—which can be used as a precursor for Ecstasy production as well as for other purposes, such as perfume or massage oil—is illegal in Cambodia. In October 2007, Thai authorities intercepted a 50-ton shipment of safrole oil which had originated in Cambodia and was reportedly destined for the U.S. and China.

ATS and heroin enter Cambodia primarily through the areas bordering Laos, Thailand, and Vietnam in the northern provinces of Stung Treng, Preah Vihear, and Ratanakiri.. Small shipments of heroin and ATS enter and exit Cambodia overland. Larger shipments of heroin, methamphetamine and marijuana are thought to exit Cambodia concealed in shipping containers, speedboats, and ocean-going vessels. Drugs, including cocaine and heroin, are also smuggled on commercial flights concealed in small briefcases, shoes, and on/in the bodies of individual travelers. Some cannabis cultivation continues despite a government eradication campaign.

ATS is the most prevalent narcotic in Cambodia, accounting for nearly 80 percent of drug use according to the NACD. Both ATS tablets, known locally as yama, and crystal methamphetamine are widely available. Heroin use is a significant problem among a relatively small number of users, three-quarters of whom are in Phnom Penh according to NACD statistics. Cocaine, Ketamine, and opium are also available in Cambodia. Glue sniffing is also a large problem, particularly among street children.

III. Country Actions Against Drugs in 2007

Policy Initiatives. Cambodian narcotics policy and law enforcement agencies suffer from limited resources, lack of training, and poor coordination. Under new leadership and with a 55 percent budget increase in 2007, the NACD has made strides in becoming a more effective organization. A UNODC project slated to run from 2008-2010 aims to build capacity at the NACD through structural and functional reform, managerial and technical capacity building, and a stronger national drug control network.

The NACD is implementing Cambodia’s first 5-year national plan on narcotics control (2006-2010), which focuses on demand reduction, supply reduction, drug law enforcement, and expansion of international cooperation.

Over the past few years, the Cambodian government has worked to strengthen previously weak legal penalties for drug-related offenses. A new drug law, drafted with help from the Anti-Drug Police and passed in 2005, provides for a maximum penalty of $25,000 (100,000,000 riel) fine and life imprisonment for drug traffickers, and allows proceeds from the sale of seized assets to be used towards law enforcement, and drug awareness and prevention efforts. However, some observers have noted that the law is too complex for the relatively weak Cambodian judiciary to use effectively. In July 2007, the Ministry of Health issued a directive increasing penalties for safrole oil production and distribution to two to five years in jail plus fines.

Law Enforcement Efforts. In general, drug-related arrests and seizures declined in 2007, although big cases such as the April superlab raid and the August bust of a tabletting facility by military police show increasingly credible law enforcement action. According to NACD reports, 229 people were arrested for various drug-related offenses in the first nine months of 2007, compared to 439 in the first nine months of 2006. Similarly, total seizures of methamphetamine pills declined 13 percent and heroin seized declined 25 percent. After several years of increasing arrests and seizures, it is difficult to determine if lower levels in this time frame are part of a new trend in trafficking or law enforcement capability, or merely a statistical variation.

On April 1, 2007, police raided a methamphetamine lab in Kampong Speu province, arresting 18 suspects including 14 Cambodians, three Chinese and one Thai national, and seizing nearly six tons of drug-making chemicals. Two additional Cambodian suspects were later arrested. The laboratory was capable only of the first stage of methamphetamine manufacture, producing the intermediate product chloroephedrine. This lab, the first uncovered in Cambodia, was among the largest discovered in Southeast Asia to date.

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, 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, circumstances which raise questions about corruption.

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 due to government pressure were not prosecuted. In August 2007, Oum Chhay, a tycoon and political advisor who was charged with involvement in the Kampong Speu superlab, died in police custody. The police maintain that he committed suicide by jumping out a window. Some observers allege that he was murdered, noting with suspicion that he was being supervised by three guards at the time of his death, and that the fall was from a second-story window in which he landed on his back. 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 2007, had still not completed the law. A government committee was in the process of reviewing possible models in Singapore and Hong Kong. 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 signed the UN Convention against Corruption in September 2007 and the convention is pending ratification by the National Assembly.

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. The National Assembly ratified the 1972 UN Protocol amending the 1961 Single Convention in September 2007 and the King signed it into law the following month. 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-related arrests, eradication and seizures have declined dramatically over the past several years. In 2007, there was an up tick in eradication, with 1,075 square meters of cannabis plantations destroyed in the first nine months, compared to 144 square meters destroyed during the full year 2006. Four people were arrested for cannabis cultivation and/or trafficking between January and September 2007.

Drug Flow/Transit. Crackdowns on drug trafficking in Thailand and China have pushed traffickers to use other routes, including routes through Cambodia. Heroin and ATS enter Cambodia by both primary and secondary roads and rivers across the northern border, transit through Cambodia via road or river networks, and enter Thailand and Vietnam. Effective law enforcement of the border region with Laos on the Mekong River, which is permeated with islands, 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. Heroin, cannabis, and 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. An October 2006 circular from the Prime Minister called for law enforcement agencies to carry out security checks, including x-ray and other screening, at airports. However, according to the NACD, these checks are still conducted by contract employees of the airport concessionaire because the government lacks the funding to buy the required equipment. Some illegal narcotics transit these airports en route to foreign destinations. On February 15, 2007, a Taiwanese national was arrested at Phnom Penh International Airport with five condoms containing 265 grams of heroin strapped to his lower abdomen. On October 14, 2007, another Taiwanese national was arrested at Phnom Penh International Airport with 800 grams of heroin in his pockets.

Domestic Programs (Demand Reduction). With the assistance of USAID, UNODC, UNICEF, WHO, the Japanese International Cooperation Agency (JICA), and several 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, will work to increase the capacity of health and human services to deal effectively with drug treatment issues, beginning by conducting an in-depth baseline study of drug use in 2008. Several local NGOs, including Mith Samlanh and Korsang, have taken active roles in helping to rehabilitate drug users.

The Cambodian government recently launched a major initiative to establish additional drug treatment facilities. A 2006 circular from the Prime Minister directed each province to establish residential drug treatment centers. As of October 2007, there were ten government-run treatment centers, with additional centers under construction. A joint NACD/Ministry of Health assessment of these centers, conducted during January and February 2007, documented serious shortcomings. The centers could not conduct proper physical and psychological intake assessments, lacked trained medical staff, did not gain consent from patients over the age of 18, and failed to provide follow-up services or refer patients to organizations that can provide those services. While proven drug rehabilitation techniques include individual and group counseling, cognitive behavioral therapy, relapse prevention, and vocational training, the government facilities rely on confinement, military-style drills, exercise, and discipline to rehabilitate their patients. In addition to the government-run centers, Mith Samlanh operates a small residential rehabilitation program which offers medically-supervised detoxification, individual and group counseling, and referral into Mith Samlanh’s extensive network of vocational training and other services.

During the first nine months of 2007, 727 drug users and addicts were admitted to the government-run centers and 89 had received such drug detoxification and rehabilitation services through Mith Samlanh. While estimates of the number of drug users in Cambodia vary widely—from the official 2007 NACD figure of 5,773 to a 2004 UNAIDS estimate of 40,000 with a 5 percent annual growth rate—it is clear that the need for drug treatment services far outstrips the available supply.

Cambodia is also implementing harm reduction programs for the first time. In 2004, the NACD granted permission to the Mith Samlanh to begin a needle exchange program in Phnom Penh. Korsang now also runs a needle exchange program as well. NACD and the World Health Organization are working to develop a pilot methadone maintenance program, which will likely be implemented at the Khmer-Soviet Friendship Hospital in partnership with Korsang, starting in late 2008.

IV. U.S. Policy Initiatives and Programs

Policy Initiatives. While Cambodia has moved beyond its recent turbulent political history to a period of relative political stability, the country is still 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 is the loss of many of Cambodia’s 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 human capacity limitations. Even with the active support of the international community, there will be continuing gaps in performance for the foreseeable future.

Bilateral Cooperation. The recent lifting of U.S. congressional restrictions on direct assistance to the Cambodian government has given the U.S. government increased flexibility in partnering with Cambodia in battling narcotics. The Defense Department’s Joint Interagency Task Force-West (JIATF-West) conducted two training missions in Cambodia in 2007 and renovated a military classroom and barracks in Sisophon. In February and March, U.S. Army personnel led training in basic land navigation, patrolling, reconnaissance, and respecting human rights in the line of duty in Battambang. In June 2007, U.S. Navy personnel instructed Cambodian military personnel in Phnom Penh in small boat maintenance.

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 three 2-week sessions during 2007, trainers from the U.S.-based drug treatment organization Daytop International provided training in residential drug treatment techniques to government officials, NGO workers, monks, military and police officials. This training, funded by the State Department’s Bureau of International Narcotics and Law Enforcement (INL), was the first comprehensive training on residential drug treatment ever held in the country.

The U.S. and Cambodia worked closely together in the aftermath of the discovery of the Kampong Speu methamphetamine lab. Bangkok-based DEA agents traveled to the site immediately after the discovery to assist in the investigation, and a team of DEA forensic chemists and precursors specialists traveled from the U.S. and other countries to analyze the laboratory. Working through the UNODC, INL provided $140,000 for the clean up effort, the largest monetary contribution by any country.

Drug use among populations targeted for HIV prevention is a growing concern as needle sharing is the most efficient means of transmitting HIV. USAID HIV/AIDS programs work with populations at high risk of contracting HIV, including sex workers and their clients, homosexual men, and drug users. These groups are not mutually exclusive as many sex workers also use and inject drugs. Prevention programs targeting high risk populations aim to reduce illicit drug use and risky sexual practices.

The Road Ahead. Cambodia is making progress toward more effective law enforcement against narcotics trafficking; however, its capacity to implement a satisfactory, systematic approach to counternarcotics operations remains low. Instruction for mid-level Cambodian 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.

With congressional restrictions on direct assistance to the Cambodian government lifted, the U.S. and Cambodia are working together to transfer some excess soldier and unit equipment from the U.S. (such as uniforms, boots, first aid pouches, compasses, cots, and tents) for use by Cambodian Army border battalions. Such equipment will help increase the Cambodian military’s ability to conduct patrols along the borders. The JIATF-West training events in FY08 will consist of one event at the newly renovated Sisophon site and another event in Preah Vihear. JIATF-West will continue their training infrastructure renovation project, which will both facilitate future JIATF-West training and also build the capacity of Cambodian law enforcement and military authorities. State INL funding for FY08 will be used to support and strengthen Cambodia’s narcotics interdiction capabilities. The U.S. is encouraged that Cambodia has recently signed the UN Convention against Corruption and will continue to press the government to adopt anti-corruption legislation.

China

I. Summary

The People’s Republic of China is a major drug transit country to regional drug consumers in neighboring parts of Asia as well as for international drug markets (though not the U.S.). China continues to have a domestic heroin consumption problem along with an upsurge in the consumption of synthetic drugs such as Ecstasy and crystal methamphetamine, known as “ice.” Chinese authorities view drug trafficking and abuse as a major threat to China’s 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. China is a party to the 1988 UN Drug Convention.

II. Status of Country

Mainland China is situated adjacent to major narcotics producing areas in Asia, Southeast Asia’s Golden Triangle, Southwest Asia’s Golden Crescent, and Northeast Asia’s Golden Azalea (North Korea). Burma continues to be the major source of opiates entering China. While the Golden Triangle area has been a longstanding problem, Chinese officials note that the Golden Crescent is the source of increasing amounts of heroin trafficked into Western China, particularly Xinjiang Province. China’s 97-kilometer border with Afghanistan is remote, but Chinese authorities are increasingly concerned that opiates from Afghanistan can find their way into China through other countries in South and Central Asia. Quantities of heroin and methamphetamine produced in North Korea continue to find their way into China’s northeastern provinces that border North Korea. Beijing claims that there are no heroin refineries in China. However, China is a major producer of licit ephedrine and pseudoephedrine which when diverted from licit uses can be used in the manufacture of methamphetamine. There is a widespread belief among law enforcement agencies, worldwide, that large-scale illicit methamphetamine producers in other countries use Chinese-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 enacted enhanced precursor chemical control laws in November 2005 and is fully engaged in multilateral and bilateral efforts to stop diversion from its chemical production sector, Chinese efforts have not matched the size of its enormous chemical industry with sufficient resources to effectively ensure against diversion.

Statistics on drug usage within China are contradictory. The National Narcotics Control Commission (NNCC) recently claimed that the number of drug users had declined. However, data from non-government sources indicate that drug abuse continues to grow at a moderate rate. 2006 NNCC statistics claim there are over 1,160,000 registered drug users in China, but some officials acknowledge the actual number of addicts is most likely much higher, and there have been published reports that China might have as many as 15 million drug abusers. Government reports indicate that 78.3 percent (700,000 people) of all registered drug addicts are heroin users. Youth between the ages of 17-35 comprise the largest percentage of registered addicts (59.3 percent), fueled largely by a dramatic increase in the disposable income of urban youth. Although the per capita reported HIV/AIDS rate in China is relatively low at 0.08 percent or 1 case in every 1,300 citizens, nevertheless, the government reported that 70.8 percent of all confirmed HIV/AIDS cases were intravenous heroin 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.

Ecstasy’s popularity is increasing among the young in nightclubs and karaoke bars along China’s wealthy east coast, particularly in Beijing, Shanghai, Nanjing, Guangzhou, and Shenzhen. According to the Beijing University National Surveillance Center on Drug Abuse (BUNSC), nearly 23 percent of drug abusers get their drugs at entertainment sites. In Beijing, nine entertainment venues were recently found to be selling drugs and shut down. With a very large, widely scattered, and developed chemical industry, China is one of the world’s largest producers of precursor chemicals, including acetic anhydride, potassium permanganate, piperonylmethylketone, pseudoephedrine, ephedrine, and ephedra. China produces and 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 U.S. and other concerned countries in implementing a system of pre-export notification of dual-use precursor chemicals. China tries to strictly regulate the import and export of precursor chemicals. According to NNCC, Chinese authorities investigated 968 cases involving precursor chemicals in 2006 and seized 1460.88 tons of precursor chemicals, a significant increase over the 157 tons reported seized in 2005. In 2006 the NNCC issued 747 precursor chemical pre-export notifications involving 89,318 tons of precursor chemicals. Nevertheless, diverted precursor chemicals from China are a major source for methamphetamine production around the world, and most observers believe that China is also the source for precursor chemicals in Golden Triangle heroin production as well.

III. Country Actions Against Drugs in 2007

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 third year 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 June 2004, MPS Bureau of Narcotics Control (BNC) implemented a nationwide drug-related information gathering, sharing, and storing network allowing data comparison alerts, and improved overall coordination in counternarcotics operations. 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. According to China’s State Food and Drug Administration (SFDA), the government is currently reviewing a new law, the Narcotics Control Law of China, regarding ephedrine and pseudoephedrine preparations and expects to approve it in 2007. In June 2007 MPS Minister and NNCC Director Zhou Yongkang announced China would intensify its war against drugs and called for reinforced efforts to fight heroin and curb the spread of new types of drugs. The People’s Procurate and the Supreme Court have improved legal standards for cases involving new types of drugs. 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. China continues to participate in United Nations Office of Drug Control (UNODC) demand reduction and crop substitution efforts in areas along China’s southern borders and has worked closely with Burma to implement an alternative crops program. In May 2006 the State Council authorized a 250 million RMB fund (approx. $32.5 million) for crop substitution projects in Northern Burma and Laos. Nevertheless, according to the NNCC’s 2006 report, Burma remains the major source of opium entering China. China continues to build on the counternarcotics MOUs with Laos, Cambodia, Thailand, Vietnam, Burma, and the UNODC and regularly hosts and/or participates in conferences and bilateral meetings. With UNODC support, NNCC conducted ongoing training in 2006 in cross-border drug enforcement cooperation, amphetamine type stimulant (ATS) data collection, and combating ATS crimes in Southern China. China participates in counternarcotics education programs sponsored by the International Law Enforcement Academy (ILEA), located in Bangkok, Thailand, and has provided training to neighboring countries. Chinese law enforcement agencies also participate in DEA sponsored professional exchanges. China has several anti-narcotics and transnational crime agreements with Shanghai Cooperation Organization (SCO) member countries in Central Asia.

Law Enforcement Efforts. The Chinese Government continues its aggressive counternarcotics campaign. In China, three agencies have primary responsibility for controlling the licit/illicit drug markets: the Ministry of Public Security (MPS), the State Food and Drug Administration (SFDA), and the General Administration of Customs (GAC). All three are part of the National Narcotics Control Commission (NNCC) that forms drug policy in China similar to the Office of National Drug Control Policy (ONDCP) in the U.S. In 2006, 58 drug smuggling investigations involving Golden Crescent heroin resulted in the arrest of 110 suspects and the seizure of 106.4 kg of heroin. Southwest Asian heroin seizures continued to increase in the first half of 2007. China Customs Anti-Smuggling Bureau (ASB) reported the arrests of 180 suspects and the seizure of 229 kg of suspected Afghan heroin between January 1 and June 15, 2007. To curb the growing Golden Crescent heroin threat specifically, Chinese authorities have stepped up border and airport checks in Guandong, Beijing, Shanghai, and Xinjiang. Overall, China invested RMB 110 million (U.S. $13.75 million) in 2006 to improve the counternarcotics system in police, border, railway, aviation, customs, and postal departments nationwide. In the first half of 2007, police seized 1.8 tons of heroin, down 43 percent over the same period last year; 244 kg of opium, down 68 percent; 2.8 tons of methamphetamine, down 9 percent. However, police seized 3.6 million methamphetamine tablets, a 283 percent increase over the same period last year, and 1.9 tons of ketamine, up 42 percent.

According to the 2007 Annual Report on Drug Control in China, Chinese authorities were involved in 46,300 drug-related cases and apprehended 56,200 suspects in 2006. China seized 5.79 tons of heroin (a 16 percent decrease from 2005), 1.69 tons of opium (a 26.8 percent decrease from 2005), 454,000 Ecstasy tablets (an 80 percent decrease from 2005), 1.79 tons of ketamine (a 32 percent decrease from 2005), and 5.95 tons of methamphetamine (an 8 percent increase from 2005.) In 2006, the NNCC investigated 968 cases involving precursor chemicals and seized 1460.88 tons of precursor chemicals, a huge increase over the 157 tons seized in 2005.

NNCC regards 2007 as a transition year, when drug use moves further away from traditional to synthetic drugs. However, because almost 80 percent of China’s drug addicts use heroin, the Golden Triangle and Golden Crescent will remain areas of serious concern for China. In 2006, in cooperation with Laos, Burma, Thailand, and the Philippines, Chinese authorities carried out an operation and captured and extradited 37 Chinese nationals living outside of China who were wanted as suspected leaders of drug trafficking rings, according to the Ministry of Public Security.

On a case-by-case basis, MPS provides DEA with strategic and operational intelligence which is used to target international drug rings. MPS has allowed DEA to interview witnesses in China and has allowed DEA to jointly conduct other investigative activity to help identify drug rings. In addition, MPS helps to facilitate the travel of U.S. law enforcement personnel, based at the U.S. Embassy in Beijing. DEA received several drug samples from MPS and Customs for analysis. DEA provided Chinese law enforcement counterparts with lead information that assisted in the development of an ongoing enforcement operation, “Operation Vulture Hunting,” to target the flows of Southwest Asian heroin into China. During the first three months of the operation there were 81 arrests and the seizure of approximately 80 kg of heroin. In January 2007, a joint operation among China, Canada, and the U.S. resulted in the seizure of approximately 25 kg of cocaine in New York and the arrests of one defendant in Canada and six defendants in China. The Chinese Government also successfully conducted joint counternarcotics operations with neighboring countries. According to the NNCC, China and Pakistan have strengthened counternarcotics cooperation, to include information-sharing and joint operations. Philippines, Hong Kong, Guangdong, and Beijing Police counterparts worked together to break up an international “ice” making and trafficking gang headed by a Fujian Province native. In June 2007, Chinese and Vietnamese police jointly destroyed 381 kg of narcotics including heroin, ketamine powder, and Ecstasy pills at Pingxiang Friendship Pass.

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. The government reported that it investigated more than 32,000 persons in 2005 for alleged corruption and more than half were found guilty. Most of the investigations involved people accused of taking bribes, dereliction of duty, or gambling. There were more cases involving higher level officials accused of taking bribes and embezzlement than in past years. One case involved the former Medicine Registration Division Director of the State Food and Drug Administration, Cao Wenzhuang, who was executed for accepting RMB 2.4 million (U.S. $320,000) in bribes.

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 anti-corruption dialogue with the U.S. through the U.S.-China Joint Liaison Group on Law Enforcement Cooperation (JLG). Narcotics-related corruption does not appear to have adversely affected ongoing law enforcement cases in which U.S. 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 has used its legal assistance channels with foreign countries to capture 70 people overseas suspected of corruption. According to MPS, of these, 37 corrupt officials were repatriated to the Chinese mainland in 2006 from Hong Kong, Macao and 11 countries, including the U.S. and Canada.

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, the 1961 UN Single Convention as amended by the 1972 Protocol, the 1971 Convention on Psychotropic Substances, the UN Convention against Corruption and the UN Convention against Transnational Organized Crime. The U.S. and China cooperate in law enforcement efforts under a mutual legal assistance agreement signed in 2000 and which entered into force in March 2001. In January 2003, the U.S. and China reached agreement on a Customs Mutual Assistance Agreement (CMAA.). In February 2005, NNCC and DEA signed a memorandum of intent to establish a bilateral drug intelligence working group (BDIWG) to enhance cooperation and the exchange of information. In July 2006 ONDCP and NNCC signed a Memorandum of Intent to increase cooperation in combating drug trafficking and abuse.

China cooperates with international chemical control initiatives in Operation Purple and accounts for 70 percent of the worldwide seizures of potassium permanganate that have been made under that operation. China also participates in Operation Topaz, an intergovernmental operation to detect and prevent precursor chemicals used for the illicit manufacture of heroin, and Project Prism, targeting synthetic drug chemicals. China continued its participation in the ASEAN and China Cooperative Operations in Response to Dangerous Drugs (ACCORD).

Cultivation/Production. China has eliminated 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. Due to China’s effective law enforcement, opium poppies are only grown in small quantities by ethnic minority groups for local consumption. Chinese officials state that there are no heroin refineries in China. Coca is not cultivated 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 ephedrine, licit synthetic pseudoephedrine, and ephedra products. China has a large pharmaceutical industry and these products all have legitimate medicinal use, but they can also be used in the production of ATS. The Chinese central government, supplemented by stricter controls in critical provinces such as Yunnan and Zhejiang, makes efforts to control exports of these key precursors. 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 Chinese-made chemicals that have been diverted is almost commonplace in law enforcement investigations around the world. Chinese authorities continued to seize clandestine methamphetamine laboratories. In the past, the majority of the labs were discovered and/or seized in the southern provinces of Fujian and Guangdong, although recently there have been laboratories seized in northeast China, specifically Shenyang and Liaoning Province.

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. Chinese authorities report that the majority of heroin produced in Burma travels via China to the international market. 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. Transshipment of drugs through Yunnan and Guangxi to Guangdong for storage, distribution, or repackaging has been especially widespread. Smaller amounts of heroin are also coming from Laos, Vietnam, and other Southeast Asian countries. Traffickers continue to use Guangzhou, Shenzhen, and Zhuhai in Guangdong Province as transit and transshipment points for heroin and crystal methamphetamine leaving China. In addition, Xiamen and Fuzhou in Fujian Province have also recently become major exit points. Between January 2006 and March 2007, Guangzhou seized 415.5 kg of heroin and arrested 510 suspects (309 of which were not Chinese) for attempted narcotics smuggling on commercial airlines. Chinese counternarcotics police have strengthened their efforts in Guangdong in 2006, disabling 17 foreign drug-trafficking gangs and capturing more than 30 foreign drug dealers. Chinese authorities acknowledge that Western China is experiencing significant problems as well. They report that drugs such as opium and heroin are being smuggled into Xinjiang Province for distribution throughout China. They are 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, specifically from Afghanistan. They have seen an increase in the number of Afghan heroin seizures in western China. MPS and DEA report that Pakistan serves as a key trafficking route for heroin from Afghanistan into China. In 2006, Pakistan arrested 54 couriers from airports in Lahore, Islamabad, and Peshawar destined for China. They seized an average of 0.75 kg of Golden Crescent heroin from each courier.

Domestic Programs (Demand Reduction). The most recent MPS statistics indicate there are over 1,160,000 registered drug users in China, but officials acknowledge the actual number of addicts is higher, with some published reports indicating there may be as many as 15 million drug abusers. Government reports indicate that 78.3 percent (700,000 people) of all registered drug addicts are heroin users. Youth between the ages of 17-35 comprise the largest percentage of addicts. Although the per capita reported HIV/AIDS rate in China is relatively low at 0.08 percent or 1 case in every 1,300 citizens. The government reported that 70.8 percent of all confirmed HIV/AIDS cases were intravenous heroin addicts. In addition to the standard reform through labor camps, the government is using media campaigns, the establishment of drug-free communities, compulsory drug rehab treatment, and voluntary rehab centers to reduce drug demand. Gansu Province assigned 2000 drug control officers to communities and villages and set up 30,000 after-care groups covering 96,000 drug users. NNCC and MPS set up an online drug users’ database to improve monitoring and information sharing across agencies. According to NNCC figures, 269,000 drug addicts underwent compulsory drug rehabilitation, 71,000 drug addicts were re-educated through labor, and 36,000 drug addicts underwent community rehabilitation. As part of its National People’s War on Illicit Drugs, China takes a multi-agency approach to educating people about drug prevention. China Central Television (CCTV) produced 80 special programs on drug control, and other Chinese news media published more than 4500 stories on drug control. CCTV held a Drug Control Publicity Week featuring in-depth reports on drug control and an eight-hour special on the People’s War on Drugs. There was extensive coverage of a successful China-Philippine joint counternarcotics investigation. The Ministry of Education held special classes in middle and primary schools on drug prevention. Guizhou Province conducted special training courses on new-type drugs for owners and managers in 16,000 entertainment locations. A 30-part TV play, “Borderless Operation,” addressed the fight against transnational drug organizations. NNCC produced a drug control fairy tale, “Escaping Terrorist Island,” published a mini novel, “Behind the Heaven,” and composed a popular song, “Let Life Be More Splendid”, all dealing with counternarcotics themes. Two well known movie stars, Liu Yuanyuan and Tao Hong, became counternarcotics spokespersons, performing in public awareness messages airing on TV and radio. Shanghai distributed 2.4 million booklets to families, and Guangdong set up 1000 village-level drug control education bases.

IV. U.S. Policy Initiatives and Programs

Bilateral Cooperation. Counternarcotics cooperation between China and the U.S. continues to develop. Chinese authorities are working with the U.S. on a number of ongoing investigations and initiatives, including use of precursors in the production in China of steroids and human growth hormones that are subsequently illegally exported to the U.S. DEA hosted the second annual bilateral drug intelligence working group (BDIWG) in June 2006 at DEA Headquarters and discussed ways to enhance strategic and investigative cooperation. China also has police liaison officers posted in several countries around the world, including the U.S. The 2005 Memorandum of Intent between DEA and MPS in February 2005 has led to a steady improvement in U.S.-China efforts to combat drug trafficking.

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, 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 improve over the coming year.

Hong Kong

I. Summary

Hong Kong is not a major transshipment point for illicit drugs destined for the international market, however can be seen as a transit point as some drugs flow through because it is a major shipping hub. Hong Kong is not a major transshipment point for drugs because of its efficient law enforcement efforts, the availability of alternate 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 Country

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 transshipment point has diminished due to law enforcement efforts and the availability of alternate routes in southern China and a diminished demand for Southeast Asian heroin in North America. 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. The 56^th edition of the Hong Kong Central Registry of Drug Abuse for 2006, with a comparison of the first halves of 2006 and 2007, reported that the total number of reported drug abusers in recent years continued to decline from 18,513 persons in 2001 to 13,204 in 2006.

Though heroin is traditionally the most commonly abused drug in Hong Kong, the number of heroin abusers has been declining for years. In 2006, there were 8,101 (or 61.7 percent of drug abusers) reported heroin users. There was a general rising trend in the abuse of psychotropic substances as a whole between 1997 and 2006. The number of psychotropic substance abusers reached a record high of 7,368 in 2006. Among psychotropic substances, the more commonly abused types include Ketamine (23.2 percent of drug abusers), triazolam/midazolam/zopiclone (16.9 percent), MDMA/Ecstasy (11.6 percent), cannabis (7.4 percent), crystal methamphetamine (6.5 percent), and cough medicine (5.7 percent). The comparison of the first half of 2006 to that of 2007 showed a decrease in heroin abusers from 5,211 to 4,788, but an increase in psychotropic drug abusers from 4,054 to 4,410 with Ketamine being abused by almost half (approximately 2,150) of the abusers.

In 2006, the Hong Kong Government 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. Country Actions Against Drugs in 2007

Policy Initiatives. Although there were no major policy changes in 2006 and 2007, 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 2007, the Hong Kong Police continued id checks on entertainment premises in order to deter young people from visiting venues where drugs are more easily available.

The 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. Due to an effective chemical tracking program, in March 2007, a significant chemical trafficker was identified as suspected of involvement in diverting large quantities of precursor chemicals to illicit uses through use of his licit pharmaceutical business. This individual had amassed over US$207 million dollars in cash which was seized. A related investigation by the HKCED and U.S. DEA identified bank accounts in Hong Kong totaling over US$10.1 million dollars being maintained by this same individual.

Corruption. The HKSAR government strongly opposes illicit production or distribution of narcotic or psychotropic drugs or other controlled substances, and the laundering of proceeds from illegal drug transactions. 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. Upon resuming the exercise of sovereignty over Hong Kong, China advised the UN Secretary General that the 1961 Single Convention and the 1972 protocol, the Convention on Psychotropic Substances, and the 1988 UN Drug Convention apply to Hong Kong. Also, the UN Convention against Transnational Organized Crime and the UN Convention against Corruption apply to Hong Kong. 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 and with Ireland in 2007 to bring the total number of countries with which Hong Kong has such agreements or treaties to 17, including the U.S. Hong Kong has also signed transfer of sentenced persons’ agreements with eight countries, including the U.S. In 2007 Hong Kong signed a mutual legal assistance agreement with Finland.

Hong Kong law enforcement agencies enjoy a close and cooperative working relationship with their mainland counterparts and counterparts in many countries. Hong Kong law enforcement agents cooperated with Japan to seize HK$18 million (apx. US$2.3 million) in drug proceeds and charge one person with money laundering. A joint investigation with New Zealand authorities resulted in two arrests for money laundering and HK$10.3 million (apx. US$1.3 million) seized.

Last year Hong Kong’s Joint Financial Intelligence Unit (JFIU) entered into Memoranda of Understanding in respect to intelligence sharing with the financial intelligence units of Australia, Korea, Japan, Singapore and Canada. In the ten years since Hong Kong returned to Chinese control, liaison information sharing and data-networking functions between Hong Kong and Chinese authorities, such as customs information, have been formalized and have successfully increased the levels of inter-system cooperation and efficiency. Training has also become an important element of cooperation between U.S. and Hong Kong law enforcement counterparts. In September 2007, the U.S. DEA and Hong Kong Customs Drug Investigation Bureau (CDIB) hosted a joint training workshop, which focused on enhancing the investigative and tactical capabilities of investigators in drug interdiction operations. The training workshop stressed the continued open exchange of information and increased international cooperation between the two participating agencies.

Hong Kong participates in Project Prism and Operation Cohesion, both managed by the International Narcotics Control Board, to control the illegal diversion of chemical precursors. Hong Kong also participates in joint tracking programs, which allow Hong Kong Customs and the U.S. Drug Enforcement Agency to target the movement of precursor chemical shipments exported from, transshipped or transiting via Hong Kong to high-risk countries. In addition to the monitoring of controlled chemical precursors, Hong Kong monitors the movement of ephedra, a raw material for the manufacture of ephedrine. The 1988 UN Drug Convention, 1961 UN Single Convention as amended by the 1972 Protocol, and the 1971 UN Convention Against Psychotropic Substances are 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 significant producer of illicit drugs.

Drug Flow/Transit. Some drugs continue to flow through Hong Kong for the overseas market, to destinations including Australia, China, Japan, Taiwan, Europe, and the United States. In July 2007, based on an aggressive container profiling program, the HKCED seized 160 kilograms of cocaine which was concealed within containerized cargo believed to be destined for European markets. The container was transiting through Hong Kong in order to disguise its origin. Traffickers use land routes through mainland China to smuggle heroin into Hong Kong. In 2007, Hong Kong Customs authorities arrested 14 Thai nationals at Hong Kong International Airport attempting to smuggle heroin into Mainland China.

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 and out of 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 cargo, 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 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. Trafficking destined for mainland China by Southeast Asians continues to be prominent.

Domestic Programs. The Hong Kong Government uses a five-pronged approach to confront domestic drug problems, including legislation and law enforcement; preventive education and publicity; treatment and rehabilitation; research; and external cooperation. 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 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. The Hong Kong Government also implemented a public awareness campaign to educate the public about the harmful effects of Ketamine and Ecstasy, the two most commonly abused drugs among youth. A HKG-sponsored Hip Hop Dance and Music Competition encourages youth to participate in healthy activities and reinforces a healthy drug-free lifestyle. The Hong Kong Government also launched a new drug education kit to disseminate counternarcotics messages in schools and publicizes the consequences of cross-boundary drug abuse.

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 100,000 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 counternarcotics education programs in local schools and conducting counternarcotics seminars with parents, teachers, social workers and persons from various uniform groups. For the 12 month period ending in August 2007, 163,000 school-age children participated in drug education programs provided by the government.

The Hong Kong Government also continued to implement a comprehensive drug treatment and rehabilitation program in 2007. 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. The Hong Kong Government will launch a pilot cooperation scheme in early 2008 to refer abusers to designated medical practitioners who will provide comprehensive health check-ups and motivational interviews, to alert abusers of any signs of health deterioration as a result of drug use, and to heighten abusers awareness of early treatment options.

IV. U.S. Policy Initiatives and Programs

Bilateral Cooperation. 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 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. This new program allows the U.S. DEA and Hong Kong Government to monitor and track other precursor chemical shipments sourced from countries or territories in Asia, which transit through Hong Kong, and are destined to high-risk countries.

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

Indonesia—the fourth largest country in population in the world—has historically not been considered a major drug producing, consuming or transit country. However, in recent years Indonesia has experienced a major increase in the production, transshipment, trafficking and consumption of narcotics. The executive branch of the Indonesian government has made anti-corruption efforts a major policy initiative along with counterterrorism and counternarcotics. Since 2002, Indonesia has seen a significant increase in the number of large-scale clandestine MDMA and methamphetamine laboratories seized by Indonesian authorities.

MDMA (Ecstasy) and methamphetamine production syndicates exploit Indonesia’s lax precursor chemical controls and use corrupt means to operate with relative impunity. These clandestine laboratories are capable of producing multi-hundred kilogram quantities of amphetamine type substances (ATS). However, in August 2006, there was a highly successful police raid disrupting some illicit drug operations.

In addition, regional drug trafficking syndicates are exploiting Indonesia’s 1.2 million miles of coastline, lack of border and port security resources, etc., for the transshipment of heroin and ATS. Increases in narcotics production/trafficking have been mirrored in drug abuse rates. These rates—specifically intravenous drug use-combined with inadequate health care, rehabilitation and demand reduction programs has resulted in a significant increase in HIV/AIDS infection.

The Indonesian counter narcotics code is sufficiently inclusive to cover arrest, prosecution and adjudication of narcotics cases. Nevertheless corruption in Indonesia is an on-going challenge to the rule of law. Among the 161 countries ranked by Transparency International in their Corruption Index, Indonesia was ranked 130th. The level of political corruption in Indonesia seriously limits the effectiveness of all law enforcement, including narcotics law enforcement and poses the most significant threat to the country’s counter drug strategy. However, the current Indonesian National Police (INP) Chief Sutanto is committed to reducing corruption and illegal activities by members of the police. Sutanto has made significant progress in internal investigation reform, human rights and governance of the national police. In 2006 over 4000 officers were disciplined for violations of the Code of Ethics and Discipline Code with 230 officers being terminated for ethics violations alone.

The INP leadership has been consistently improving, with the integration of more modern law enforcement management systems and procedures including anti-corruption efforts. The INP participates in several international donor-initiated training programs and continues to commit increased resources to counter narcotics 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. The INP relies heavily on assistance from major international donors, including the U.S., for the skills and equipment it needs to carry out its mission. Indonesia is a party to the 1988 UN Drug Convention.

II. Status of Country

In 2006, Indonesian authorities continued to seize large-scale clandestine methamphetamine and MDMA laboratories, suggesting that Indonesia is quickly becoming a manufacturing site for narcotics. As recently as 2005, Indonesia has been listed as an important importer of pseudoephedrine . Lax and inadequate precursor chemical controls combined with porous borders and endemic levels of corruption continue to be a significant threat to Indonesia’s counter drug efforts. The diversion and unregulated importation of precursor chemicals remains one of the most significant problems facing Indonesia’s counter drug efforts. To date, Indonesian authorities have been unsuccessful in controlling the diversion of precursor chemicals and pharmaceuticals. Numerous large international pharmaceutical and chemical corporations have large operations throughout Indonesia.

The Indonesian National Narcotics Board (BNN) estimates that approximately 3.2 million people or, 1.5 percent of Indonesia’s total population are drug abusers. According to INP arrest data, in 2006, the INP conducted 14,105 narcotics investigations. All major groups of illegal drugs are readily available in Indonesia: amphetamine-type stimulants, especially, MDMA Ecstasy, as well as, heroin, marijuana and modest amounts of cocaine.

The large scale production of MDMA and methamphetamine is one of the most significant drug trafficking threats in Indonesia. Clandestine mega MDMA and methamphetamine laboratories are capable pf producing multi-thousand kilogram quantities. Indonesian/Chinese organized crime syndicates use familial connections in the People’s Republic of China (PRC) as a source for precursor chemicals and laboratory equipment. Furthermore, production syndicates rely upon chemists trained in the Netherlands for the production of MDMA, as well as Taiwanese chemists for the production of crystal methamphetamine.

Southwest Asian Heroin. Despite Indonesia’s proximity to the “Golden Triangle” there remains no market base for Southeast Asian heroin in Indonesia. However, Southwest Asian heroin is trafficked through Indonesia by West Africans and Nepalese trafficking groups utilizing sources of supply in Afghanistan, Pakistan and Thailand. These trafficking groups utilize human couriers traveling via commercial air carrier, to smuggle drugs to Europe, Canada, and the United states.

Cocaine. While there is no known market base for cocaine in Indonesia, authorities in Indonesia have made several small cocaine seizures in Jakarta and Bali, based on information provided by the DEA. Cocaine is suspected of being transshipped through Indonesia, via commercial air carrier, en route to Australia and Japan, with small user amounts remaining in Indonesia for use by Western tourists.

III. Country Actions Against Drugs In 2007

Policy Initiatives. The Indonesian counter narcotics code is sufficiently inclusive to enable, police, prosecutors and judiciary to arrest, prosecute and adjudicate narcotics cases. Under Indonesian Laws No. 22/1997 on narcotics and 5/1997 on psychotropic substances, the Indonesian courts have sentenced approximately 57 drug traffickers to death. The continued lack of modern detection, enforcement and investigative methodologies and technology, and pervasive corruption, are the greatest obstacles to advancing Indonesia’s counternarcotics efforts.

According to the BNN, the GOI has established new policies and strategies, in a “goal oriented rolling Plan of Action”, consisting of stages covering 3 years for each stage. These stages will continue until Indonesia reaches a drug-free condition, hopefully by 2015. The mission of Indonesia’s National Drug Plan is: 1) To reduce illicit drug supply, trafficking and production; 2) To reduce drug use among Indonesian youth; and 3) To minimize the harmful effects of drugs and drug use in Indonesian society.

The primary policy goals of Indonesia’s National Drug Plan are to: 1) To minimize the level of illness, disease, injury and premature death associated with the use of illicit drugs; 2) To minimize the level and impact of drug-related crime and violence within the community; and 3) To minimize the loss of productivity and other economic costs associated with illicit drug use.

In March 2007, lawmakers from Indonesia’s House of Representatives Commission III and the BNN proposed a new regulation, to be attached to the national narcotics law which would allow for law enforcement agencies to confiscate convicted drug traffickers assets to fund Indonesia’s drug trafficking eradication program. Under the new regulation, assets seized by the GOI would be used to rehabilitate impoverished drug abusers and would serve to supplement the budget of the BNN. The BNN receives approximately $30 million per year from the state budget, far below $53 million the agency requests for its yearly budget.

Law Enforcement Efforts. The Indonesian National Police