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International Narcotics Control Strategy Report, 1996 Released by the Bureau for International Narcotics and Law Enforcement Affairs, U.S. Department of State Washington, DC, March 1997

SOUTHEAST ASIA AND THE PACIFIC

I. Summary

Australia is primarily a drug consuming country, although it does have the potential to be a transit point. Some heroin bound for the US market may transit Australia, and Australia also has the potential to serve as a transshipment point for South American cocaine destined for Southeast Asia. No evidence of transshipment exists, however. Australia is a party to the 1988 UN Convention and is an active participant in the Commission on Narcotic Drugs and the Dublin Group.

II. Status of Country

Illicit drug use is recognized as a problem in Australia. Marijuana and amphetamines, which are produced locally, are the principal illegal drugs. Some amphetamines are smuggled from Australia into New Zealand. Evidence suggests that cocaine, smuggled in from South America and the US, is a growing concern. However, Australian cocaine use and arrests are still low in comparison with other illicit drugs. Heroin consumption is a significant problem. There is a licit opium poppy industry in Tasmania, but there are effective controls to prevent diversion of the licit opium crop.

III. Country Actions Against Drugs in 1996

Policy Initiatives. Australia's National Drug Strategy, a comprehensive approach of demand reduction and supply control measures, is intended to address problems caused by all drugs, both licit and illicit. The National Drug Strategy involves a five­year plan that recognizes that the drug problem will not be solved by focusing on specific drugs. Instead, environment and social context are viewed as crucial to understanding the reasons for drug abuse and the potential for harm. The plan proposes goals and objectives, key national indicators and program priorities for focusing attention and action in the drug arena.

Australia's domestic policy is complemented by an international drug strategy which aims to minimize the harmful effects of drug abuse and illicit drug trafficking on the health, welfare and social fabric of Australia and the international community by contributing to global, regional and bilateral efforts in accordance with Australian national drug policies and practices. Australia is an active participant in international drug control forums such as the Commission on Narcotic Drugs and the Dublin Group.

Accomplishments. The Government of Australia (GOA) is conducting a strong counter­drug campaign and is a party to the 1988 UN Convention. Six state and three GOA federal agencies devote considerable resources toward combatting the drug problem. The Australian Federal Police (AFP) and the DEA maintain representatives in each other's countries to coordinate their efforts against drug trafficking.

Corruption. Australian authorities respond strongly to all instances of official corruption and prosecute cases involving criminal behavior. Since March 1995, the New South Wales Royal Commission has released information concerning its investigation of corruption within the New South Wales Police Service and the Commonwealth­New South Wales Joint Drug Task Force, which existed from 1979 through 1988. The GOA actively opposes the production and distribution of illegal drugs and the laundering of drug proceeds.

Agreements and Treaties. A mutual legal assistance treaty with the US is under negotiation. A US­Australia extradition treaty is in effect. Australia cooperates closely with the US and third countries to counter money laundering and is active in the Financial Action Task Force.

Cultivation/Production. Cannabis is the only illicit drug known to be cultivated in Australia. Crop size has not decreased in recent years despite vigorous eradication efforts. GOA law enforcement authorities report an increase in the use of sophisticated indoor and hydroponic cannabis growing operations. The production of amphetamine and methamphetamine is increasing, and there is some manufacturing of small quantities of synthetic heroin known as "homebake."

Drug Flow/Transit. According to DEA reporting, Australia is an attractive target for South American cocaine trafficking organizations and Southeast Asian heroin traffickers.

IV. US Policy Initiatives and Programs

Policy Initiatives. The primary USG goals are the assessment of US­Australia trafficking trends and assistance in gathering intelligence on drug trafficking groups and their effects on international markets. The US and Australia consult closely in pursuing common counternarcotics objectives in regional and international fora. There is excellent cooperation between GOA and USG authorities, with the exchange of narcotics information proceeding without any difficulty. There have been no problems regarding the extradition of narcotics criminals between the two countries. DEA makes USG counternarcotics training available to GOA law enforcement authorities.

I. Summary

Burma is the world's largest source of illicit opium and, potentially, heroin, as opium cultivation and production in 1996 increased to near record levels. The 1996 crop estimates indicate there were 163,000 hectares under opium poppy cultivation which could yield up to 2,560 mt of opium gum ­­ enough to produce 250 mt of heroin and to satisfy the US heroin market many times over. Although there were some limited improvements in the Burmese Government's counternarcotics performance with regard to drug and precursor chemical seizures, these efforts fell far short of what is needed to cope with Burma's burgeoning drug trade. Burma's antidrug efforts suffer from a lack of resources as well as the lack of a strong and consistent commitment.

Although the "surrender" of drug lord Khun Sa and the dismantling of his Mong Tai Army (MTA) was portrayed by the State Law and Order Restoration Council (SLORC) as a positive development, Khun Sa has not been brought to justice and has apparently been granted personal clemency from prosecution or extradition. He is said by authorities to be under a form of house confinement in Rangoon and permitted to engage in business activities, but not narcotics­related activities. Reports suggest, however, that he and his MTA colleagues continue to be involved in the narcotics trade.

The ethnic drug trafficking armies with which the government has negotiated cease­fires, such as the United Wa State Army (UWSA) and the Myanmar National Democratic Alliance Army (MNDAA­Kokang Chinese), remain armed and heavily involved in the heroin trade and have to some extent moved into territory vacated by Khun Sa's former MTA. The top leaders of these ethnic groups are: U Sai Lin (Lin Ming­Shing) of the Eastern Shan State Army (ESSA); Yang Mao­Liang, Peng Chia­Sheng and Liu Go­Shi of the MNDAA; Pao Yu­Chiang, Li Tzu­Ju and Wei Hsueh­Kang of the United Wa State Army; and U Mahtu Naw of the Kachin Defense Army (KDA). Nevertheless, the government's limited efforts to extend law enforcement into the ethnic areas during the year resulted in some seizures of narcotics and precursor chemical and the destruction of some heroin refineries. These seizures pale in comparison with overall production, however, and are less than those in neighboring, non­producing states.

Money laundering is a growing problem in Burma, and there is reason to believe that the laundering of drug profits is having a substantial impact on the Burmese economy. An underdeveloped banking system and lack of enforcement against money laundering have created a business and investment environment conducive to the use of drug­related proceeds in legitimate commerce. Drug abuse ­­ in particular intravenous drug use ­­ is increasing, as is the incidence of HIV/AIDS infection.

II. Status of Country

Burma provides the bulk of the world's opium supply. It produces about 84 percent of the opium cultivated in Southeast Asia. Most of this supply of illicit opiates is produced in ethnic minority areas of Burma's Shan State, such as the Kokang and Wa territories over which Burmese authorities have minimal control. Since 1989, the SLORC has negotiated cease­fire agreements with the drug trafficking groups that control these areas, offering them limited autonomy and developmental assistance in exchange for ending their insurgencies. Because the SLORC's highest priority has been to end the fighting and the threat to its national security, counternarcotics efforts in these areas have been a secondary consideration, even though the groups are said to have agreed to the gradual phaseout of opium cultivation and drug trafficking within their areas. Nevertheless, we have seen no discernible effort by these groups to reduce trafficking or production. Following the surrender of Khun Sa, the Kokang, Wa and Essa areas in particular became drug trafficking havens where opium was produced and refined with relative impunity.

As part of the SLORC's efforts to bring the ethnic groups under its control, it granted leaders of these drug trafficking armies significant political legitimacy, and several participate in the government's National Constitutional Convention. These leaders have exploited their relationship with Rangoon to expand their businesses ­­ legitimate and illegitimate ­­ although their prosperity has not filtered down to the ordinary people of the ethnic areas.

III. Country Actions Against Drugs in 1996

Policy Initiatives. Burmese counternarcotics activities increased from a very low base during 1996, especially with regard to heroin, precursor chemical, and amphetamine seizures, but remained grossly inadequate compared to the magnitude of Burma's drug problem.

The "surrender" of Khun Sa allowed the Burma Army to project its authority into the former MTA area. The military disrupted, at least temporarily, trafficking routes and destroyed a number of heroin refineries in the area. There are also reports, however, of officials turning a blind eye to refining activity in return for bribes.

The SLORC did not announce any new drug control policy initiatives during 1996. It continued limited efforts to implement its "Master Plan for the Development of Border Areas and National Races." This plan calls for a program of integrated development combined with law enforcement. The stated aim is to improve the living standards in the ethnic areas and provide viable economic alternatives to opium cultivation. In 1993, the Government of Burma (GOB) and UNDCP launched the China/Myanmar project and the Thailand/Myanmar project in Mong Yang and Tachilek districts, respectively. These projects, while improving living standards and introducing alternative crops to farmers within the project areas themselves, had little, if any, impact on the enormous problem of opium cultivation even in neighboring areas, much less other areas of eastern and northern Burma. The projects drew to a close in December 1996.

The GOB and UNDCP initiated a 12­month pilot integrated rural development project in 1994 in the Wa region in an effort to take advantage of the United Wa State Army's decision to establish five "opium poppy­free zones" in its area of control. The stated goal was to bring about a gradual reduction of opium cultivation in the WA area. The pilot project was designed to test the feasibility of a planned five­year, $15 million rural development project aimed at crop substitution. Negotiations on the "Drug Control and Development in the Wa Region of Shan State" project between the GOB, the UNDCP, and the Wa leaders were concluded in November 1996. The SLORC raised a number of obstacles to implementation of the project. Protracted negotiations between UNDCP and the Burmese resolved many of these issues, but some remain, and donors are concerned about implementation. The Burmese cabinet has not yet formally approved the project. In contrast to UNDCP's previous projects in Mong Yang and Tachilek, the Wa project will incorporate a monitoring and evaluation component designed to measure progress in eliminating opium cultivation. As an integrated development scheme, it will also focus on infrastructure, as well as on the provision of educational and health facilities in the Ho Tao and Mong Pawk districts of the Wa region.

Accomplishments. The GOB negotiated the "surrender" of the notorious drug lord Khun Sa and his MTA in January 1996. According to the GOB, the terms of the surrender stipulated that in return for ending his insurgency and surrendering his weaponry, Khun Sa would be allowed to live under close government supervision in Rangoon, where he could engage indirectly, via third­party investors, in legitimate business ­­ but not drug trafficking ­­ and would not be prosecuted for his trafficking activities or extradited to the US. The MTA drug trafficking network has been disrupted, but reports suggest that Khun Sa and his MTA associates are still involved in the trade. Overall trafficking from Burma has not diminished, as other groups, particularly the Wa, took up the slack caused by the dissolution of Khun Sa's army. Moreover, Khun Sa has not been brought to justice in Burma, and the GOB has refused USG requests to turn him over for prosecution in the US. Indeed, the SLORC treats him with respect, addressing him with the traditional honorific.

Seizure of drugs and precursor chemicals, while still minimal, increased from a low base during 1996. The combined police and military narcotics task forces seized 493 kgs of heroin, as opposed to 72 kgs in 1995. In October, the authorities seized for the first time the amphetamine precursor ephedrine ­­ more than three mt ­­ which apparently originated in China for conversion at labs in Burma. They also seized 5.6 million tablets of amphetamines. Seizures of acetic anhydride more than doubled from 1995 totals to 2,668 gallons. However, opium gum seizures continued to decline from previous years, totaling 992 kgs versus 1,060 kgs in 1995. In the July­October period, the Burmese reported that they destroyed 11 heroin refineries compared to the 12 destroyed from 1988 through June 1996. The GOB conducted these counternarcotics activities in areas controlled by ethnic drug trafficking groups such as the Kachin Defense Army, the Kokang Army, the MNDAA, and the United Wa State Army. These limited inroads into the ethnic areas do not, however, constitute a serious challenge to the drug trafficking armies, which by and large continue to conduct their trade unimpeded.

Unlike previous years, when heroin seizures involved small quantities, this year the SLORC claimed some larger seizures, including the largest ever recorded in Burma ­­ 143 kgs seized near Kutkai in Northern Shan State in August. Authorities seized another 44.8 kgs in Hopong in Northern Shan State in August and 45 kgs in Tachilek in September. These seizures are small in comparison with Burma's actual production and with seizures in neighboring countries. The unprecedented precursor and amphetamine seizures have alarmed the Burmese authorities because they signal a possible future stimulants problem for the Burmese populace. Thus far, the amphetamines produced in Burma have been primarily for export to Thailand and China rather than for domestic consumption.

The 1993 Narcotic Drugs and Psychotropic Substances Law brought the Burmese legal code into conformity with the 1988 UN Convention. As such, the 1993 law contains useful legal tools for addressing money laundering, the seizure of drug­related assets, and the prosecution of drug conspiracy cases. However, to date these provisions remain largely unused as Burmese police and judicial officials have been slow to implement the law, targeting few if any major traffickers and their drug­related assets. Undermining SLORC credibility, a Burmese official involved in counternarcotics declared flatly in December that money laundering did not exist in Burma because of the country's strict banking laws. In one instance, however, the authorities reportedly seized buildings belonging to the Wa of the southern military region as the result of the heroin seizure in Tachilek mentioned above, although the disposition of these assets is unknown.

Law Enforcement Efforts. The GOB's coordinated drug enforcement effort is led by the Office of the Central Committee for Drug Abuse Control (CCDAC), which is comprised of personnel from various security services, including the police, customs, military intelligence, and the army. CCDAC now has 18 drug enforcement task forces around the country, most located in major cities and along key transit routes near Burma's borders with China, India and Thailand. While CCDAC and its task forces are responsible for effecting the bulk of narcotics seizures and arrests, the agency suffers from a lack of adequate resources. The UNDCP and DEA in the past provided various CCDAC units with modest equipment and training, but they were unable to do so this year. CCDAC's resources are inadequate to support its law enforcement mission.

Corruption. There is no evidence that the government, on an institutional level, is involved in the drug trade. However, there are persistent reports that lower level officials, particularly in outlying areas of the border regions, take bribes in return for looking the other way and that some local officials and commanders are actively involved in the drug trade. The lack of a vigorous enforcement effort against money laundering leaves Burma vulnerable to the growing influence of traffickers through the use of drug proceeds in legitimate business ventures. Although there is no concrete proof that drug money is involved, businesses owned by family members of known traffickers invested heavily during the year in infrastructure projects, such as roads and port facilities, as well as in hotels and other real estate development projects.

Agreements and Treaties. Burma is a party to the 1971 and 1988 UN drug conventions. The SLORC deposited instruments of ratification to the 1988 Convention with the UN International Narcotics Control Board in Vienna. However, the Rangoon regime maintains its reservations on two of the Convention's Articles, one on extradition of Burmese citizens to third countries, and one on the use of the International Court of Justice to resolve disputes relating to the Convention (Articles 6 and 32, respectively). The US does not have a mutual legal assistance treaty with Burma. It is the opinion of the USG, however, that a US­UK extradition treaty, which was accepted by the post­independence Burmese Government in 1948, remains in force and is applicable to the extradition of drug fugitives from Burma to the US. The SLORC refuses to recognize the applicability of this treaty, as well as the US request to render Khun Sa to face trial in the US. In May, the GOB and the UNDCP signed a six­nation (Burma, Cambodia, China, Laos, Thailand, Vietnam) memorandum of understanding on a sub­regional action plan aimed at controlling precursor chemicals and reducing illicit drug use in the highlands of Southeast Asia.

Cultivation and Production. Burma is by far the world's largest producer of opium, as opium poppy cultivation increased six percent and production increased nine percent over 1995 levels due to good weather, growing conditions and lax enforcement. The 163,100 hectares cultivated in 1995­96 had the potential of producing up to 2,560 mt of opium. The bulk of Burma's opium poppy cultivation traditionally has been in the mountainous regions of the Shan Plateau, which extends the length of the Shan State, from the Chinese border to the Thai border. Since 1989, however, cultivation has been expanding into areas under Burmese Government control on the west bank of the Salween River.

Drug Flow/Transit. Until 1996, heroin tended to be produced in large, relatively static refineries in the Shan State, well ensconced in ethnic enclaves protected by drug trafficking armies. These labs, run by the ESSA, MNDAA (Kokang), KDA, UWSA, and MTA, were left untouched by the GOB, in keeping with the SLORC's cease­fire agreements with these drug militias. However, in 1996 the GOB made inroads into these defended areas, reportedly destroying a number of labs and forcing some traffickers to use smaller and more mobile labs to refine heroin. A growing amount of methamphetamines reportedly is produced in labs co­located with heroin refineries along the Chinese, Thai and Lao borders. Heroin produced by Burma's ethnic groups is trafficked largely through unmarked transit routes crossing the porous Chinese and Thai borders and, to a lesser extent, the Indian, Bangladeshi and Lao borders. Although Thailand was once the primary route for Burmese heroin to exit Southeast Asia, trafficking through China is now increasing.

As in 1995, traffickers moved a growing amount of heroin through central Burma, often from Lashio, through Mandalay to Rangoon or other seaports such as Moulmein, for sea­borne export to Singapore or Malaysia. Trafficking routes leading through Kachin and Chin States and Sagaing Division in northern Burma to India also are used to a lesser extent. Traffickers import acetic anhydride, an essential chemical in the production of heroin, primarily from China, India and, to a lesser extent, from Thailand.

Demand Reduction/Domestic Programs. Drug abuse is a growing problem in Burma. Official estimates put the addict population at approximately 60,000, but UNDCP and NGO's working in the health sector estimate the actual population is at least five times that figure. Heroin is the drug of choice and its intravenous use is contributing to the rapid spread of HIV/AIDS, particularly in the Kachin and Shan states. According to the GOB's "Rapid Assessment Study of Drug Abuse in Myanmar," sponsored by the Ministry of Health and UNDCP in 1995, drug treatment services are not reaching most drug users because of a lack of facilities, lack of properly trained personnel, and inadequate treatment methods.

IV. US Policy Initiatives and Programs

Policy Initiatives. Direct USG counternarcotics aid to Burma has remained suspended since 1988, when the Burmese military brutally suppressed the popular pro­democracy movement. Initiatives such as an aerial eradication program, which had been effective in containing the expansion of Burmese opium cultivation, have not been carried out by the Burmese Government since 1988. Currently, the USG engages the Burmese Government on a very limited level. DEA shares drug­related information with the GOB and conducts joint drug enforcement investigations with Burmese police and military intelligence. Various US agencies have twice joined Burmese counterparts in conducting annual opium yield surveys in the mountainous regions of the Shan State; the Burmese Government invited USG participation in a third such joint survey in February 1997. However, the Burmese Government cancelled a planned survey in 1996 at the last minute, shortly after the "surrender" of Khun Sa. Results from the surveys gave both governments a more accurate understanding of the scope and magnitude of Burma's opium crop.

The USG continues to urge the SLORC to take serious steps to curb Burma's runaway opium production and heroin trafficking. Specifically, the Rangoon regime has been encouraged to:

• undertake opium poppy eradication on a wide scale in areas under its direct control or immediate influence;
• press ethnic groups such as the Wa, the Eastern Shan State Army and the Kokang, with which it has made political accommodations, to undertake credible measures to reduce opium cultivation and end heroin trafficking and production;
• actively enforce existing antidrug, conspiracy and money laundering legislation;
• provide strong support to multilateral drug control projects in the Shan State;
• hold Khun Sa accountable for his decades of drug trafficking and deprive him of assets derived from the drug trade;
• take action against drug­related corruption, including prosecution and appropriate punishment of corrupt officials and money launderers.

Bilateral Cooperation. USG counternarcotics cooperation with the Burmese regime is restricted to basic law enforcement operations and involves no bilateral material or training assistance from the US, due to concerns over Burma's shallow commitment to the counternarcotics effort, disregard for the rule of law, and violation of basic standards of human decency. DEA's liaison with Burmese police and military ­­ conducted through DEA's three­person office in Rangoon ­­ will continue at its limited level. Although DEA was unable to provide training to Burmese counternarcotics personnel during the year, it did encourage cooperation by the CCDAC on two major investigations of international drug trafficking groups operating in Burma.

The Road Ahead. Based on experience in dealing with large­scale narcotics trafficking problems elsewhere around the world, the USG recognizes that ultimately large­scale international aid, including developmental assistance and law enforcement aid, will be needed to curb drug production and trafficking. The USG is prepared to consider such assistance, contingent upon the GOB's demonstration of a strong commitment to counternarcotics, the rule of law and significant movement toward political reform.

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I. Summary

Cambodia made significant efforts toward taking control of the drug trafficking and transit problem which it has acknowledged. There is a significant flow of heroin transiting Cambodia which affects the US and other countries. The National Assembly passed a comprehensive counternarcotics law on December 3. The statute, which was drafted with UNDCP assistance and advice, includes tough anti­money laundering provisions. Passage of the law allows the police and the courts, previously hamstrung by lack of comprehensive legislation, to operate more effectively against narcotics traffickers. A second significant step was the formation, at the urging of the US, of a more efficient 40­person National Anti­Drug Unit to replace the 900­person National Anti­Narcotics Unit of the National Police' It was too unwieldy to function effectively, given its lack of trained personnel and equipment. The new Unit, which was formed in November, will be the focus of USG training and equipment assistance and will serve as a model for development of similar anti­drug units throughout Cambodia. Training will be supported by DEA, U.S. Customs and the Department of Defense Joint Agency Task Force on Counter­Narcotics (JIATF­West).

Cambodian law enforcement units seized 40 kgs of heroin during the year, down from the 1995 total. The Ministry of Interior publicly destroyed 71 kgs of heroin seized the previous year. The burning was witnessed by US and French Embassy officials, and by representatives of DEA and UNDCP. The Royal Government of Cambodia (RGC) continued a program of eradication of marijuana plantations, reportedly destroying approximately 180 hectares. Approximately 56 mt of marijuana believed to have been shipped from Cambodia were seized by international law enforcement agencies in the UK, Belgium, the Netherlands, Mauritania, Malta, Hong Kong and Australia. According to the National Police Anti­Narcotics Unit, 12 heroin couriers working for Nigerian trafficking organizations were arrested. At the request of the RGC, DEA tested 11 samples of substances (some evidence bags contained multiple brands of suspected drugs) suspected of being narcotics.

Political controversy between the two major political parties has hampered law enforcement efforts; throughout the controversy, however, officials from both parties expressed their commitment to counternarcotics concerns. At the working level, the directors of both the National Police Anti­Narcotics Unit and the Municipal Police Counter Narcotics Unit put aside differences to participate in two JIATF­West planning conferences for long­term training in support of narcotics control efforts.

Part II. Status of Country

Cambodia shares borders with Thailand, Laos and Vietnam. It lies near the major trafficking routes for Southeast Asian heroin. Cambodia's four­year­old democracy, installed after elections in 1993, still faces an active, although diminished, Khmer Rouge insurgency. Laws and legal institutions are still being developed. Enforcement agencies also are in the initial stages of operation and do not have even minimal resources. National and municipal police charged with narcotics law enforcement activities lack basic training and basic law enforcement techniques for implementing drug enforcement measures, including drug identification. They have no communications equipment or facilities. Cambodia has approximately thirty­three banks, but the National Bank only recently received legal authority to regulate them. The Royal Cambodian Government, recovering from over twenty years of warfare and internal strife, is heavily dependent on external assistance. Most ministries, including those charged with police functions, have funds sufficient only to cover salaries. The lack of funds for training and operations, coupled with the newness of Cambodia's democratic institutions, make Cambodia vulnerable to drug traffickers and money launderers operating in Southeast Asia.

There is no solid information about the full extent of drug trafficking, but it is clear that traffickers are taking advantage of present circumstances in Cambodia. The size of one recent seizure, coupled with anecdotal evidence, lends credence to other information suggesting that Cambodia is an important trafficking route for Southeast Asian heroin and a growing problem for the West, including the US.

III. Country Actions Against Drugs in 1996

Policy Initiatives. The Ministry of Justice, with the assistance of a USG­funded advisor, completed a draft of antinarcotic legislation, which was passed by the Royal Cambodian Parliament on December 3. The legislation contains a provision outlawing the laundering of drug proceeds. It also commits the government to becoming a party to the 1961 Single Convention on Narcotic Drugs, the 1971 Convention on Psychotropic Substances and the 1988 UN Convention.

Accomplishments. RGC officials put aside political differences in agreeing to destroy 71 kgs of heroin seized in 1995. The USG and Cambodia amended their bilateral antinarcotics agreement to include an additional $180,000 to provide the National Police and Municipal Police Anti­Drug Units with basic radio communication equipment, and to provide funding for an advisor at the Ministry of Justice to assist on counternarcotics issues.

Law Enforcement Efforts. In addition to the seizure of 40 kgs of heroin, marijuana eradication efforts by the National Police Anti­Drug Unit continued throughout 1996. According to government sources, authorities destroyed 180 hectares.

Corruption. In the wake of a November 1995 article in the Far Eastern Economic Review alleging the involvement in narcotics trafficking of government officials and those close to the government, the RGC promised to investigate, discharge from government and prosecute any person alleged to be involved in drug trafficking. It publicly called for information which would help the investigation. RGC officials levy accusations against each other in what many interpret as an effort to undermine the credibility of political rivals. Whatever the basis and intent of such accusations, the investigation has thus far yielded no indictments or other concrete results.

Agreements and Treaties. Cambodia has signed, but not yet become a party to, the 1961 Single Convention on Narcotic Drugs and its 1972 Protocol.

Cultivation/Production. Marijuana is cultivated in parts of Cambodia. There has been no survey of the extent of cultivation, and there are no good data on which to base an estimate. There have been some reports of opium poppy cultivation and of the existence of methamphetamine labs in Cambodia, but to date these have not been substantiated.

Drug Flow/Transit. Heroin is known to transit Cambodia from the Golden Triangle for probable delivery to countries in the region, to Europe and to the US. Opium is believed to transit Cambodia from Laos to Thailand. Approximately 56 mt of cannabis from Cambodia was seized by the UK, Belgium, the Netherlands, Mauritania, Malta, Hong Kong and Australia. A comprehensive picture of trafficking activity is still not available. However, increasing information about the trade suggests that heroin trafficking is a serious concern, especially in light of increased law enforcement activities in neighboring countries and the lack of an effective legal or law enforcement system in Cambodia.

Demand Reduction/Domestic Programs. Government authorities do not believe that domestic opiate use is a major problem. Anecdotal evidence suggests that narcotics use by foreigners is increasing. Cannabis use in food preparation is widespread. Abuse of pharmaceutical drugs, which are not presently regulated in an effective manner, is common. Abusers of illicit drugs often inject them, creating an increased HIV/AIDS risk. The RGC is currently discussing the passage of a new pharmacy law and a concomitant crackdown on unlicensed pharmacies. There are no government demand reduction programs in place in Cambodia at this time.

IV. US Policy Initiative and Programs

Policy Initiatives. The USG encourages the Government of Cambodia to become a party to the 1988 UN Convention, the 1961 Single Convention and the 1971 Convention on Psychotropic Substances.

Bilateral Cooperation. The RGC welcomes bilateral cooperation in training by US Customs, DEA and other elements of the USG. DEA personnel visit Cambodia monthly to consult with Cambodian narcotics control forces and provide customized training. Until the USG­funded drug laboratory is fully operational, the US will assist in drug identification through DEA laboratories in the US. Approximately 40 persons from the antidrug units received emergency medical training from DOD personnel. Additionally, two Cambodian officers attended a two­week DEA regional training seminar for mid­level managers in Bangkok. One senior enforcement manager and a Cambodian chemist attended a DEA forensic chemist training seminar in the US. DEA agents from the Bangkok Country Office travelled to Phnom Penh monthly to provide training and technical assistance to the antinarcotics units of the national and municipal police.

The Road Ahead. The RGC is cooperating with its Asian neighbors by attending regional conferences, most recently a UNDCP­sponsored conference in Laos in November. Also, the Government of France has provided some training and equipment to assist the RGC's fight against narcotics trafficking. The most important step Cambodia can take, however, is to tackle the problem implicit in the accusations of high­level official corruption. Failure to do so will eventually undermine the credibility of its nascent counternarcotics efforts.

I. Summary

The Chinese Government and its law enforcement departments expended greater attention and resources on drug interdiction and prevention in 1996, as the flow of heroin and opium transiting China from the Golden Triangle increased. The amount of heroin and opium seized by Chinese police in 1996 grew substantially over the previous year. Chinese authorities made the largest seizure (600 kgs) in Asia of heroin destined for the West, including the US. Burma is still the main source of the heroin and opium flow through China, but there is evidence that an increased amount of opium is also entering the country from Vietnam and Laos. People's Republic of China (PRC) officials reported a record number of registered drug addicts in China in 1995, and some predict that the final number for 1996 will be even higher. Increased financial flows and incomplete regulation provide greater potential for money laundering. China has met, or is actively seeking to meet, the goals and objectives of the 1988 UN Convention by continuing efforts to enhance law enforcement measures, public education, and international cooperation. Bilateral law enforcement dialogue and information sharing between the US and China improved in limited areas in 1996.

II. Status of Country

Despite tough law enforcement efforts by the PRC, an increasing amount of heroin and other opiates from narcotics­producing countries of the Golden Triangle is being transshipped by criminal organizations through China. Much of this increase can be attributed to increased enforcement efforts in Thailand, disruption of the trafficking organizations in Burma, and China's limited drug interdiction resources. Improved transportation and communication links, a goal of China's economic development, facilitate the movement of narcotics as well as legitimate goods. Furthermore, China's political decentralization over the past 17 years has helped trafficking organizations increase their influence, as local governments may be less responsive to central law enforcement directives.

Burma is the source of an estimated 90 percent of the heroin transiting China. Most of the illicit drugs shipped through China are transported across the border via vehicles and pedestrians. Authorities believe that most drugs are then moved within China by motor vehicle. Officials recognize that rail and air transport of drugs could become significant problems in the future, but state that these methods are still uncommon.

There is little evidence of domestic production of heroin in China, but PRC officials say about 10 percent of the opium seized in China is produced locally. The PRC is a major chemical producer and exporter, and drug traffickers' attempts to acquire precursor chemicals are a growing problem for Chinese law enforcement officials. Although Chinese authorities have uncovered few cases of money laundering, the problem could increase along with a rise in drug trafficking and other illegal activity.

PRC officials report that there were 520,000 registered drug addicts in 1995 (the most recent year for which figures are currently available), up from 380,000 in 1994. Most drug addicts are 18­35 year old males. Heroin and opium are the primary choices, addicts also abuse cannabis, stimulants and depressants. While in the past most drug addicts were located in the south, particularly Yunnan Province, Chinese officials report that drug abuse is now a problem throughout the country.

III. Country Actions Against Drugs in 1996

China's National Narcotics Control Commission (NNCC) reports that the PRC has met, or is actively seeking to meet, the goals and objectives of the 1988 UN Convention. The NNCC directs the PRC's counternarcotics efforts. The Commission oversees drug interdiction and prevention work in 18 government ministries and agencies and directs policy, enforcement, research, and international cooperation. China is an active participant in the UNDCP. In November, Shanghai hosted a UNDCP experts' meeting on amphetamine­type stimulants attended by representatives from 35 countries and international organizations. China also participated in the senior officials meeting of the UNDCP­sponsored Sub­regional Drug Eradication Project in Rangoon.

Policy Initiatives. In April, China's Ministry of Public Security began a nationwide anti­crime campaign known as "Strike Hard." As a part of this campaign, it devoted significant resources to drug interdiction, resulting in thousands of arrests and record amounts of seized contraband. The anti­crime campaign is expected to continue indefinitely. The Chinese Government says that it is also committed to preventing drug production through economic means. It has offered seeds and technical training to Chinese farmers in an effort to wean them off opium cultivation. China is considering an attempt to broaden the program to include more extensive forms of economic assistance.

Accomplishments. The Ministry of Public Security attributes increases in the amounts of heroin and opium seized to the police force's increased vigilance. The amount of opium seized in the first ten months of 1996 exceeded by 26 percent the entire amount confiscated during 1995. The amount of heroin seized in the first ten months of 1996 exceeded by 47 percent the entire amount seized in 1995.

Law Enforcement Efforts. PRC officials are particularly proud of their April 15 seizure of 600 kgs of heroin in Guangdong Province, a record amount in China. They have emphasized that much of the confiscated heroin was intended for markets in the West. They also have noted that several other drug seizures in 1996 each netted more than 100 kgs of heroin. Police officials say that Chinese authorities are focusing on major traffickers and organized crime in their efforts to control transship of narcotics. The Chinese Government reports that in recent years police arrested a number of middle­ to high­level crime figures involved in drug trafficking from the Golden Triangle. During this year's anti­crime campaign, special resources were devoted to drug interdiction efforts; officials say that this emphasis will continue.

Corruption. China has taken a strong stand against official corruption and has laws dealing specifically with government officials who are found guilty of the use, manufacture, or delivery of narcotics. Chinese observers admit, however, that rapid economic growth and liberalization in many areas of daily life have spawned an atmosphere of corruption and greed; corruption is recognized as a widespread problem. There is no evidence of high­level official involvement in narcotics trafficking. However, the juxtaposition of low­paid law enforcement personnel and the highly profitable drug business creates the potential for corruption.

Agreements and Treaties. The PRC is a party to the 1988 UN Convention, as well as the 1961 Single Convention, the 1975 Single Convention (which amends the 1961 Convention and its 1972 Protocol) and the 1971 Convention on Psychotropic Substances. China has greatly increased the number of mutual legal assistance treaties it has with other nations in recent years. It now has bilateral treaties with more than 20 countries and extradition treaties with three nations. In 1996, China signed mutual legal assistance treaties with specific attention to narcotics trafficking with three countries ­­ Russia, Mexico, and Pakistan. China and the US have been discussing a Customs Mutual Assistance Agreement for two years. A senior PRC Customs official indicated in November that China Customs would resume discussions, possibly leading to the signing of an agreement.

Cultivation/Production. There is limited heroin production in China, but Chinese officials report that about ten percent of the opium seized by police is domestically produced. Opium produced in China appears to be mainly for domestic consumption. According to some reports, small fields of opium poppy have been discovered growing in the northwest province of Xinjiang, in addition to the provinces bordering the Golden Triangle. Cannabis also grows naturally in Xinjiang Province and is cultivated for use in commercial rope manufacturing, as well as for narcotics production.

Drug Flow/Transit. Most of the heroin entering China is produced in Burma, which shares a 2,000 kilometer border with the PRC. Much of the opium smuggled into China, however, is produced in Vietnam and Laos, which also border the PRC. A rapid increase in the availability of road, rail, and air links, coupled with greater individual freedom of travel in China, has expanded the number of possible routes for the movement of illicit drugs in China. Officials say that drug abuse has been discovered in all areas of China.

Demand Reduction/Domestic Programs. Due to recognition among Chinese officials that drug abuse was more widespread than initially thought, there has been a movement to rapidly increase the number of drug treatment and rehabilitation centers. There are now more than 500 such facilities in the country. There are also some 75 drug treatment centers at "reeducation through labor" facilities. Much of the growing public awareness about drug abuse in China can be attributed to greater media attention to narcotics. Television and print media highlighted increasing problems with drug use in urban areas and sympathetically portrayed the plight of patients seeking treatment.

Drug addicts in China are encouraged to register and receive treatment at government treatment centers. The number of registered addicts grew to 520,000 in 1995 from 380,000 in 1994. This steep increase may reflect improved statistical methods rather than a sharp rise in drug abuse. The Ministry of Health pursues the integration of customary detoxification methods with traditional medicines, acupuncture, and other Chinese­developed treatments and also has sought assistance from foreign rehabilitation organizations.

IV. US Policy Initiatives and Programs

Policy Initiatives. The USG continues: (1) to seek a closer dialogue with China on the international and regional narcotics situation; (2) to encourage exchange of information with Chinese counternarcotics officials on international trafficking networks and narcotics­related cases, and urge reduction initiatives in China; and (3) to encourage regional cooperation and counter­narcotics projects.

Bilateral Cooperation. PRC law enforcement officials express an interest in maintaining, and expanding, current low levels of bilateral cooperation, particularly drug prevention cooperation. Working­level dialogue and information­sharing between US and Chinese law enforcement improved and expanded in limited areas during the year. However, the PRC government declined for the present to approve opening of DEA and FBI offices at the US Embassy in Beijing. Chinese officials assert that prospects for enhanced bilateral cooperation were dealt a blow when a US court ordered released the alleged Chinese drug trafficker Wang Zongxiao, who had originally been escorted to the US by Chinese police in 1989 to testify as a witness on the understanding that he would return to China.

Chinese officials participated in several INL or DEA­funded seminars and training programs during the year. These included a two­week regional cooperation seminar in Bangkok, which was attended by four public security officials, three of whom represented provincial drug interdiction bureaus. The Ministry of Public Security showed a keen interest in control of precursor chemicals, sending four officials to the US to take part in a DEA­sponsored program designed to help law enforcement officials detect and prevent illegal transshipments of such materials. In August, INL funded a program which sent US Customs representatives to Sichuan Province to teach drug interdiction techniques to Chinese customs and public security officers.

The Road Ahead. The Chinese Government is showing increased vigilance against drug trafficking, due both to public awareness of rising crime and to the authorities' understanding of the growing severity of the problem. As a result, working­level dialogue and cooperation may advance in the future. (Chinese Narcotics Control Commission officials say they are already planning to host two previously postponed US chemical control seminars.) Chinese approval of the establishment of DEA and FBI offices in Beijing will promote enhanced cooperation, which both sides have identified as a common, high­priority goal.

I. Summary

Hong Kong's primary role in the international drug trade is that of a money laundering base. This occurs through traditional banking networks as well as non­bank facilities such as remittance centers and money changers. Criminal elements both within and outside Hong Kong use the territory's well­developed financial networks to finance and arrange shipments of narcotics originating in Southeast Asia to the US and other markets. The overall pattern of drug trafficking in the region also points to Hong Kong as a key transshipment point for drugs to the US and other markets. In 1996, the government moved to further strengthen the legislative framework for combatting narcotics trafficking by, among other things: extending licensing controls to an additional 21 precursor chemicals; substantially increasing the fines for failure to keep adequate records of sales of dangerous drugs; introducing implementing legislation for bilateral extradition agreements; and proposing legislation that will establish heavier sentencing of drug traffickers who target young people.

Hong Kong cannot be a signatory to the 1988 UN Convention because it is not a UN member. However, Hong Kong continues its vigorous and generally effective efforts to meet the goals and objectives of the Convention. There has been excellent cooperation between the US and Hong Kong on matters relating to drug trafficking and money laundering. On December 20, the US and Hong Kong signed an agreement for the surrender of fugitive offenders (extradition agreement), and the two sides have initialled a mutual legal assistance agreement (MLAA) that will, when in force, include issues currently covered by a Bilateral Narcotics Agreement which expires on June 30, 1997.

II. Status of Country

As one of the world's most developed financial centers, Hong Kong is an attractive base for money laundering. The government recognizes this problem, and has sought to use the investigation, confiscation, and restraint provisions embodied in the Drug Trafficking (recovery of proceeds) Ordinance to deprive traffickers of their profits. In 1996, authorities confiscated assets valued at over $1 million; assets valued at over $12 million were restrained pending additional investigation. Drug traffickers use Hong Kong's largely unregulated non­banking sector (remittance centers and money changers) to launder drug proceeds. The Hong Kong Government is in the process of establishing guidelines for these non­bank entities that will require them to establish suitable policies to discourage money laundering activity, including proper customer identification, record keeping, and procedures for reporting suspicious transactions.

Hong Kong is one of Asia's major financial and commercial centers, and individuals inside the territory play a role in the financing of the international heroin trade. Although Hong Kong has long been a center for transshipment of both legitimate trade and contraband originating in China, local law enforcement officials assert that most heroin shipments financed by Hong Kong criminal elements or others using the territory's banking networks do not transit Hong Kong. There is little evidence that of illicit drug refining or manufacturing in Hong Kong.

III. Country Action Against Drugs in 1996:

Policy Initiatives. Hong Kong organizes its counternarcotics program around a five­pronged strategy that blends law enforcement activities, preventative education and publicity programs, treatment and rehabilitation programs, research efforts, and international cooperation. In May, Governor Christopher Patten convened the second annual Hong Kong Summit Meeting on Drugs at which he announced that nearly $4 million in additional funds would be used to help fund new government counternarcotics initiatives in the area of law enforcement, preventative education, treatment, rehabilitation and research. This effort complemented an initiative in March that established a $45 million "Beat Drugs Fund," the interest of which will be used semiannually to fund new counternarcotics initiatives proposed by voluntary agencies. The first tranche of this fund ­­ over $1 million ­­ was awarded in September to 24 projects, including 21 designed around preventative education and publicity, 20 focusing on treatment and rehabilitation efforts, and 3 dedicated to research.

Accomplishments. In addition to the items noted above, Hong Kong moved forward with a number of new legislative initiatives designed to strengthen its counternarcotics regime. These included: 1) In January, an amendment to the 1994 Acetylating Substances (Control) Ordinance extended licensing restrictions to an additional 21 precursor chemicals. 2) In May, the maximum fine stipulated in the Dangerous Drugs Regulations for contravention of record­keeping requirements for authorized handlers of these narcotics was increased from nearly $6,500 to over $58,000. The regulations governing the acquisition and supply of these dangerous drugs were further tightened in August. 3) In November, Part IV­A of the Drug Trafficking Recovery of Proceeds Ordinance came into operation, empowering the Hong Kong Police and Customs and Excise Service to detain property which is being imported and exported and has been shown to be the proceeds of drug trafficking. 4) In December, Hong Kong authorities introduced the Surrender of Fugitive Offenders Bill, which will serve as the implementing legislation for a number of bilateral extradition agreements that Hong Kong is negotiating to serve beyond the July 1, 1997 reversion to Chinese sovereignty, including that signed with the U.S. on December 20.

In addition to these items already in place or under active consideration by Hong Kong's Legislative Council, Hong Kong is also currently drafting an amendment to the Dangerous Drugs Ordinance that will increase the sentencing penalties for traffickers who target Hong Kong's youth. In response to concerns voiced in last year's INCSR report, Hong Kong authorities are also studying possible amendments to Schedules 1 and 2 of the Control of Chemicals Ordinance that will bring the salts of 17 chemicals under licensing control.

Hong Kong also actively supports international counternarcotics efforts, maintaining close links with the UN, the World Health Organization, the Financial Action Task Force, Interpol, and the World Customs Organization. For nearly a decade, Hong Kong's Customs and Excise Department has run the World Customs Organization's Regional Intelligence Liaison Office of the Economic and Social Commission for Asia and the Pacific Region. In 1996, Hong Kong collaborated with the UNDCP laboratory on a project on signature analysis/profiling of seized drug materials. Hong Kong also attends expert meetings convened by the UNDCP to discuss measures to control and regulate amphetamine­type stimulants. Hong Kong's Customs and Excise Department has maintained close liaison with the International Narcotics Control Board regarding the import and export of precursor chemicals and their salts.

Law Enforcement Efforts. An additional 38 officers were added to the Police Narcotics Bureau during the year to increase the bureau's surveillance capabilities. In November, an additional 22 posts were created to establish investigative and intelligence units within the Customs and Excise Department to support the licensing control system for precursor chemicals. Additional pharmacists have been recruited to increase the number of inspections of clinics and pharmacies from 560 to 700 per month in an attempt to discourage the illegal sale of controlled drugs. Through November, Hong Kong narcotics officers had seized 216 kgs of No. 4 heroin, 8.6 mt of herbal cannabis, 22 kgs of cannabis resin, 16 kgs of cocaine, and 43 kgs of methamphetamine. In the first ten months of the year, a total of 12,727 suspects were arrested for drug offenses, compared to 16,143 for all of 1995. While statistics for the number of persons convicted of drug­related offenses is not yet available for 1996, in 12,080 persons were convicted in 1995.

Corruption. There is no known narcotics­related corruption among senior government or law enforcement officials in Hong Kong. Hong Kong has a comprehensive Anti­Corruption Ordinance that is effectively enforced by an independent commission against corruption that reports directly to the governor. The Chinese authorities have pledged that this group will continue to function unimpeded after the transition.

Agreements and Treaties. Hong Kong currently cooperates with its international partners in the confiscation of the proceeds of drug trafficking and other related procedures by the means of time­limited bilateral agreements. Hong Kong has concluded bilateral narcotics agreements with the US, Canada, Australia, and Malaysia, and has in place equivalent arrangements with the UK and some of its dependencies. A draft bilateral narcotics agreement was initialled with Thailand in January 1996. All bilateral narcotics agreements will expire on June 30, 1997, on the eve of Hong Kong's reversion to Chinese sovereignty. To avoid a hiatus in its counternarcotics cooperation, Hong Kong is currently implementing legislation for these agreements. The US­Hong Kong MLAA will be ready for signature when approved by the Sino­British Joint Liaison Group (JLG). MLAAs with other countries, including Australia, also await JLG approval and enactment of Hong Kong's implementing legislation.

On December 20, the US and Hong Kong signed an Agreement for the Surrender of Fugitive Offenders (extradition agreement), which will remain in force after the 1997 reversion to Chinese sovereignty. The agreement establishes important procedural principles and provides for the surrender of fugitive offenders, including those involved in narcotics trafficking. The US­Hong Kong agreement marks the sixth such agreement Hong Kong has signed in this important area of cooperation against international crime; the other five were signed with the Netherlands, Canada, Australia, Malaysia, and the Philippines. The US­Hong Kong extradition agreement will come into force after ratification by the USG and completion of domestic procedures by Hong Kong. In December, Hong Kong introduced implementing legilsation, the Fugitive Offenders Bill, into its Legislative Council.

Drug Flow/Transit. Hong Kong authorities believe that the majority of narcotics shipments financed or brokered by Hong Kong­based narcotics traffickers are shipped directly from either the Southeast Asian source countries or from locations in China without entering the Territory. The majority of the heroin and methamphetamine seized in Hong Kong appears destined for the local market. There was only one seizure of heroin in 1996 that appeared destined for the US market ­­ 21 kgs contained in an airfreight shipment routed from China through Hong Kong to Los Angeles.

Hong Kong is one of the world's major container ports, with 1996 projections of at least 13 million containers either destined for, or transiting, the territory. There was one major seizure of approximately 7.85 mt of marijuana from a container at the Hong Kong container port. The container originated in Cambodia and transited Singapore with a final destination of Hong Kong shown on the bill of lading; information developed in the course of the investigation indicates that the ultimate destination was in fact Europe. There were no major narcotics seizures in the US in the first ten months of 1996 from containers either originating in or transshipped via Hong Kong.

The importation of cocaine direct from South America to Hong Kong is increasing, with seizures of 15.8 kgs through November, as opposed to 1.8 kgs for all of 1995. The couriers arrested at the airport have all been Latin American and flew directly to Hong Kong from various South American cities. The investigation into the seizures indicated that the cocaine was to be delivered directly to Hong Kong Chinese traffickers.

Hong Kong is a source/transshipment point for precursor chemicals such as ephedrine, one of the main precursor chemicals used in the manufacture of methamphetamine. There are numerous chemical supply outlets in Hong Kong capable of supplying multi­ton quantities of these precursor chemicals. Mexican authorities seized approximately three mt of ephedrine destined for a major Mexican methamphetamine trafficker that had been shipped from Hong Kong by a Hong Kong­based company. Prior to this delivery, there had been two deliveries of ephedrine from the same source, totalling approximately 1.9 mt.

Demand Reduction/Domestic Programs. Hong Kong has in place an active preventative public education program designed to discourage drug use, particularly focusing on Hong Kong's youth. Through November, a special team within the Narcotics Division had visited nearly 400 primary, secondary, and technical institutes to provide preventative education talks that reached nearly 105,000 students. The Education Department supplements these talks by integrating drug education into various subjects in the school curriculum. The Narcotics Division also works jointly with anticrime committees organized at the district level to fight drug abuse. These efforts are supplemented by radio, television, and print media campaigns publicizing the antidrug message. A new drug hot line was launched in June that seeks not only to provide information on the harmful effects of drugs, but also on treatment and rehabilitation facilities available in Hong Kong.

Part IV. US Policy Initiatives and Programs

Policy Initiatives. The USG stresses joint investigations with Hong Kong law enforcement officials to develop prosecutable cases, either in Hong Kong or the US, against the major Hong Kong­based traffickers. These traffickers are responsible for financing and brokering multi­hundred kgs shipments of heroin, methamphetamines, and marijuana not only to the US, but to Southeast Asian and European countries as well. The USG will assist the Hong Kong Customs and Excise Department with further development of its chemical control program and work with it to identify and monitor suspicious container shipments. The USG will encourage the Hong Kong Government to adopt policies designed to discourage money launderers by: urging the government to adopt mandatory rather than voluntary financial transaction reporting requirements, encouraging increased supervision, and supporting Hong Kong's efforts to enact tighter controls over non­banking institutions.

Bilateral Cooperation. Hong Kong and US investigators cooperated on several international narcotics investigations resulting in arrests in both Hong Kong and the US. There are free exchanges of information on a daily basis between the US and Hong Kong agencies with counternarcotics responsibilities. Hong Kong investigators travelled to the US to follow up on investigative leads, and US investigators made several trips to Hong Kong to coordinate with Hong Kong investigators in furthering U.S. investigations. Drug Enforcement Administration diversion investigators from Washington, lectured at Hong Kong Customs and Excise Department­organized chemical control seminars. In addition, DEA sponsored two Hong Kong customs officers to attend a regional chemical control conference in Bangkok. DEA officers provide monthly briefings at the Royal Hong Kong Police's Command School.

The Road Ahead. A high priority for the Hong Kong Government in early 1997 is enactment of the implementing legislation that will provide a framework for continued international counternarcotics cooperation, including legislation for the surrender of fugitive offenders (extradition) and mutual legal assistance agreements. In addition, Hong Kong authorities are studying possible avenues for addressing other weak spots in their counternarcotics legislation, such as the absence of effective controls on non­bank remittance centers and money changers that US law enforcement authorities believe are used by criminal elements to launder the drug proceeds. Hong Kong plays an active role in the Financial Action Task Force (FATF) and in the FATF Asian Task Force. The Hong Kong Government pledged to cooperate with the USG in its efforts to counter international drug trafficking. Under the umbrella of the US Consulate General, DEA and other US law enforcement agencies have been instrumental in counternarcotics efforts in Hong Kong as well as elsewhere in the region. The USG expects this cooperation to continue beyond Hong Kong's reversion to Chinese sovereignty in July 1997.

I. Summary

Indonesia is not a major producer of narcotics, nor a narcotics­derived money laundering center, but is increasingly used as a transit point for Southeast Asian heroin, including transshipment to the US, Australia and Europe. As interdiction efforts in the region have become more sophisticated and more effective, the attractiveness of Indonesia as a transshipment point has increased. Rapid growth in the tourism sector, now promoted by the government, will possibly accelerate the transformation of Indonesia into an increasingly important regional transit point for illicit narcotics. Expanding international trade, including increased shipping and air traffic, will have a similar effect. Indonesia's criminal code lists a small range of narcotics as illicit and does not include controls on money laundering. These factors impede law enforcement in the area of narcotics trafficking and money laundering. Law enforcement authorities cooperate and coordinate with interdiction efforts of DEA, the US Customs Service and the State Department's regional security officers. Indonesia has signed, but is not yet a party to, the 1988 UN Convention.

II. Status of Country

Marijuana is produced in large quantities in Northern Sumatra (Aceh), primarily for domestic consumption. There is no accurate estimate of the amount of land committed to marijuana production. Over the past year, the production, sale and consumption of ecstasy has become a major problem, notably in urban areas such as Jakarta. International trafficking in the drug also is growing rapidly, though much of this entails smuggling of the drug into Indonesia, especially from Western Europe.

Indonesian enforcement authorities focus their efforts principally on eradication of domestic marijuana production and, increasingly, on the elimination of consumption, production and trafficking in ecstasy. Official antinarcotics concern over designer drugs, notably ecstasy, has eclipsed government concern with more traditional illegal drugs (marijuana). Heroin trafficking networks expanded through Indonesia, with involvement of Southeast Asian, South Asian and Nigerian connections. Target countries for the traffickers included the US, Australia and West European states. There is not yet, however, evidence of a significant effect on the US from drugs transiting Indonesia.

III. Country Actions Against Drugs in 1996

Policy Initiatives. The government made no changes in its counternarcotics legislation, although it did adopt a more aggressive enforcement posture vis­a­vis the rapidly escalating trade in, and consumption of, ecstasy.

Accomplishments/Law Enforcement Efforts. Distribution of illicit drugs has drawn the increasingly active involvement of the police, whose raids increased in frequency on night clubs and other likely venues of designer drug and other illicit narcotics consumption and sale. Eradication of the sale, transport and financing of narcotics was a focus of antinarcotics activities by the authorities, particularly vis­a­vis the domestic market. Asset seizure in drug cases is not widely practiced in Indonesia. Arrests of drug traffickers were reported frequently in Jakarta and the Kuta Beach area of Bali, where nightly patrols of discotheques netted police hundreds of ecstasy tablets and other drugs and drug paraphernalia. Typically, the drugs were brought into Bali from Jakarta or from abroad. There are unconfirmed reports that ecstasy is manufactured in Bali and Jakarta. The Indonesian media reported arrests with increasing frequency of foreigners in connection with narcotics use, possession and trafficking.

Corruption. On several occasions, military and police personnel were arrested for involvement in drug­related activities. Authorities arrested a pilot for the Indonesian National Airline, Garuda, in the Netherlands for attempting to smuggle 8,000 ecstasy tablets to Jakarta. There is no evidence that the Government of Indonesia (GOI) as a matter of policy facilitates or fosters narcotics trafficking.

Agreements and Treaties. Indonesia has signed, but has not yet become a party to, the 1988 UN Convention. It is, however, a party to the 1961 UN Single Convention and its 1972 Protocol. Extradition cooperation with the US in narcotics­related cases is not possible, as there is no formal extradition relationship between the US and Indonesia. Mutual legal assistance is good between Indonesian authorities and DEA, US Customs and other agencies, such as the US Coast Guard.

Cultivation/Production. The Indonesian National Police (INP), in particular the Narcotics Subdirectorate, and Indonesian Customs continued their efforts to combat narcotics smuggling. The illicit cultivation of marijuana in Aceh Province drew the attention of eradication authorities. There were no new initiatives in this area, and no significant rise in production of marijuana has been noted. However, street sources contend that illicit manufacture of some designer drugs, notably ecstasy, has begun in Jakarta and in Bali.

Drug Flow/Transit. As anti­trafficking efforts by governments in the region have grown in sophistication, there has been a trend, noted in previous years, for traffickers from elsewhere in Asia,, Southwest Asia and Nigeria to look to Indonesia. Rapid growth in tourism, shipping and air traffic accompanying Indonesia's rapid development has increased the opportunities for traffickers to use it as an illicit narcotic transit point.

Demand Reduction/Domestic Programs. Increased police vigilance targeting domestic use, supported by regular press coverage of raids and arrests, reflected the growing concern of the government and the public about domestic drug consumption patterns. Demand reduction is increasingly important in Indonesia, as use of ecstasy rises, particularly among Indonesia's young urban elite. While the government promulgated no significant new demand reduction legislation or regulations in 1996, it is likely that they will be on the government agenda for 1997.

IV. US Policy Initiatives and Programs

Policy Initiatives. The US encourages the Indonesian Government to ratify the applicable UN drug conventions and supports modification of existing narcotics laws to expand the list of illicit narcotics, as well as to adopt new legislation for money laundering. The US Embassy in Jakarta, and the DEA and Customs Attaches in Singapore coordinate cooperation with the GOI on narcotics matters. (The DEA office in Jakarta was closed in 1987, and there is no resident Customs Attache at Embassy Jakarta.)

Bilateral Cooperation. DEA and INL sponsored the attendance of the head of the Narcotics Investigation Unit of the Indonesian National Police, and another officer, at the International Narcotics Enforcement Seminar held in Virginia. Two Indonesian narcotics officers attended the Asian Regional Drug Enforcement Seminar in Bangkok. The US Coast Guard organized a two week in­country training program for sea communications officers (equivalent of US Coast Guard) and port authority officers. US Customs officers presented a 12­week in­country narcotics detector dog handler training course for Indonesian customs officers.

The Road Ahead. In addition to its focus on developing increased mechanisms for continuing cooperation with GOI law enforcement authorities on narcotics interdiction issues, the USG will advocate that Indonesia give greater attention to the problem of money laundering, including enactment of new legislation. Indonesia's continuing economic growth, in combination with its geographic location and vulnerability to drug trafficking and transshipment, will subject it to greater international scrutiny with regard to law enforcement issues.

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I. Summary

Japan is not a major producer of illicit narcotics, but methamphetamine use continues to be a major problem. Based on arrest statistics, the methamphetamine addict population in Japan is estimated to total 400,000 to 600,000. About 90 percent of all drug arrests involve methamphetamines. Although arrests declined in recent years, abuse remains at a high level. Because Japan is not a producer of methamphetamines, nearly all methamphetamine trafficked in Japan is smuggled from foreign sources.

DEA and US Customs representatives believe narcotics­related money laundering takes place in Japan, although the extent is unknown. Differences between wholesale and retail prices of illegal drugs in Japan are much larger than that of prevailing prices in the US, making drug trafficking a lucrative business in Japan. Japanese organized crime groups are deeply involved in drug trafficking and earn large profits that local law enforcement authorities believe are being laundered through front companies. These authorities note an increase in the number of criminal cases involving companies fronting for organized crime groups. Despite the existence of a money laundering law, the statute has not been extensively used.

II. Status of Country

Antinarcotics efforts in Japan are hampered by the reluctance of prosecutors to use evidence obtained through investigative tools such as legally authorized wiretaps and long­term undercover operations. Recent changes in legislation, however, now permit authorities to conduct controlled deliveries of firearms and narcotics, and Japanese authorities enjoyed some successes in 1996. Primarily because domestic demand is relatively low, Japan is unlikely to become a significant country for the production of, or trafficking in, narcotics. Japan nonetheless is Asia's largest consumer of methamphetamines, and Japan's efforts in international drug control fora often focus on this problem. The discovery in 1995 that the Aum Shinrikyo religious sect secretly accumulated large quantities of controlled drug precursor chemicals came as a shock; the government's response has been to require registration by all persons who purchase such precursors. Legislation has existed since 1992 to tighten controls on money laundering, organized crime, and precursor chemicals, but those laws have not been extensively employed.

Japan is suspected of being a major money laundering center. Its banking institutions are among the most secretive in the world, and the reporting of suspicious transactions by financial institutions is voluntary. Currency transportation reporting requirements are viewed by the GOJ as a foreign exchange control mechanism, rather than a mechanism to prevent money laundering. Transport out of Japan of Japanese yen in amounts over five million yen requires a Ministry of Finance license; physical transportation of currencies other than yen in any amount is not reportable. US Customs has notified Japanese enforcement authorities of several instances of individuals who failed to report the transport of five million yen (around $45,000 at current exchange rates) or more to the US. Although this represents a criminal violation under Japanese law, Japanese authorities declined to take action.

III Country Actions Against Drugs in 1996

Policy Initiatives. In July, the Government of Japan established a central intelligence office on narcotics and smuggling and has improved its intelligence and analysis capabilities.

Accomplishments. Japan is generally cooperative, on an informal basis, in law enforcement matters. The Japanese cooperate fully with regard to USG fugitive transit requests.

Law Enforcement Efforts. Over 95 percent of all methamphetamine smuggling and distribution is believed to be controlled by Japanese organized crime groups; police antinarcotics efforts thus focus on those groups. Cocaine and heroin use is small but growing. In July, customs authorities in Yokohama seized 552 kgs of methamphetamines that was being smuggled from Taiwan. Other significant drug seizures in 1996 included the seizure of over 3,000 tablets of diazepan from a Thai citizen at Narita Airport, and 7.5 kgs of cocaine discovered aboard a ship in Yokohama.

Corruption. Japan has no known drug­related corruption.

Agreements and Treaties. Japan has no narcotics­specific bilateral agreement with the US or with any other country. Nonetheless, the DEA reports excellent cooperation between authorities of the two countries in implementing the bilateral extradition treaty. Cooperation with Japanese law enforcement authorities on other matters on an informal basis is generally good. However, the lack of an mutual legal assistance treaty impairs the ability of Japanese and foreign law enforcement agencies to investigate crimes with a nexus in Japan. Although Japanese authorities respond to formal requests for investigative assistance sent under cover of diplomatic notes, the processing of such requests is slow and time consuming.

Cultivation/Production. Despite revelations in the past eighteen months of the Aum Shinrikyo's stockpiling of large quantities of precursor chemicals, drug production itself is not a significant problem in Japan.

Drug Flow/Transit. Arrests of foreigners for violating drug­related laws are increasing. Filipinos, Iranians, South Koreans, and Thais are major nationalities represented. Almost all drugs illicitly trafficked in Japan are smuggled from overseas. China, Taiwan, and Thailand are the principal overseas sources.

Demand Reduction/Domestic Programs. There are public service announcements and other drug abuse prevention programs, but are limited in scope. Drug treatment programs are small and generally run by private organizations.

IV U.S. Policy Initiatives and Programs

Policy Initiatives. The US seeks greater Japanese sharing ­­ on an official basis ­­ of criminal intelligence, including criminal record information, in a straightforward and timely manner. In 1996, the US and Japan agreed to expand the Narcotics Working Group established under the aegis of our Common Agenda agreement to include transnational organized crime issues. A first bilateral meeting directed at opening discussions on narcotics and crime law enforcement issues was held in October. Future meetings are expected to clarify areas where more extensive cooperation may be possible.

The Road Ahead. The USG encourages Japan to play a more active role on narcotics and crime issues consistent with its international stature. We are particularly concerned that Japan broaden already enacted antinarcotics laws in order to enable Japanese law enforcement officials to perform more seizures of drug­related property and assets, authorize law enforcement officials to conduct greater electronic surveillance in drug­related cases, enact a "conspiracy statute," expand its law on money laundering to include proceeds from non­narcotics crimes, and require reporting on physical transportation of any currency and/or negotiable instruments into or out of Japan. The US also encourages greater Japanese participation in counternarcotics activities in other countries to which Japan gives assistance.

I. Summary

Laos is still a distant third, after Burma and Afghanistan, in world production of illicit opium. In the 1995/96 growing cycle, Laos produced an estimated 200 mt of opium, an increase of 11 percent over the 1994/95 estimate, but still approximately 50 percent of production in 1989. The area of cultivation increased by 28 percent to an estimated 25,250 hectares. This increase is troubling, particularly in light of international developmental assistance. Project areas with crop substitution projects, however, including one funded by the USG, saw only low levels of poppy cultivation. The Lao Government continued to press ahead on counternarcotics efforts. In May 1996, it passed an amendment to the existing law to ban opium production and increase penalties for trafficking. Two additional Counternarcotics Units (CNU) were created in Bokeo and Savannakhet provinces. In November, the Lao Government agreed to the assignment of a DEA representative to the US Embassy. Laos also continued its active participation in regional counternarcotics efforts, attending the second annual regional ministerial­level conference in Rangoon in May, signing a UNDCP­sponsored project document on regional law enforcement cooperation, and hosting a regional working level conference on trafficking of precursor chemicals and involvement of West African drug traffickers in Southeast Asia in December. Laos is not yet a party to the 1971 and 1988 UN drug conventions, but if it meets the goals of its master plan, it will have established the necessary basis for accession.

II. Status of Country

The Lao Government states that it is committed to international cooperation in counternarcotics efforts and is seriously trying to address the problem of opium production and trafficking through integrated rural development projects, through educational and informational outreach programs and through counternarcotics law enforcement. Several donor countries are involved in projects in Laos which are developing the infrastructure and economy and which have an indirect impact on opium production.

The sustained success in reduction of opium cultivation in integrated rural development project areas has demonstrated that, when given an alternative, the traditional hill­tribe opium farmers will stop growing opium. According to USG surveys of the 1996 crop, poppy cultivation in the USG­funded Houaphan project areas remained low despite the increases in other parts of the country. The same success was noted in the UNDCP Palavek Project area, where production dropped from an estimated five mt prior to the initiation of the project to the point that the area has become a net importer of opium to support its addict population. Similar reductions have been reported in other UNDCP crop control project areas.

Annual fluctuations in opium production in Laos and in neighboring countries are often attributable, in part, to the weather. The increase in opium production in the 1996 growing season, however, also reflects the increase in opium prices in Southeast Asia during this period, brought about to some extent by disruptions of drug trafficking networks in Burma.

III. Country Actions Against Drugs in 1996

Policy Initiatives. Counternarcotics Master Plan: The plan was developed under a UNDCP­funded project and addresses all aspects of the drug problem in Laos, including crop control, law enforcement, legislative development, demand reduction, and facilitation of international cooperation. Full implementation of the plan was premised, probably unrealistically, on a total of $35 million in support from international donors. Specific counternarcotics goals and milestones include: reduction of opium production to less than 70 mt by the year 2000 (an amount estimated to be for internal consumption); no further increase in opium addiction between 1996 and 2000; comprehensive drug legislation adopted between 1996 and 2000; and ratification of the UN drug conventions of 1971 and 1988 between 1996 and 2000. Progress has been slow in implementing the plan, and increased Lao commitment and international support will be required if the Lao are to be successful in their efforts.

Legislative Developments. A major step forward in strengthening Lao narcotics laws was taken in early 1996 when the National Assembly approved recommended changes to Article 135, the Lao decree dealing with narcotics violations. Included in the changes was a section that banned the production of opium, heroin and other drugs. The inclusion of this section brings Laos closer to requirements of the 1971 and 1988 UN drug conventions. The Lao also changed Article 135 to increase penalties for trafficking from a maximum of eight years in prison to a possible life sentence. This change brings penalties under the Lao law more in line with those in neighboring countries. Work is continuing on a more comprehensive drug law for Laos, which will include regulation of licit drugs as well as refining the criminal elements of the legislation.

Money Laundering: Laos is not a major financial center. Its commercial banking system is being developed, with the assistance of international financial institution consultants. The senior Lao leadership has expressed concern about the potential for money laundering operations, however, via the many foreign (overwhelmingly Thai) banks which have established branches in Laos. The Lao are discussing possible legislation to counter such activities with the resident UNDCP office, which has provided support in the past for legislative development. The Lao continued to participate in regional money laundering conferences. The Lao kip is not a free currency; the GOL strictly regulates its export.

Asset Seizure/Forfeiture: Lao customs legislation, enacted in 1994, specifically authorizes asset seizure. The law states that the means of conveyance of contraband can be seized along with the contraband. There have been several instances of such seizures in drug­related cases during 1996. The draft narcotics legislation also includes a section on asset forfeiture. A UNDCP legal advisor stated that under current laws and judicial procedure, provisions are adequate to deal with narcotics violations and that the courts can order the seizure of assets. The legal advisor added, however, that additional legislation would be required should the current one­party system of national political administration be modified in the direction of greater individual rights, including the rights of those accused of crimes.

Accomplishments. The Vientiane­based Counternarcotics Unit (CNU) experienced a growing case load during the year and requested additional staff from the Ministry of Interior. In addition to the investigative load carried by the CNU in Vientiane, investigators from the unit are sent to provincial locations to assist in investigations. Additionally, members of the original CNU are functioning as trainers for the newly created units in Savannakhet and Bokeo provinces. Those two provincial units were authorized in late 1995 and organized in early 1996. All basic equipment, including vehicles and communications gear, is now on order and delivery to the units should be completed early in 1997. Despite the fact that the provincial units are not yet fully trained and equipped, they have had significant successes in their first year of operation. The Bokeo unit raided two major amphetamine laboratories in the Ban Mom area of the province and seized large quantities of amphetamine powder, heroin, processing chemicals, and equipment. Twenty­two defendants were arrested in the case. The Savannakhet CNU was very active in marijuana eradication and seizures, and it seized heroin and opium destined for Vietnam. A fourth CNU is being created in the northwestern province of Luang Namtha under a USG­funded UNDCP project; it is expected to be operational by mid­1997. English language training for CNU officers was instituted at the headquarters to improve their ability to interact with the multi­national community in Vientiane and to broaden the pool of personnel available for advanced training opportunities outside Laos.

Gains in the Houaphan Crop Control Project were partially offset by damage caused during three successive major storms. Despite the fact that important elements of the original project design are not yet completed, the cultivation of commercial opium crops was eliminated in the two districts of the Lao­American project. Two hydroelectric/irrigation dams were inaugurated in February 1996, and electricity was provided to 487 families in the project areas, with another 275 families awaiting hook­up to the system. The storms destoyed the water course to the power plant in Nam Et, however, and will have to be repaired to restore electricity and irrigation for that area of Viengthong District. There also was serious damage to the fords and to sections of the roads. Planning is now underway to repair and complete these project elements. Additional funding made available during 1996 will allow for the construction of one of the dams included in the original project design, but held in abeyance awaiting funding. Training for the project staff continued during 1996 with participation in various seminars and workshops. Construction of several small irrigation schemes was completed. Approximately 100 hectares of new paddy land were brought into production in 1996, an important step toward a major project goal of making the area self­sufficient in food production.

Laos was active in international law enforcement activities throughout the year. Representatives of the Lao Drug Commission participated in the Heads of Narcotics Law Enforcement Agencies conference held in Manila in November, 1996. The Lao Government signed a UNDCP­sponsored law enforcement project agreement to allow for regional cooperation in controlled deliveries and related techniques. In December, Laos hosted a workshop in conjunction with the UNDCP for signatories of the Regional Drug Control Memorandum of Understanding. Attendees at the conference, which focused on trafficking of precursor chemicals and on West African couriers, included representatives from China, Cambodia, Burma, Thailand, and Vietnam. During the year, Laos finalized a bilateral agreement with Russia to cooperate in counternarcotics efforts; a similar agreement is being developed with Vietnam.

Law Enforcement Efforts. The INL­funded Counternarcotics Units in Vientiane, Savannakhet and Bokeo reported the successful completion in 1996 of 35 cases which resulted in the arrest of 105 drug offenders. Seizures resulting from these cases include 14.85 kgs of heroin, 8.6 kgs of opium, 21,855 amphetamine tablets, on 1.09 mt of processed marijuana, 7.5 kgs of amphetamine powder, and 1.46 mt of precursor chemicals. Additionally, authorities also seized vehicles, cash, and laboratory equipment. Incomplete reporting from other counter­drug activities in the provinces adds an additional 35 cases to this total, with 52 arrests. Seizures reported in these areas include 208 kgs of opium, 1.4 kgs of heroin, and 82 kgs of processed marijuana. Overall seizures, however, were minimal, particularly in light of the increased opium crop. Combined eradication efforts throughout Laos resulted in the destruction of 104.6 mt of cannabis under cultivation.

Corruption. There has been no solid evidence developed to indicate involvement of Lao Government officials in narcotics trafficking. Given Laos' poverty and the low pay received by all Lao Government employees, however, it is assumed that some officials and military personnel accept large financial rewards from the illicit drug business. It is also possible that some officials at relatively senior levels are aware of, or involved in, such narcotics­related activities. The Lao Government itself does not, however, encourage or facilitate the production or distribution of illicit drugs. During 1996, the Lao media periodically reported on trials and convictions of government officials charged with corruption. The willingness of the government to take action in such cases indicates that it would act in a similar fashion regarding narcotics­related corruption.

Agreements and Treaties. The US and Lao governments signed a memorandum of understanding on counternarcotics cooperation in 1989. The USG signed a crop control project agreement every year since then. Both countries have expressed their intention to continue and expand this integrated rural development/crop control effort. The GOL signed the first law enforcement bilateral project agreement with the USG in 1992 and signed four subsequent agreements since that time. Although the Government of Laos does not have a mutual legal assistance or extradition treaty with the US, it agreed informally to cooperate in deporting drug traffickers and demonstrated its willingness to do so in 1992 when it deported a US narcotics fugitive into USG custody. The Lao are not a party to the 1971 and 1988 UN drug conventions, but senior GOL officials have stated that they accept the agreements in principle and are committed to ratification under their master plan.

Cultivation/Production. Opium is produced in the ten northern provinces of Laos where it is used traditionally as a medicine, used socially, and used as a cash or barter crop. USG crop estimates indicate a 28 percent increase in cultivation of opium poppy from 1995 levels and an increase in production of approximately 20 mt of opium. Despite the overall increase, production in Laos is still approximately half of that recorded in 1989, the year that the Lao became actively engaged in crop control efforts. The most significant increases were noted in the provinces of Phongsali and Luang Namtha, where central government control is minimal. The Lao Government expressed serious concern about this development.

Drug Flow/Transit. The ability of the Lao Government to control the flow of narcotics within and across its lengthy, porous borders is severely limited by lack of personnel, resources, expertise, and ready access to many isolated areas of the country. There is effective control over its borders with Thailand, Burma, China, Vietnam, and Cambodia only in the vicinity of major population areas, along principal land routes, and at established river crossings. Laos is a land­link between all the countries in the area, which makes it important to drug traffickers. There are no valid estimates of the volume of narcotics that move through the varied routes, but trafficking through Laos appears to be increasing.

Demand Reduction/Domestic Programs. Heroin addiction reportedly is not yet a problem in Laos, but the Lao Government is concerned about increased use of amphetamines and glue sniffing in urban areas. Opium addiction is the main drug abuse problem and is widespread in the rural areas of the northern portion of the country. UNDCP­supported surveys indicate an opium addict population of approximately 42,000, consuming an estimated 60 mt of opium each year. This amount, added to the estimated 20 mt for medical and occasional usage, yields a domestic consumption of approximately 80 mt annually. The Lao Government conducts public awareness programs to emphasize the dangers of narcotics usage and trafficking. Both government­ and donor­supported detoxification and rehabilitation programs in Laos have had notable success. The first two detoxification/rehabilitation programs in the Lao­American crop control project area were completed in 1996 and additional programs are scheduled. Daytop International conducted the first of a series of drug treatment workshops during the year for the training of health care workers in detoxification and treatment procedures.

IV. US Policy Initiatives and Programs

Policy Initiatives. The USG focused on two primary counternarcotics objectives in Laos: to help the GOL eliminate opium poppy cultivation, and to suppress illicit trafficking of narcotics and precursor chemicals. The USG addresses the first of these goals through the bilateral Houaphan Crop Control Project. The goal of suppressing trafficking is being pursued through a series of law enforcement project agreements, which support the development and operation of special Counternarcotics Units within the police structure, and through support of Lao Customs. Additional assistance was provided under these project agreements to support the Lao National Commission for Drug Control and Supervision, which has overall policy direction for antinarcotics activities under the office of the Prime Minister.

Bilateral Cooperation. Opium cultivation in the USG­funded crop control project areas has been brought to a very low density, and there has been an approximate 50 percent reduction in production nationwide since 1989. Under the bilateral US­Lao Law Enforcement Project Agreement, renovation of a customs counternarcotics office was completed and a training facility was refurbished and equipped for the training of Lao customs officers involved in narcotics enforcement. The US Customs Office of International Training conducted a train­the­trainer course in Vientiane for a class of Lao customs officers and police from the CNU. These trainees will participate in mobile training teams which will travel to the provinces to provide counternarcotics training. Coordination improved between the CNU and DEA's Udorn and Bangkok offices but still fell short of fostering effective enforcement cooperation. DEA/Udorn provided assistance with the development and maintenance of investigative and administrative files for the CNU and coordinated investigative matters on a regular basis. The most significant recent development has been the agreement by the Lao Government to the assignment of a permanent DEA representative to the US Embassy staff.

The Road Ahead. Although there has been steady progress in our counternarcotics relationship with the Lao Government, the Lao must act more aggressively on narcotics matters. The Lao Government, having enacted more stringent laws regarding opium production, is still cautious about enforcement of such legislation in the absence of an acceptable cash crop which will meet the economic needs of farmers. The USG will offer support to the GOL via continuation of the crop control project and through law enforcement assistance. The USG also encourages support from other donors and UNDCP for Lao master plan projects. Absent a stronger counternarcotics commitment by the Lao Government, however, progress in Laos will not accelerate as desired.

I. Summary

Malaysia is a transit country for heroin bound for the US, Europe, and other destinations. Domestic consumption and trafficking are serious concerns. Malaysia's severe anti­trafficking laws include a mandatory death sentence for convicted traffickers. In an effort to bolster enforcement and demand reduction activities, the government instituted various bureaucratic measures, including the establishment of a new interagency group headed by the Prime Minister. In a welcome development, law enforcement authorities are actively pressing for enactment of a conspiracy law to enable prosecution of traffickers who escape prosecution under existing criminal statutes. Marked by productive visits to Washington by a senior police official and the Attorney General, successful joint enforcement activities, and well received training, bilateral counternarcotics cooperation continued to be strong. The DEA office in Kuala Lumpur engaged in fruitful operational activities, and arranged useful training for Malaysian counterparts. Malaysia is a party to the 1988 UN Convention.

II. Status of Country

No opium poppy is grown in Malaysia, and it is not likely to become a significant producing country. Due to its proximity to the Golden Triangle, Malaysia is likely, however, to remain a major transit country. There are serious concerns about domestic consumption. While there is no evidence that money laundering is a problem in Malaysia, observers are concerned that the offshore financial center, Labuan, could become a popular money laundering destination. Officials have expressed an interest in adopting a comprehensive anti­money laundering regime, but have not implemented any concrete measures to date.

The battle against narcotics is a top priority, and the government seeks ways to enhance its counternarcotics efforts. The government also enforces severe anti­trafficking laws, including a mandatory death penalty for convicted traffickers.

III. Country Actions Against Drugs in 1996

Policy Initiatives. The government implemented several initiatives in pursuit of its battle against narcotics trafficking and consumption. In February, the Cabinet established the National Drug Council. This high­powered council, headed by the Prime Minister, is tasked to examine a wide range of narcotics issues and formulate a comprehensive counternarcotics plan. The Anti­Narcotics Division of the Royal Malaysian Police (RMP) was elevated to department status. This move is expected to provide additional resources and improve the RMP's counternarcotics efforts. In another positive development, the Government of Malaysia's (GOM) Anti­Narcotics Task Force (renamed the National Narcotics Agency) was given responsibility over rehabilitation/treatment activities. This change, made in response to shortcomings in treatment activities, is expected to enhance the government's demand reduction efforts.

In recognition of the need to prosecute drug kingpins and conspirators, senior GOM officials expressed a keen interest in adopting a conspiracy law. The Director of the RMP's Anti­Narcotics Department visited Washington and met with senior USG officials to discuss this issue. The Deputy Home Minister announced in November that the Dangerous Drugs Act would be amended to enable prosecution of drug kingpins. The proposed amendment reportedly would allow the authorities to use evidence previously deemed insufficient to prosecute kingpins under the Act. The government also proposed an amendment to the Dangerous Drugs Act to impose harsher punishment for rehabilitation/treatment center employees who supply narcotics to inmates.

Accomplishments. Malaysia made progress in its efforts to meet the objectives of the 1988 UN Convention. Negotiations for a bilateral mutual legal assistance treaty between Malaysia and the US are proceeding smoothly and are expected to be concluded this year. The new National Drug Council is working on a counternarcotics master plan. In response to problems in rehabilitation/treatment centers, the GOM implemented various initiatives to bolster demand reduction efforts. Observers believe that these moves will bear fruit.

Law Enforcement Efforts. The GOM upgraded the Anti­Narcotics Unit of the Royal Malaysian Police to department status, giving it access to additional resources for counternarcotics activities. Due in part to this reorganization, the number of arrests significantly increased. From January to September, RMP and Customs arrested 973 suspects for trafficking (up from 648 during the same period last year) and 1,619 for possession (up from 1,497 last year). Authorities detained almost 900 suspected traffickers under the Special Preventive Measures section of the Dangerous Drugs Act. In the year's major operation, RMP officers killed two international drug kingpins during a shootout. They recovered 20 bricks of heroin, weighing 10 kgs, and weapons from the suspects, who reportedly were involved in international trafficking between Thailand and the US through Malaysia.

Corruption. There is corruption in the lower and middle ranks of law enforcement agencies, but it is limited in scale, and those caught are generally prosecuted according to relevant laws. The most common form of narcotics­related corruption involves the sale of narcotics to inmates by prison guards and treatment center employees. The GOM proposed an amendment to the Dangerous Drugs Act to strengthen the penalties for such activities. The GOM itself does not in any way encourage or facilitate illicit production or distribution of narcotics or psychotropic drugs.

Agreements and Treaties. The GOM is moving forward on ratification of the new bilateral extradition treaty with the US signed in 1995. Negotiations for a bilateral mutual legal assistance treaty are proceeding smoothly and are expected to conclude in 1997.

Malaysia is a signatory of the 1988 UN Convention. Still not in full compliance with all of the requirements of the Convention, the GOM is seeking to bring domestic legislation in line with the Convention.

Cultivation/Production. There may be small­scale production of cannabis, but no statistics are available.

Drug Flow/Transit. Heroin from Malaysia's heroin producing neighbors transits Malaysia through land, air, and sea borders to the US, Europe, and other destinations. Nigerian couriers are often used.

Domestic Programs (Demand Reduction). In response to a rising addiction rate and problems in large government­managed treatment centers, the GOM implemented bureaucratic changes and took other initiatives to bolster its demand reduction efforts. All demand reduction activities, including rehabilitation and treatment, now fall under the purview of the National Narcotics Agency. This reorganization is expected to improve coordination. Other measures taken by the GOM included implementing economic activities for inmates, proposing harsher penalties for illegal activities by treatment center counselors, and building additional rehabilitation centers. The National Narcotics Agency engaged in educational programs and requested training in US drug prevention programs.

IV. US Policy Initiatives and Programs

Policy Initiatives. These included:

• the negotiation of a bilateral mutual legal assistance treaty;
• encouraging adoption of key legislative measures, including conspiracy law and an anti­money laundering statute, to strengthen Malaysia's counternarcotics efforts;
• working toward a more productive cooperation in law enforcement operations, including sharing of information;
• encouraging stronger regional counternarcotics cooperation, with particular focus on Malaysia's roles as Association of Southeast Asian Nations' chair in 1997 and host of the Asia Pacific Economic Cooperation summit in 1998.

Bilateral Cooperation. INL­funded training continued to play an important role in bilateral counternarcotics cooperation. In line with the bilateral Memorandum of Understanding on Counternarcotics Cooperation, the US also provided much needed detection equipment to the GOM and is arranging training on school­based prevention programs. Sparked by the Malaysian Attorney General's visit to Washington, negotiations for an MLAT are moving forward. Cooperation between DEA and the RMP improved greatly during the year.

The Road Ahead. Despite the GOM's counternarcotics efforts, Malaysia will continue to be a major transit point. Domestic consumption and trafficking also will be serious problems. The GOM took several promising steps this year, and there are indications that it will take additional measures next year to bolster its counternarcotics efforts and move toward meeting the goals of the 1988 UN Convention. Bilateral cooperation will be important. Through cooperation and training, the US will endeavor to enhance the GOM's interdiction efforts and strengthen Malaysia's demand reduction training capability.

I. Summary

The Philippines serves as a transit point and producer for crystal methamphetamine, and as an exporter of locally produced marijuana and hashish bound for point in East Asia, the Pacific, Australia, Europe, and the US. The decline in heroin seizures registered in the previous year continued in 1996, and there has been no evidence that heroin traffickers have resumed using the Philippines as a transit point for heroin en route to the US. However, the continuing low level of seizures indicates that there is still some transshipment of Southeast Asian heroin. Although proposed legislation is pending in the Congress, the Philippines lacks laws on money laundering and asset forfeiture. During 1996 the Philippines Senate ratified the 1988 UN Convention and exchanged instruments of ratification with the US marking the entry into force of the US­Philippines Extradition Treaty and the Mutual Legal Assistance Treaty.

II. Status of Country

The Philippines is a major producer and exporter of marijuana due to official corruption, ineffective enforcement, and ideal growing conditions. While most of the marijuana is either consumed domestically or exported to Japan and Australia, some of it is destined for the Europe and the US (although not in significant quantities). Geography and the lack of funding make it unlikely that eradication efforts will have a significant impact on marijuana production.

Improvements in customs controls and international airport security appear to have convinced heroin traffickers to stop using the Philippines as a transit point for heroin bound for the US. The Philippines currently has no known domestic heroin problem. As in previous years, no drug treatment center reported a single case of opiate addiction during the year.

Crystal methamphetamine is the drug of choice among Philippines drug users. It is primarily imported from China, Hong Kong, and Taiwan as well as manufactured locally on a small scale; there is evidence that the Philippines exports crystal methamphetamine in small quantities to Guam and Hawaii. Authorities discovered two methamphetamine laboratories during 1996. The precursor chemicals involved had been smuggled into the country rather than diverted from legitimate imports. The ease with which precursor chemicals can be smuggled into the country, and the lack of adequate investigative resources make it likely that more such labs could operate for a considerable length of time with little risk of discovery.

III. Country Actions Against Drugs in 1996

Policy Initiatives. In February, the Philippines Senate ratified the 1988 UN Convention, which it had signed in 1988. In accordance with many of the obligations imposed by the Convention, legislation is pending (as it has been for the past year) to criminalize money laundering, authorize asset forfeiture, loosen bank secrecy, and prohibit plea bargaining in drug cases.

In addition, the Philippines Government is considering a number of measures to improve the Philippines National Police (PNP), including increased pay and additional training, under a proposed PNP modernization plan. This legislation also is pending from the previous year in the Philippines Congress. Outside of the PNP, the National Bureau of Investigation has been authorized to expand its narcotics unit, and plans to become more active in drug investigations. The Dangerous Drugs Board (DDB), active in education and treatment, was moved from the Health Department to the Justice Department to improve antidrug program coordination.

Legislation was enacted in 1996 to create a national computer information system, intended to provide law enforcement authorities with computerized access to criminal records and other law enforcement information. The system is expected to be operational in 1997.

Accomplishments. The government has an active marijuana eradication program which receives periodic assistance from the US Navy's Criminal Investigative Service. Following ratification by the US in August, the US­Philippines Extradition and Mutual Legal Assistance Treaties entered into force in November. The Philippines has in place the controls on imports of chemical precursors required by the 1988 UN Convention and receives good cooperation from its domestic chemical industry, which is beginning to produce some precursor chemicals. Although enforcement of controls has improved, effective control of precursor chemicals has not been achieved. Drug education has become an integral part of the school curriculum at all levels.

Law Enforcement Efforts. The Narcotics Command (NARCOM), the PNP's antinarcotics unit, has had some success in making the Philippines a less attractive transit point for heroin, primarily as a result of better security at the international airports in Manila and Cebu. Since September, no heroin seized in the US has been found to have transited the Philippines. However, NARCOM lacks the resources and training required to mount the large scale investigations necessary to dismantle local drug networks. Most of NARCOM's arrests and seizures result from buy­bust operations, tips and accidental discoveries.

Corruption. The government still has not effectively addressed corruption among police and customs officials, even though such corruption is widely recognized as a major barrier to antinarcotics efforts. Corruption among customs officials facilitates smuggling of precursors into the country and complicates efforts by the DDB to track their import. While lower ranking police officers are occasionally relieved from duty for possession or use of drugs, there have been no arrests of high­level police officials on narcotics­related charges. In one case during the past year, a foreign diplomatic employee witnessed a senior NARCOM officer soliciting a bribe from the lawyer of a foreign trafficker. Although the information was reported to his superiors, the official was never disciplined. Judicial corruption is also acknowledged to be a common impediment to narcotics prosecutions. In a recent example, a case against narcotics traffickers caught with 45 kgs of marijuana was handled by the court as a case of possession of 45 grams, and the defendants were granted bail. The court clerk claimed to have misplaced the decimal point.

Agreements and Treaties. Both the mutual legal assistance treaty and the bilateral extradition treaty with the US entered into force following the exchange of instruments of ratification in November. The Philippines Senate ratified the 1988 UN Convention in February of 1996. Implementing legislation for the UN Convention has not been passed, though many of the required measures are contained in the Crime Control Act that is pending in the Congress. The Philippines is also a party to the 1961 UN Single Convention on Narcotic Drugs, its 1972 Protocol, and the 1971 UN Convention on Psychotropic Substances.

Cultivation/Production. While marijuana is grown throughout the Philippines, the major areas of production are concentrated in the mountainous regions of northern Luzon and Mindanao. Crystal methamphetamine is produced locally on at least a small scale ­­ two local production laboratories were discovered in 1996.

Drug Flow/Transit. The use of the Philippines as a transit point for heroin couriers appears to have remained at the low level of the previous year because of increased enforcement efforts at international airports. US Customs was unable to trace any heroin seizures to couriers who had transited the Philippines, but did make several small seizures of heroin shipped from the Philippines via the mail system. In addition, Philippines authorities seized small quantities of heroin. Private boats and shipping containers are used to smuggle marijuana and hashish out of the country.

Demand Reduction. The DDB works with the Department of Education, Culture, and Sports (DECS) to implement the government's preventive education program. Drug abuse education is integrated into the curriculum at all levels. The Philippines Drug Abuse Resistance Education program also is active in selected schools in Manila and a few provinces. The DDB's community­based preventive education program and the DECS program enjoy the involvement and support of numerous non­governmental organizations. The DDB also oversees a large network of government and private treatment and rehabilitation centers.

IV. US Policy Initiatives and Programs

Policy Initiatives. The US works with Philippines authorities to prevent the Philippines from being used as a transit point by heroin couriers bound for the US. The US provides training to improve the ability of Philippines authorities to act against drug trafficking organizations. The US encourages passage of the proposed anti­money laundering and asset forfeiture laws.

Bilateral Cooperation. DEA works closely with NARCOM and other government agencies to reduce the flow of drugs from the Philippines to the US. USG­funded training of Philippines officials from NARCOM, Customs, Immigration and the PNP resulted in increased cooperation and improved enforcement capabilities. IBL­funded training in demand reduction helped the efforts of authorities to reduce the local market for drugs, and the acquisition of radio and computer equipment funded by INL improved the ability of NARCOM to coordinate its investigations.

I. Summary

Singapore neither produces nor processes narcotics. However, due to its preeminent role in regional shipping and finance, international traffickers use Singapore for the transit of narcotics and the laundering of drug proceeds. Government of Singapore (GOS) enforcement efforts against local consumption and sales are highly effective. Singapore authorities track traffickers, and are cooperative in sharing information with other countries in the region. They have excellent working relations with their USG counterparts. The GOS indicated its willingness to negotiate a designation agreement with the USG to share drug money laundering information and proposed to hold formal negotiations in early 1997. Singapore is not a party to the 1988 UN Convention, but is a party to the 1961 UN Single Convention and its 1972 Protocol, as well as to the 1971 UN Convention on Psychotropic Substances.

II. Status of Country

Singapore does not produce or process narcotics and is unlikely to become involved in such activities in the future. Singapore's strict and well­publicized enforcement of the death penalty for drug traffickers helps discourage narcotics use. The number of drug traffickers hanged in Singapore increased dramatically in the last two years, underlining the GOS' tough stand on domestic illicit drug activity.

The GOS nonetheless is concerned about the increase in addiction rates and recidivism among drug offenders who have undergone treatment. There are currently about 9,000 addicts undergoing rehabilitation in Singapore treatment centers, the same number as in 1995. Addicts undergoing rehabilitation are becoming repeat offenders at a present rate of 81 percent. The GOS initiated enhanced drug awareness efforts in schools and public awareness campaigns at the local level to target this problem. Punitive measures, including caning and a prison sentence, are being strongly considered for repeat offenders who have been through the rehabilitation program four or five times.

Interception of narcotics being transshipped through Singapore is the greatest deficiency in enforcement. GOS officials are reluctant, without specific information, to stiffen enforcement efforts at the port. Instead, they manifest greater willingness to share information with USG counterparts on specific cases. Singapore authorities assisted the USG last year in its trafficking and money laundering investigations. In March, GOS authorities used DEA information to confiscate 72 kgs of heroin transiting Singapore from Bangkok. In another DEA­assisted investigation, the GOS seized $20 million of laundered drug money.

III. Country Actions Against Drugs in 1996

Policy Initiatives. GOS officials indicated their willingness to negotiate a "designation agreement" with the USG to enable further information sharing on drug­related money laundering cases. In order to enable even limited information sharing with the US on drug money laundering, a memorandum of understanding or mutual legal assistance treaty is mandated by Singapore's drug trafficking (Confiscation of Benefits) act of 1992. The GOS has indicated that it wishes to conclude a treaty with the US before doing so with any other country. Singapore is not a party to the 1988 UN Convention.

Accomplishments. While Singapore does not cultivate or produce narcotics or precursor chemicals, it could improve its efforts at monitoring the distribution and sale of chemicals. The transshipment of narcotics through Singapore causes concern. The GOS cooperates with regard to USG extradition requests. Demand reduction efforts focused on drug rehabilitation, which received increased funding and press attention in the last year. The GOS aimed its demand reduction efforts at the schools to increase antidrug education.

Law Enforcement Efforts/Corruption. Singapore's Central Narcotics Bureau (CNB) is effective and substantially free from corruption. There is no evidence of support for corruption at higher levels.

Agreements and Treaties. Singapore is cooperative in extradition matters under the 1931 US­UK Extradition Treaty applicable to Singapore, and is a member of the Financial Action Task Force. As noted, Singapore has not acceded to the 1988 UN Convention.

Cultivation and Production. Singapore is not a producer of illicit drugs.

Drug Flow/Transit. Because of Singapore's geographic position and its function as one of the largest ports in the world, it is vulnerable to illicit containerized transshipments. Similarly, the airport, as a regional hub, is a transshipment point.

Demand Reduction/Domestic Programs. Singapore frequently enforces the death penalty for drug trafficking, which is credited as a significant deterrent. The GOS has mustered greater resources for rehabilitation addicts, and the number of addicts appears to have stabilized. Private rehabilitation programs are also active and may receive government financing in support of their efforts.

IV. US Policy Initiatives and Programs

Policy Initiatives. The USG responded to GOS overtures with respect to a designation agreement to enable greater information sharing in money laundering cases. The US forwarded a draft to the GOS; Singapore proposed beginning formal negotiations in early 1997.

Bilateral Cooperation/Road Ahead. The USG's first priority is conclusion of a designation agreement. In addition, it encourages Singapore to ratify the 1988 UN Convention and cooperate in monitoring distribution and diversion of vital and precursor chemicals.

I. Summary

Due to its geographic location relative to the Golden Triangle and its role as a regional transportation/shipping hub, Taiwan is a transit point for international narcotics trafficking. Taiwan's authorities say that its ongoing aggressive domestic counternarcotics program led to a decline in drug trafficking, exhibited in a statistical decline in seizures, prosecutions, and percentage of prison population incarcerated for drug­related offenses in Taiwan. Taiwan cannot be a party to the 1988 UN Convention because it is not a UN member. In 1996, however, it passed several pieces of legislation (including new laws addressing money laundering, organized crime and asset forfeiture) which, while not specifically targeted against narcotics, nonetheless will bring Taiwan into closer conformity with the goals and objectives of the 1988 Convention. These laws also could enhance the authorities' ability to attack those most responsible for illicit drug trafficking in and through Taiwan. Legislation on control of precursor chemicals is also under consideration in Taiwan.

Taiwan's operational cooperation expanded with US law enforcement agencies in the area of counternarcotics, through the American Institute in Taiwan (AIT). The unofficial offices representing the US and Taiwan continue negotiations on a new memorandum of understanding (MOU) to provide a more precise legal basis for even broader counternarcotics cooperation. The Taiwan authorities have been willing to cooperate informally in the area of joint operations. The UN in 1996 removed Taiwan from its list of major drug transit countries. The Taiwan authorities dispute US claims that the island is a significant transit point for heroin to the US. There is no dispute, however, that Taiwan has been a lucrative market for traffickers, and Taiwan nationals clearly are involved in international narcotics trafficking.

II. Status of Country

Taiwan is not a significant cultivator or producer of illegal narcotics, but the illegal consumption of both heroin and methamphetamines is a serious social problem. In the past, amphetamines were produced on­island; due to aggressive police efforts and shifting market forces within the drug trade, production facilities in recent years moved to mainland China.

Although the UN in 1996 removed Taiwan from its list of major drug transit countries, US experts continue to believe that Taiwan is a major transit point for international narcotics trafficking. This assessment is due to the pattern of trafficking in the region and concern that Taiwan's ports, like other busy container ports in the region, are being used as transit points for narcotics shipments en route to other destinations, despite the efforts of Taiwan law enforcement authorities, Kaohsiung is the world's third busiest port in terms of container traffic, after Hong Kong and Singapore, and is a major transit and transshipment center for shipping to and from other ports in the region. Official Taiwan figures show that of the 3.8 million shipping containers entering Keelung and Kaohsiung ports each year, a significant percentage are "in transit,"; in accordance with standard international practice, these are not normally subject to inspection by Taiwan Customs. Of the remaining 2 million containers entering Taiwan which local authorities are legally permitted to inspect, Customs examines approximately 15 percent.

Taiwan authorities recognize that money laundering ­­ which in the past has been linked in Taiwan not only to narcotics trafficking but to illegal manufacturing and insider trading on the securities market as well ­­ has become a growing problem. The legislature in October passed a new money laundering prevention law which criminalizes t