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International Narcotics Control Strategy Report, 1999 Released by the Bureau for International Narcotics and Law Enforcement Affairs, U.S. Department of State Washington, DC, March 2000

SOUTHEAST ASIA AND THE PACIFIC

AUSTRALIA

I. Summary

Australia is a committed partner in international efforts to combat illicit drugs. Australia is a consumer, rather than a producer, nation. There is no evidence of narcotics destined for the U.S. transiting Australia. U.S. and Australian law enforcement agencies have excellent cooperation on narcotics matters. Drug policy is an issue of increasing importance in domestic affairs in Australia, with the passage of state legislation allowing for safe heroin injecting rooms (clean needles provided, no prosecution for drug offenses) in two Australian cities. Australia is a party to the 1988 UN Drug Convention.

II. Status Of Country

Cannabis is the most widely used illicit drug in Australia. According to a 1998 survey for Australian Institute of Health and Welfare (AIHW), nearly 40 percent of Australians over the age of 14 have used the drug at least once, with 17 percent having used it in the last 12 months. The survey revealed that 46 percent of all Australians report having used at least one illicit drug in their lives, with 22 percent having done so in the previous year.

Heroin use is on the rise in Australia. 2.2 percent of all Australians reported using heroin in the 1998 AIHW survey, up from 1.4 percent in 1995. Among men aged 20-29, 6.2 percent reported heroin use in 1998, up from 3.6 percent three years earlier. The state of New South Wales (NSW) and the Australian Capital Territory (ACT) have passed legislation allowing for the creation of "safe heroin injecting rooms," and the state of Victoria is considering similar legislation. The federal government, after receiving a letter from the UN Narcotics Control Board, has asked the NSW and ACT governments to delay implementation while it reviews whether the establishment of such rooms violates Australia's obligations under the 1988 UN Drug Convention.

Australia's large banking sector and a freely exchangeable currency have allowed money launderers to take advantage of Australia. The government is committed to prevention and enforcement actions against money laundering and measures such as know-your-customer rules and a U.S. $6500 cash transaction reporting requirement make laundering difficult. Nevertheless, wire transfers and travelers checks have been used to launder drug proceeds through the Australian financial system.

III. Country Action Against Drugs

Policy Initiatives. The government's comprehensive drug strategy remains the "Tough on Drugs" program first announced by Prime Minister John Howard in 1997. During the year, two new components of the plan were announced. The first provided U.S. $13 million in government grants for community organizations to provide treatment, rehabilitation, and support to those affected by drugs. The second was an agreement between the federal government and the governments of the states and territories to divert many first time drug offenders into treatment and education programs, giving an early intervention focus to the strategy. Since its inception, nearly U.S. $190 million has been spent on implementation of the Tough on Drugs strategy, according to the Prime Minister's office. Drug policy remains an issue in which both the federal and state governments have a role. This leads to variations in laws and punishments across Australia.

Law Enforcement Efforts Australia continued aggressive anti-narcotics law enforcement activities in 1999. Responsibility for these efforts is divided between the federal and state governments, with the various law enforcement agencies generally working well together. There were two significant heroin seizures during the year. In July, the Australian Federal Police (AFP) seized 80 kilos of heroin. In October, the Australian customs service found over 219 kg of heroin in an ocean container in Sydney harbor on a boat arrived from Indonesia.

In a report issued in March 1999, the Australian Bureau of Criminal Intelligence (ABCI) reported that between July 1, 1997 and June 30, 1998, federal and state/territory enforcement authorities seized 320.9 kg of heroin and other opiates, 103.1 kg of cocaine, and 182.2 kg of methamphetamine and other amphetamines.

The AFP has established a number of overseas liaison posts to assist in narcotics-related investigations. These liaison officers, particularly those in the Pacific Island nations, also assist local law enforcement agencies in training and institution building. The AFP, both in country and overseas, has a close working relationship with U.S. Agencies such as DEA and FBI.

Corruption. The Australian government is vigilant in its efforts to prevent narcotics related corruption. There is no information of any senior official of the government facilitating the production or distribution of illicit drugs or aiding in the laundering of proceeds from such activities.

Agreements And Treaties. A mutual legal assistance treaty between the U.S. and Australia entered into force on September 30, 1999. There is also a bilateral extradition treaty, under which the U.S. requested the extradition of two persons for narcotics offenses during 1999. Both cases are proceeding through the courts. The Australian government is working through the court system to extradite a prominent Mexican money launderer back to Mexico pursuant to that country's request.

Cultivation/Production. The only significant illicit cultivation in Australia is cannabis, which remains at less than 5000 hectares throughout Australia. Australia has a significant licit opium crop, primarily on the island of Tasmania. Controls against diversion of that crop are excellent.

Drug flow/Transit. Australia has been and continues to be a target for Southeast Asian heroin trafficking organizations and South American cocaine traffickers. The U.S. embassy continues to monitor the possibility of these drugs transiting Australia to the U.S., but to date there has been no information that this is occurring.

IV. U.S. Policy Initiatives And Programs

U.S. Policy Initiatives. The primary USG counternarcotics goals in Australia remain looking for signs of traffic from Australia to the U.S. and providing mutual assistance and sharing intelligence in an effort to disrupt and dismantle international trafficking organizations. The cooperation between U.S. and Australian authorities in achieving these goals is excellent.

The Road Ahead. Australia shows no sign of lessening its commitment to the international fight against drug trafficking, particularly in Southeast Asia. The U.S. can expect to enjoy excellent bilateral relations with Australia on the counternarcotics front and the two countries should work well together in UNDCP and other multilateral fora.

BRUNEI

I. Summary

Brunei Darussalam does not produce narcotic drugs, and does not consume them in significant quantities. Drug-related problems are relatively minor. There are no indications that Brunei is being used for major transshipment of illegal drugs or for money laundering. The Brunei government has a vital, proactive anti-drug program led by the Narcotics Control Bureau (NCB). The Brunei government actively participates in regional activities and multilateral anti-drug fora and has made substantial progress in strengthening laws pertaining to narcotics-related crime. Brunei is a party to the 1988 UN Drug Convention. Contact and cooperation with regional U.S. Drug Enforcement Agency (DEA) officials has been positive.

II. Status Of Country

The quantity of illegal drugs coming to or transiting Brunei is relatively small. Brunei authorities report there is no evidence of drug syndicates operating in the country. Drugs that enter Brunei are smuggled in by air, at its single international airport; in vehicles, crossing Brunei's several border checkpoints; by water, from the nearby Malaysian states of Sabbah and Sarawak; or through illegal jungle entry points. Most illegal narcotics shipments move through Brunei between the Malaysian states of Sabah and Sarawak, but some of them inevitably stay and are consumed locally.

Crystal methamphetamine, marijuana (cannabis), and heroin are the drugs of abuse of choice in Brunei. In 1999 Brunei authorities noted an increasing presence of methamphetamine, a slight reduction in cannabis, and a drop in the use of heroin to almost zero. There is no evidence of cocaine traffic or use in Brunei.

III. Country Actions Against Drugs in 1999

Law Enforcement. Brunei's Narcotics Control Bureau (NCB), which leads the country's counternarcotics efforts, is well-funded. Its staff is trained and dedicated, professional and, although small, they efficiently perform investigative and enforcement activities. Cooperation between the NCB, police, customs, and other agencies involved in counternarcotics is excellent.

Brunei vigorously prosecutes those arrested for narcotics offenses. Like its neighbors, Malaysia and Singapore, Brunei has a well-publicized death penalty for possession of heroin for the purpose of trafficking (more than 30 grams), for marijuana (more than 600 grams), for cocaine (more than 40 grams), and most recently for possession and trafficking in methamphetamine (more than 250 grams). One drug dealer was convicted and put to death in 1996, and in November 1999 another was sentenced to death. As in Malaysia and Singapore, this tough policy on drugs appears to have a significant deterrent effect.

Policy Initiatives. Asset forfeiture laws are used in Brunei's drug-related cases. Money laundering legislation was still undergoing legal review in late 1999, but the Brunei government announced that a law would be put into place soon. Anticipating such a law, in 1999 Brunei authorities initiated a cooperative effort with regional money laundering experts.

Brunei participates in ASEAN and other regional anti-drug fora, and regularly cooperates with the Malaysian government in counternarcotics operations along common borders. Brunei drug officials also maintain regular contact with counterparts in Singapore, Thailand, and Australia.

Agreements and Treaties. There are no bilateral law enforcement treaties between the U.S. and Brunei. The government of Brunei has no narcotics agreements with the U.S., but there is excellent ad hoc cooperation with the regional DEA presence in Singapore. Brunei is a party to the 1988 UN Drug Convention.

Drug Flow/Transit. The Brunei government appears concerned about Brunei becoming a transit point for precursor chemicals, but has not developed a preventive strategy yet. However, to combat drug smuggling, the Brunei government sponsored a DEA training course for NCB, customs, postal and local business representatives that focused on smuggling through courier and postal services.

Demand Reduction. The Brunei government operates one drug rehabilitation facility, which accommodates approximately 250 (voluntary and involuntary) residents. Recent government focus has been on demand reduction activities, especially targeting the use of crystal methamphetamine. In 1999 the Brunei government funded school and village programs with anti-drug messages geared to 6 to 17-year-old students and their parents.

Corruption. There is no indication of drug-related corruption in Brunei.

IV. U.S. Policy Initiatives And Programs.

Bilateral Cooperation. During 1999 the Narcotics Control Bureau and police have been attending training courses at the newly created International Law Enforcement Academy (ILEA) in Bangkok. In September 1999, the DEA Singapore country office conducted the first ever narcotics training conference in Brunei. Training focused on mail and parcel interdiction techniques and was presented to representatives from the NCB, Brunei customs, the Brunei post office, and various private courier service companies, including Federal Express, DHL, UPS, and TNT. This training was extremely well received.

Road Ahead. The NCB continues to request further training, including technical training in a wide range of anti-narcotics law enforcement techniques. Brunei needs to remain vigilant against the amphetamine-type stimulant epidemic which has beset the rest of Asia.

BURMA

I. Summary

Burma is the world's second largest source of illicit opium and heroin, with Burmese production exceeded only by that of Afghanistan. Due in large part to severe drought conditions in poppy growing areas, production and cultivation continued to decline significantly in 1999 for the third year in a row. In 1999 there were an estimated 89,500 hectares under opium poppy cultivation, down 31 percent from 1998. This cultivated area could yield up to a maximum of 1,090 metric tons of opium gum. The opium production figure is 38 percent lower than in 1998 and is less than half of the average amount of production during the last decade. The government maintained most of its opium crop-eradication efforts, expanding some of these only slightly. During 1999, seizures of methamphetamine continued to exceed last year's record seizures, although opium and heroin seizures were well below 1998 figures. Burma made its first airport seizures of narcotics in 1999. The Government of Burma (GOB) made little, if any, effort against money laundering during the year. While there were cases of interdiction and arrests of members of some cease-fire groups for narcotics trafficking, the GOB has been unwilling or unable to take on the most powerful groups directly. Cease-fire agreements with insurgent ethnic groups dependent on the narcotics trade involve an implicit tolerance of continued involvement in narcotics for varying periods of time. Burma is a party to the 1961 UN Single Convention, the 1971 UN Convention on Psychotropic Substances, and the 1988 UN Drug Convention.

II. Status of Country

Burma has been, and continues to be, one of the world's largest producers of illicit opium. Burmese opium production doubled in 1989, the year after the State Law and Order Restoration Council (SLORC-the military junta that now rules Burma under the Name State Peace and Development Council, or SPDC) took power. Production levels remained high and stable for several years, but production began to decline in 1997 and dropped significantly in 1998 and 1999. The decline in potential production in 1999 over 1998 is largely due to drought, although the drop also reflects the GOB's effort to keep areas out of opium cultivation as part of its eradication efforts. The U.S. Government (USG) discontinued most U.S. direct assistance to Burma in 1988 in response to massive human rights abuses.

Burma currently accounts for approximately 80 percent of the total production of Southeast Asian opium. Most of this supply of illicit opiates is produced in ethnic minority areas of Burma's Shan State. Over the past few years, the GOB has increased its presence in this region, particularly the southern portion of it, an area formerly under the control of Chang Qifu (Khun Sa). Since 1989, Rangoon has negotiated cease-fire agreements with most of the drug-trafficking groups that control these areas, offering them limited autonomy and development assistance in exchange for ending their insurgencies. The regime's highest priority is to end insurrection and achieve some measure of national integration; counternarcotics interests in these areas are a lesser priority, reflected in the fact that many of the cease-fire agreements effectively permit the minorities to continue their narcotics cultivation and trafficking activities. Moreover, the cease-fire agreements have had the practical effect of condoning money laundering, as the government encouraged these groups to invest in "legitimate" businesses as an alternative to trafficking and some chose this opportunity to sanitize past illicit proceeds with investments in hotels and construction companies, for example.

The ethnic drug-trafficking armies with whom the government has negotiated cease-fires (but not permanent peace accords), such as the United Wa State Army (UWSA) and the Myanmar National Democratic Alliance Army (MNDAA-Kokang Chinese), remain armed and heavily involved in the heroin trade. Through cease-fire agreements, the GOB appears to have given the trafficking armies varying degrees of autonomy; for example, Burmese troops cannot even enter Wa territory without explicit permission. Among the top leaders of those ethnic groups believed by the USG to be involved in the heroin and/or amphetamine trade are, Peng Jiasheng, and Liu Goushi of the MNDAA; Pao Yuqiang, Li Zuru, and Wei Xuekang of the UWSA; Mahtu Naw of the Kachin Defense Army (KDA); Mong Sa La and Yang Maoliang of the Mongko Defense Army (MDA); and Yawd Serk of the Shan United Revolutionary Army (SURA), which was formerly part of drug lord Chang Qifu's Mong Tai Army. Chang Qifu disbanded his army in January 1996 in return for generous terms of surrender, which allowed him to avoid criminal prosecution. U Sai Lin (Lin Mingxian) of the Eastern Shan State Army (ESSA) has been listed in previous years as a major narcotics insurgent leader, but he has successfully rid his area of opium cultivation. There are no current, confirmed reports of Sai Lin or the ESSA still being involved in narcotics trafficking, although it is likely that ESSA territory is a trafficking route because of its location along the border with China.

There is reason to believe that money laundering in Burma and the return of narcotics profits laundered elsewhere are significant factors in the overall Burmese economy, although the extent is impossible to measure accurately. Political and economic constraints on legal capital inflows magnify the importance of narcotics-derived funds in the economy. An underdeveloped banking system and lack of enforcement against money laundering have created a business and investment environment conducive to the use of drug-related proceeds in legitimate commerce.

Drug abuse-in particular intravenous drug use-is on the rise in Burma and is accompanied by an alarming spread of the HIV/AIDS virus, especially in the ethnic minority areas that are the source of the drugs. HIV/AIDS infection rates in gem and jade mining areas are particularly high.

In the past four years, as overt military challenges to Rangoon's authority from the ethnic groups have eased somewhat, the government, while maintaining its primary focus on state security, has stepped up its counternarcotics enforcement efforts. The GOB garrisoned troops on a year-round basis for the first time in the Kokang region during 1997, but it still does not have troops in Wa territory. The MNDAA, the KDA, and the MDA in Shan State have declared their intention to establish opium-free zones in territory under their control by the year 2000; the ESSA has already declared its territory an opium-free zone. The Wa have announced their territory will be an opium-free zone by the year 2005.

Ethnic groups have made "opium-free" pledges since 1989, but, with the exception of the Kachin State and ESSA territory, results have been limited. In view of the extensive opium cultivation in northern Shan State, the area of greatest opium density, expanded reduction in cultivation will require considerable eradication, much greater law-enforcement, and alternative-development efforts by the authorities. Such efforts necessitate vastly greater financial resources than the government has, however. Implementation of such a program would also require increased cooperation between the government and the ethnic groups involved in production and trafficking.

The GOB, for its part, stated that it would support its eradication efforts with development assistance in the form of infrastructure improvements and advice on crop substitution. The GOB also requested USG assistance in verifying whether these groups fulfill their commitments. The USG has requested additional information to pinpoint the areas in question. The GOB has promised to provide this information. Exchange of information on the status of opium cultivation could then occur during the opium poppy survey carried out jointly with the GOB on a year-by-year basis. In view of China's long border with the Wa area, the GOB asked China for assistance in curbing Wa trafficking. Both countries have established a regular forum for discussing counternarcotics cooperation.

III. Country Actions Against Drugs in 1999

Policy Initiatives. Burmese counternarcotics efforts in 1999 made progress with regard to increased methamphetamine and ephedrine seizures and Burma's first seizures of drugs transiting the airport in Rangoon. An improved security situation in parts of northern Shan State permitted the Burmese anti-drug forces to conduct more vigorous law-enforcement efforts, especially in the Kachin and Kokang regions. The GOB has continued its cooperation with Japan to plant opium substitute crops on 14,565 acres. Such efforts must be stepped up, if they are to have a significant impact on the overall trafficking problem.

With encouragement from the Drug Enforcement Administration (DEA) and U.S. Embassies in Rangoon and Bangkok, the Burmese and Thai governments agreed to undertake joint operations against drug trafficking along Thailand's northern border with Burma. Operation of a joint anti-drug task force in Tachilek, Burma and Mae Sai, Thailand, however, has been hampered by political disharmony between the two countries.

The Burmese continued to refuse to render drug lord Chang Qifu on grounds that he had not violated his 1996 surrender agreement. This agreement reportedly stipulated that if Chang Qifu ended his insurgency and retired from the drug trade, the GOB would provide him with security in Rangoon and allow him to conduct legitimate business. Burmese authorities assert that he will continue to enjoy immunity from prosecution in Burma or rendition to another country as long as he does not violate his surrender agreement. This issue remains a source of friction between Burma and the U.S. The 1988 UN Drug convention obligates parties, including Burma, to prosecute such traffickers. GOB officials have stated they would be willing to prosecute Chang Qifu or his subordinates, if it can be proven that they have engaged in narcotics trafficking after the surrender agreement was signed.

The SPDC affirmed its intention to increase its efforts to implement the ongoing "Master Plan for the Development of Border Areas and National Races." The plan calls for a program of integrated development combined with law enforcement aimed at improving living standards in the ethnic areas and providing viable economic alternatives to opium cultivation. Few GOB resources have been devoted to such development projects, however; health, education, and infrastructure in border areas remain poor. GOB policy is to force the leaders in the ethnic areas to spend their own revenues, including from the drug trade, on social and physical infrastructure. The GOB's ability to continue or expand its opium eradication efforts is likely to be adversely affected by the lack of such economic alternatives.

The UNDCP has begun an integrated rural development project in the southern portion of the Wa region in furtherance of the United Wa State Army's unilateral decision announced in 1995 to establish five "opium-poppy-free zones" in its area of control to reduce opium cultivation gradually. The project is part of a planned five-year, $15 million rural development project aimed at crop substitution and alternative development. The project area has expanded to include 2 more townships for a total of five, with over 200 villages participating. UNDCP has begun projects in agriculture, road building, water and sanitation, and community development. 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 developing the infrastructure as well as providing educational and health facilities in the Ho Tao and Mong Pawk districts of the Wa region.

Accomplishments. While the extent of the drug threat from Burma remained high, law-enforcement efforts, particularly seizures of amphetamine, showed some improvement. Opium production during 1999 showed a significant decline; much of the decline, however, was the result of a region-wide drought. Seizures of 28.8 million amphetamine tablets in 1999 represented a notable increase over the previous year's record seizures of 15 million tablets. Opium and heroin seizures as of October 1999 declined from the 1998 seizure rate. The decline largely resulted from changes in trafficking patterns and refining methods adopted by traffickers in response to GOB enforcement efforts in prior years. The combined police and military narcotics task forces seized 273.2 kilograms of heroin in 1999 compared to 490 kilograms seized in 1998. By October, officials seized 1.44 metric tons of opium, compared with 5.2 metric tons for all of 1998. As indicated above, opium cultivation dropped by 31 percent and potential opium production by 38 percent to the lowest level in ten years. GOB law enforcement also made its first arrests of traffickers at Mingaladon Airport in Rangoon in October and November, seizing a total of 10.7 kilograms of heroin. To date, the GOB has also seized 6.43 metric tons of ephedrine in 1999, most of it coming from India. The GOB destroyed 23 heroin refineries and six methamphetamine refineries during 1999. The GOB also eradicated 9,800 additional acres of poppy fields, according to Burmese figures. The USG is unable to verify the accuracy of the eradication figures.

Law Enforcement Measures. The 1993 Narcotic Drugs And Psychotropic Substances Law brought the Burmese legal code into conformity with the 1988 UN Drug Convention. As such, the 1993 law contains useful legal tools for addressing money laundering, the seizure of drug-related assets, and the prosecution of drug conspiracy cases. However, Burmese policy and judicial officials have been slow to implement the law, targeting few, if any, major traffickers and their drug-related assets. Burmese drug officials claim they lack sufficient expertise to deal with money laundering and financial crimes, but money laundering is believed to be carried out on a massive scale.

Formally, the Burmese government's drug-enforcement efforts were led by 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. The CCDAC, which is under the effective control of the Directorate of Defense Services Intelligence (DDSI) and relies, in part, on military personnel to execute law- enforcement duties, continues to suffer from a lack of adequate resources 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 and reliable reports that officials, particularly corrupt army personnel posted in outlying areas, are either involved in the drug business or are paid to allow the drug business to be conducted by others. Army personnel wield considerable political clout locally, and their involvement in trafficking is a significant problem. The Burmese have said that they would welcome information from others on corruption within their ranks, and a few military personnel are known to have been arrested for narcotics-related offenses in 1999.

The lack of an enforcement effort against money laundering encourages the use of drug proceeds in legitimate business ventures by traffickers or former traffickers. Businesses owned by family members of former or present traffickers have invested heavily in infrastructure projects, such as roads and port facilities, as well as in hotels and other real-estate development projects during the year. Some of these investments are intended to supplement government expenditures on rural development projects in areas under control of the ethnic insurgent and trafficking groups. There is solid evidence indicating that drug profits formed the seed capital for many otherwise legitimate enterprises in the commercial services, and manufacturing sectors.

Agreements and Treaties. Burma is a party to the 1961 UN Single Convention, the 1971 UN Convention on Psychotropic Substances, and the 1988 UN Drug Convention. The Rangoon regime, however, has always refused to extradite Burmese citizens to other countries. The United States does not have a mutual legal assistance treaty (MLAT) with Burma. The USG believes that a U.S.-U.K. Extradition Treaty, which was accepted by the post-independence Burmese government in 1948, remains in force and is applicable to U.S. requests for extradition of drug fugitives from Burma. The GOB continues to refuse to recognize the applicability of this treaty.

The GOB is one of six nations (Burma, Cambodia, China, Laos, Thailand, Vietnam) that, along with the UNDCP, signed a Memorandum of Understanding (MOU) covering a sub-regional action plan aimed at controlling precursor chemicals and reducing illicit drug use in the highlands of Southeast Asia. In addition to periodic meetings with counterparts from the other signatories to the MOU, Burma has held counternarcotics discussions with Russia and India in 1999. The GOB signed bilateral drug control agreements with India in 1993, with Bangladesh in 1994, with Vietnam in 1995, and with the Russian Federation, Laos, and The Philippines in 1997.

Cultivation and Production. Burma is the world's second largest producer of opium. Potential production decreased sharply from 1998 levels, however, marking the third straight year of decline after a decade of steady production at a high level. Opium cultivation declined an estimated 31 percent and production declined an estimated 38 percent to 1,090 metric tons. Since the early 1990s the areas of most intense cultivation have gradually shifted from southern to northern Shan State. The bulk of the opium crop has been in areas controlled by ethnic minority groups. The GOB has signed or tried to sign cease-fire agreements with many of these groups since 1989. In the last few years, however, the GOB has begun to increase its presence in areas previously under ethnic control, with the notable exception of the Wa region. The government continued its eradication efforts during 1999 in areas previously subject to eradication, but did not expand the program significantly. A drought that affected both northern and southern areas of Shan State, was largely responsible for the sharp decline in potential opium production in 1999.

The GOB conducted a baseline survey of opium cultivation for the second year aimed at determining actual opium production (as opposed to potential production that the USG measures) throughout the country. According to Burmese figures, there were 102,066 acres cultivated in 1999, producing a total of 449 tons. The methodology used to arrive at these figures is unknown, and the U.S. must rely on the higher figures resulting from the joint U.S.-Burma opium yield survey.

Drug Flow/Transit. Most heroin in Burma is produced in small, mobile labs located near the borders with Thailand and China in Shan State in areas controlled by ethnic narcotics insurgencies. A growing amount of methamphetamine is reportedly produced in labs co-located with heroin refineries in the Wa region and the former Shan United Army territory in southern Shan State. Seizures of amphetamine tabs as of November had outpaced the record 15 million seized in 1998, reflecting the growing popularity of methamphetamine production among traffickers. Heroin and methamphetamine produced by Burma's ethnic groups are trafficked largely through transit routes crossing the porous Chinese and Thai borders; to a lesser extent over the Indian, Bangladeshi, and Lao borders; and through Rangoon onward by ship to other countries in the region. Although Thailand remains an important route for Burmese heroin to exit Southeast Asia, trafficking through China is on the increase.

Acetic anhydride, an essential chemical in the production of heroin, and ephedrine, the principal chemical ingredient of methamphetamine, are imported primarily from China and India. Traffickers continued moving heroin through central Burma, often from Lashio through Mandalay to Rangoon or other seaports, such as Moulmein, for shipment to Singapore or Malaysia. Trafficking routes leading through Kachin and Chin States and Sagaing Division in northern Burma to India continued to operate as secondary routes.

Demand Reduction. Drug abuse is a growing problem in Burma. Official estimates put the drug-addicted population at approximately 86,537, up from last year's estimate of 66,463. According to UNDCP and non-governmental organizations working in the health sector, the actual number is significantly higher, totaling about 400-500,000. Heroin is cheap in Burma, and intravenous use of heroin contributed 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. The Non-Governmental Organization (NGO) "World Concern" is implementing a demand-reduction project in Kachin State.

IV. U.S. Policy Initiatives

Direct material USG counternarcotics aid to Burma has remained suspended since 1988, when the Burmese military brutally repressed the pro-democracy movement. In 1998, the GOB refused to renew a crop substitution project, Project Old Soldier, by the U.S. NGO 101 Veterans, Inc., in 25 villages in the Kutkai area of northern Shan State. Currently, the USG engages the Burmese government on counternarcotics on a very limited level. DEA, through the U.S. Embassy in Rangoon, shares drug-related intelligence with the GOB and conducts joint drug-enforcement investigations with Burmese counternarcotics authorities. Various U.S. agencies have conducted opium yield surveys in the mountainous regions of the Shan State in 1993, 1995, 1997, 1998, and 1999, with essential assistance provided by Burmese counterparts. In cooperation with Burmese counternarcotics personnel, the USG plans to conduct another survey in early 2000. Results from the surveys give both governments a much more accurate understanding of the scope, magnitude, and changing geographic distribution of Burma's opium crop.

The U.S. Government continues frequently to urge the Burmese government to take serious steps to curb Burma's large-scale opium production and heroin trafficking. Specifically, the Rangoon regime has been encouraged to:

Prosecute drug-trafficking organizations and their leaders, and deprive them of assets derived from the drug trade;

Take action against drug-related corruption, including prosecution and appropriate punishment of corrupt officials and money launderers;

Take action against fugitive drug-traffickers and turn them over to third countries;

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 Kokang, and the Kachin, who have pledged to create opium-free zones in their regions, to make good on their commitments;

Enforce existing anti-drug, conspiracy, and anti-money-laundering legislation;

Provide strong support to multilateral drug-control projects in Shan State.

Bilateral Cooperation. USG counternarcotics cooperation with the Burmese regime is restricted to basic law-enforcement operations. The U.S. provides no bilateral material or training assistance due to U.S. concerns over Burma's commitment to effective counternarcotics measures, human rights, and political reform. DEA's liaison with Burmese policymakers and military officials-conducted mainly through DEA's office in Rangoon-will continue and will focus on providing intelligence on enforcement targets and coordinating investigations of international drug-trafficking groups.

The Road Ahead. Based on experience in dealing with significant narcotics-trafficking problems elsewhere around the world, the USG recognizes that ultimately large-scale and long-term international aid, including development assistance and law-enforcement aid, will be needed to curb fundamentally and irreversibly drug production and trafficking. The USG strongly urges the GOB to commit itself fully and unambiguously to implementing effective counternarcotics measures, respecting the rule of law, punishing drug traffickers and major trafficking organizations (including asset forfeiture and seizure), combating corruption, enforcing anti-money-laundering legislation, continuing eradication of opium cultivation, destroying drug-processing laboratories, and respecting human rights.

Burma Statistics
(1991-1999)

	1999	1998	1997	1996	1995	1994	1993	1992	1991
Opium
Potential Harvest (ha)	89,500	130,300	155,150	163,100	154,070	146,600	165,800	153,700	160,000
Eradication (ha)	9,800	16,194	10,501	0	0	3,345	604	1,215	1,012
Cultivation (ha)	99,300	146,494	165,651	163,100	154,070	149,945	166,404	154,915	161,012
Potential Yield (mt)	1,090	1,750	2,365	2,560	2,340	2,030	2,575	2,280	2,350
Seizures
Opium (mt)	1.440	5.200	7.884	1.300	1.060	2.265	2.265	2.193	1.512
Heroin (mt)	0.273	0.386	1.401	0.505	0.070	0.347	0.300	0.266	0.183
Marijuana (mt)	0.274	0.160	0.288	0.259	0.239	0.290	0.600	0.292	0.724
Acetic Anhydride (gal)	-	-	2,137	5,082	1,159	1,191	1,016	1,136	-
Other Data
Heroin Labs Destroyed	23	32	33	11	3	4	0	2	6
Meth Labs Destroyed	6	-	-	-	-	-	-	-	-
Narcotics Arrests	6,413	4,456	4,522	4,522	5,541	7,134	7,520	6,109	7,357
Heroin Users (thousands)	300	300	300	150	100	30	30	30	30
Opium Users (thousands)	120	120	120	120	120	120	120	120	120

CAMBODIA

I. Summary

The year 1999 saw the establishment of peace and political stability throughout all regions of Cambodia after more than 30 years of warfare. The coalition government established in November 1998 has emphasized law and order and economic development. The National Drug Policy Board was reorganized to provide more effective operational leadership and anti-narcotics enforcement was somewhat energized. Cambodian anti-narcotics officials have begun to establish working contacts with their counterparts in the region. UNDCP has provided welcome technical assistance in the areas of precursor chemical control, demand reduction, drug control and cross border cooperation, and has sponsored several well attended, well received training sessions.

Cooperation with U.S. law enforcement has continued to be excellent. Officials at the highest levels of the government have made public statements on the importance of combating illegal narcotics. However, there is substantial cannabis (marijuana) cultivation for export almost exclusively to non-U.S. destinations. Cambodia remains a major transit route for Southeast Asian heroin to overseas markets, including the U.S.

Lack of financial resources, shortage of trained personnel, and high levels of judicial corruption continue to hinder sustained advances in anti-narcotics enforcement. Officials at all levels continue to plead for U.S. assistance in training anti-narcotics police. Cambodia did not participate in the International Law Enforcement Academy in Bangkok.

II. Status of Country

Cambodia is not a major producer of opiates or cocoa-based drugs, although cannabis production is significant. Cambodia is not a center for narcotics derived money laundering. It is the only country in Southeast Asia that does not have a significant domestic drug abuse problem, having been saved from drug abuse by poverty, political turmoil, and isolation.

Marijuana is cultivated in significant quantities for export, as well as for domestic consumption. Although reliable figures about areas under cultivation are not available, estimates are that production could be quite high. Marijuana production in Cambodia is concentrated in four provinces, Koh Kong, Kampong Cham, Stung Treng, and Banteay Meanchey, and is reported to be in the control of ethnic Sino-Thai criminal organizations. Europe is the major destination for Cambodian cannabis. Of the approximately 70 tons of Cambodian cannabis that has been seized outside Cambodia since 1996, the majority of seizures have been made in European countries. Australia and the U.S. have also been destinations for shipments of Cambodian marijuana. The Prime Minister has announced the provincial officials who have knowledge of cannabis production and fail to take action will be removed from their posts.

Cambodia shares borders with Thailand, Laos, and Vietnam, and lies near the major trafficking routes for Southeast Asian heroin. Its principal involvement in the international narcotics trade is as a significant transit route for Southeast Asian heroin to overseas markets, including China, Europe, Australia, and the United States. There is little hard information available on the scale of heroin trafficking through Cambodia, but law enforcement in Cambodia is lax, and corruption endemic. There are clear indications of alien smuggling and counterfeiting, and there have been reliable reports that narcotics traffickers and other organized criminal elements use Cambodia as a kind of refuge for their activities.

There have also been reports in the past of methamphetamine laboratories operating in Cambodia at some points along the western border with Thailand, and some have been raided in previous years. In 1999, the Interior Minister condemned the presence of some new methamphetamine labs in Koh Kong province along the Thai border, which he claimed had been established by Thai criminals to supply the Thai market. While use of methamphetamine is still limited, Cambodian officials have become very concerned over the past year about the potential for rapid increase in methamphetamine abuse and are anxious to avoid an epidemic of the proportions experienced in neighboring countries.

Cambodia's law enforcement agencies have very few resources and generally lack even basic training in law enforcement techniques and drug enforcement measures. Three decades of civil warfare and factional fighting further hampered a sustained and organized effort against illegal drugs. In 1998, the cessation of factional fighting and the final demise of the Khmer Rouge along with the formation of a new coalition government have provided a measure of stability and allowed the government to devote more attention to combating crime in general, and illegal narcotics in particular. The new government has given priority to the reestablishment of law and order throughout the country and combating corruption. Both law enforcement agencies and the judicial system remain very weak. Defendants in important narcotics cases have had charges dropped inexplicably and been set free after paying very small fines.

III. Country Actions Against Drugs In 1999

Law Enforcement. Law enforcement in general has been energized, relative to 1998, and anti-narcotics efforts were noticeably more effective than in previous year. Measures to confiscate illegal weapons were taken throughout the year, contributing to generally greater security. The Prime Minister announced that the cultivation of cannabis would not be tolerated and that provincial officials who were aware of such activities and failed to take steps to combat it would be removed from office.

Cambodian law enforcement officials have also provided excellent cooperation in counterfeiting cases. The U.S. dollar is widely accepted in Cambodia and the police actively pursue counterfeiters of it. The U.S. embassy is routinely notified when counterfeit or suspected counterfeit currency is seized. Secret Service officers, stationed in Bangkok, have visited regularly to work with Cambodian authorities on counterfeit cases and to provide training to law enforcement and bank officials in counterfeit identification.

Corruption. Corruption is an endemic problem in Cambodia, and has adversely affected drug law enforcement. Poorly paid and ill-trained police and judicial officials frequently look the other way in narcotics and other criminal cases. There has been a real danger of Cambodia becoming a refuge for criminal elements, convinced that enforcement would either be totally ineffective, or in the unlikely event they were apprehended, that they could buy their way out. The combination of incompetence and venality, even at high levels in government and the police, pose an on-going challenge to improved narcotics law enforcement.

Policy Initiatives. The government reorganized its counternarcotics policy body, the National Authority for Combating Drugs (NACD), in response to complaints from a variety of sources that the existing group was ineffective. The new members come from law enforcement and operational backgrounds. Although the NACD secretariat members do not have law enforcement units under their direct control, they claim to have the ability to call on resources from all law enforcement agencies as necessary to conduct anti-narcotics operations. The UNDCP believes that this body has the potential to become an effective policy and coordination unit and is proposing a four year U.S. $ 2.3 million "NACD Support Project" which would strengthen the NACD Secretariat. This program includes supplying one senior drug control advisor on a full time basis and other short term technical advisors. The Cambodian authorities have enthusiastically accepted this proposal, which unfortunately has not yet been funded.

Accomplishments. In the past year, UNDCP has sponsored a number of seminars and training courses which were enthusiastically received and well attended, but the desperate need for training far exceeds what is currently available. Cambodia has also begun to cooperate with neighboring countries in narcotics law enforcement, most notably with Thailand and Laos. Exchanges of visits with regional narcotics enforcement authorities, also sponsored by UNDCP, have provided Cambodian officials with new insight into the regional nature of the narcotics problem, opportunities for information sharing, and the beginnings of regional cooperation to combat trafficking. Several highly publicized methamphetamine seizures were made at Pochentong Airport, including one involving an American citizen with 4,000 tablets heading to Japan, and several others at or near the Thai border. [this sentence does not describe drug flow/transit. You may as well just include it in accomplishments, above.

Cultivation/Production. Cambodian authorities had some success in combating illicit cultivation during 1999. The provincial governors were instructed to make sure that farmers understood that cannabis cultivation would not be tolerated and that they would be held accountable. A number of small scale plantations and fields were destroyed during the year, with one 160 hectare plantation discovered and raided in December.

Agreements and Treaties. Although Cambodia is listed as a signatory to the 1961 UN Single Convention and its 1972 Protocol, it has not yet ratified the convention. Cambodia has no extradition agreement with the U.S., but the Cambodian government has cooperated with U.S. law enforcement in the past in rendering or deporting persons wanted in the U.S. for crimes, including narcotics, upon request and presentation of an appropriate warrant. The U.S. embassy has been assured that such cooperation will continue. The Cambodian government concluded an extradition treaty with Thailand in 1998 and is in the process of negotiating an agreement with Laos. These are both important steps in Cambodia's fight against illegal drugs.

Demand Reduction. A three day workshop on drug abuse prevention and drug demand reduction in September attracted an overflow audience of 120 government health, education, and law enforcement officials, NGO representatives, children advocacy groups, and Embassy representatives.

IV. U.S. Policy Initiatives

Bilateral Cooperation. DEA law enforcement agents from Bangkok visited Cambodia regularly in 1999 and received excellent cooperation from their Cambodian counterparts. U.S. officials at many levels, including the U.S. ambassador, raised the narcotics issue with Cambodian officials at all levels, up to and including the Prime Minister, regularly throughout the year. The Cambodians freely admitted their shortcomings in the area of enforcement due to lack of resources, and regularly appealed for USG assistance, especially training. The Cambodian government accepted a U.S. proposal to conduct quarterly high level consultations on anti-narcotics objectives. The first such consultation was held in July 1999.

The DEA country attache stationed in Bangkok and the U.S. ambassador presented a USG-funded drug testing laboratory (funded from prior years' assistance). A series of meetings were held with the Prime Minister, deputy Prime Minister and Interior Minister, and top law enforcement officials, during which ways to continue and expand U.S. Cambodian cooperation were discussed. The Deputy Prime Minister specifically requested U.S. assistance in providing training and equipment for anti-narcotics police, for help in expanding their "connections" to international law enforcement, and for assistance in drug prevention and education; especially American experts to help with drug abuse curriculum and grass roots prevention programs.

Cambodian law enforcement authorities continued their tradition of cooperation with U.S. law enforcement authorities, including making arrested drug suspects available for interview by DEA. In October, at the request of the Assistant U.S. Attorney in Seattle Washington, the Cambodian authorities permitted two Cambodian police officers to travel to the U.S. to testify for the prosecution in a major narcotics case. The successful prosecution of this case was the result of more than two years of effective cooperation between DEA and the Cambodian government.

The Road Ahead. The U.S. will suggest continued efforts against corruption in Cambodia, and continued vigorous enforcement of Cambodia's anti-narcotics laws. Cambodia needs to be particularly sensitive to the threat that a lax enforcement atmosphere encourage criminal elements to "set-up shop" in Phnom Penh. There is also increasing danger to Cambodia's own people from the beginnings of methamphetamine trafficking to Cambodia. To some extent, Cambodia's poverty protected the Kingdom's subjects from more expensive illegal drugs.

CHINA

I. Summary

China continued to take strong, effective steps to combat the use and trafficking of narcotic drugs in 1999. Although preliminary figures indicate that seizures of heroin declined significantly from 1998's record level, possibly because of a decline in production in Burma, China's total heroin seizures still surpassed the amount of heroin seized in all other Asian countries. Seizures of methamphetamine and other amphetamine-type stimulants soared, while those of precursor chemicals and opium remained at previous years' levels. Government officials estimate that more than 10 percent of China's 1.3 billion citizens viewed a nationwide anti-narcotics exhibition. The U.S. Drug Enforcement Administration (DEA) opened an office in Beijing. China continues to cooperate actively on operational issues with U.S. drug-enforcement officials. Although the overall relationship remained intact, some elements of the law-enforcement relationship were affected by NATO's accidental bombing of the Chinese Embassy in Belgrade. A meeting of the Joint Liaison Group, Subgroup on Law Enforcement, postponed after the bombing, is expected to convene in the spring of 2000. The U.S. and China expect to finalize a framework for mutual legal assistance in 2000 as well. China often did not respond to U.S. requests for information on law-enforcement issues, and, when it did reply, the information requested often arrived too late to be of operational value. China is a party to the 1988 UN Drug Convention as well as to the 1961 UN Single Convention and its 1972 Protocol, and the 1971 Convention on Psychotropic Substances.

II. Status of Country

China is now the principal route for heroin smuggled out of Burma, with roughly 90 percent of seizures of Southeast Asian heroin occurring within Chinese borders. There is evidence that some heroin also enters China from Laos and Vietnam and that smaller amounts enter from Southwest Asia. Preliminary figures suggest that heroin seizures in China declined significantly in 1999 from 1998's record level. Since narcotics interdiction remains one of China's primary law-enforcement priorities, it is likely that this decline was due, at least in part, to a decline in production in Burma. There are 596,000 registered heroin addicts in China, but the government recognizes that the actual number of users is far higher. Chinese officials are increasingly concerned about the abuse of methamphetamine and other amphetamine-type stimulants (ATS). Seizures of ATS more than doubled in 1999, with the largest seizure in excess of one metric ton.

China is a major producer of precursor chemicals. The ephedra plant, from which the precursor of methamphetamine is made, grows wild in northern China. China monitors all 22 of the chemicals on the 1988 UN Drug Convention watch list. Yunnan, the province most directly affected by China's drug problem, goes further by monitoring exports of 28 chemicals. China cooperates with the United States and others in providing pre-export notification of dual-use precursor chemicals.

Under Chinese law, laundering the proceeds from narcotics trafficking is a crime, but the legal system and the banking system have not kept pace with China's rapid internationalization. Consequently, China is vulnerable to financial exploitation by drug traffickers. China participated in early meetings of the Asia-Pacific Group on Money Laundering, but, for a number of reasons, has not attended recent meetings of that body and did not pursue membership in the Financial Action Task Force.

III. Country Action Against Drugs in 1999

The Chinese government has pledged to put more manpower, more material, and more financial resources into the fight against illicit narcotics. China's counternarcotics strategy includes prevention, education, interdiction, and rehabilitation. In 1999, the government produced more than 6000 sets of a traveling anti-drug educational exhibition, which counternarcotics officials estimate was viewed by more than 160 million people. Chinese educational efforts are targeted primarily at youth, the segment of society most likely to use illegal drugs.

Policy Initiatives. China is committed to achieving the goals of the 1988 UN Drug Convention. China cooperates with the UNDCP and regional states on a number of projects. One such project, scheduled to begin in 2000, aims to reduce demand in the regions bordering Yunnan province, where heroin enters China from Burma. China also supports crop-substitution efforts in Burma and Laos.

Law Enforcement Efforts. Preliminary figures suggest that, while significantly lower than last year's record level, Chinese seizures of Burmese heroin will continue to account for the great majority of all such seizures in Asia. On July 4, after a lengthy investigation, Guangdong provincial authorities broke a case that resulted in twelve arrests and the seizure of 1584 kilograms of methamphetamine, an amount nearly equal to last year's total seizures. DEA sent a letter of congratulation to the Minister of Public Security in recognition of this accomplishment.

Corruption. Despite on-going efforts to combat official corruption, the phenomenon remained widespread. The media regularly reported cases of high-level government officials implicated in corruption. Most of the reports involved smuggling of consumer goods, misappropriation of funds, embezzlement, or abuse of power. There were no reports in the state-controlled media of senior government officials engaging in narcotics-related corruption.

Agreements and Treaties. In April, China and the United States signed a Customs Mutual Assistance Agreement, which will speed communications and enhance the flow of counternarcotics-related intelligence. Problems in overall U.S.-China relations affected implementation of several aspects of a May 1998 Memorandum of Understanding (MOU) on Law Enforcement Cooperation. A meeting of the Joint Liaison Group was held in Washington in March 1999, but, in the wake of the accidental bombing of their Embassy in Belgrade, the Chinese postponed a follow-up meeting in Beijing in the fall. The follow-up meeting is expected to be held in spring 2000. The U.S. and China also expect to complete a framework for mutual legal assistance in 2000. In July 1999 the DEA opened an office in Beijing, as agreed in a Memorandum of Understanding signed in May 1998.

China is a member of the Memorandum of Understanding States (MOU States) with the UN Drug Control Program (UNDCP) and five Southeast Asian nations. In the MOU the members agreed to collaborate on drug-control projects and programs. China has signed more than 30 mutual legal assistance and extradition treaties with 24 countries.

Cultivation/Production. China produces limited quantities of opium, mostly for domestic consumption. Production of synthetic drugs is a growing problem, particularly in Fujian and Guangdong provinces. China is a major producer of precursor chemicals used in the manufacture of illegal drugs, and China continued to strengthen its efforts to control these chemicals. Chinese police monitor closely all precursor chemicals listed in the 1988 UN Drug Convention, particularly ephedrine and potassium permanganate. U.S.-China cooperation on monitoring the movement of precursor chemicals into and out of China is, in general, excellent. However, the Ministry of Public Security rarely provides responses to routine requests from the United States for verification of the bona fides of importers, exporters, and agents.

Drug Flow/Transit. China shares a 2000-kilometer border with Burma. The majority of heroin produced in Burma now travels through China en route to the international market. Smaller quantities of heroin enter China from Southwest Asia. China supports crop-substitution programs in Burma, as well as in Laos, which have resulted in significant decreases of poppy-crop production in the project areas.

Domestic Programs. There are 596,000 registered heroin addicts in China, but government officials admit that the actual number of users is far higher. More than 80 percent of drug abusers are under 35 years of age, and government anti-drug education campaigns are centered on this group. Drug treatment is compulsory for known users. Most of the more than 600 government-run drug treatment and rehabilitation centers rely on a "cold turkey" approach to break the drug habit. Some centers also use traditional Chinese medicines to help users overcome their addiction.

The government has also placed increasing importance on the establishment of "drug free communities." The goal of these communities is to eliminate narcotics trafficking and drug-related crime, but also to provide an environment free of the pressures that lead many former abusers to relapse into drug use.

IV. U.S. Policy Initiatives and Programs

Policy Initiatives. Despite setbacks in other areas of the bilateral relationship in 1999, operational-level cooperation between Chinese and U.S. law-enforcement officials continued. U.S. policy objectives are to expand bilateral dialogue at both the operational and policy level, to foster more cooperation between American and Chinese enforcement officials, to increase Chinese counternarcotics capability, and to encourage regional counternarcotics cooperation.

Bilateral Cooperation. In 1999 the United States worked to improve counternarcotics cooperation at the operational level. A significant step in that direction was the establishment of a DEA office in Beijing. The United States regularly provided operational intelligence to Chinese narcotics enforcement officials, but the Chinese response to U.S. requests for similar information was uneven. In 1999 the Department of State, DEA, and the U.S. Customs Service continued to provide training designed to improve the enforcement ability of Chinese counternarcotics officials. In May Chinese law-enforcement officials participated in a two-week DEA-sponsored training course on jetway narcotics inspections. The U.S. Customs service held a contraband enforcement team training session in Yunnan province in March. In August U.S. Customs conducted a "risk management" course designed to help Chinese Customs officials identify high-risk cargoes. The Chinese postponed or cancelled a number of other training courses following NATO's accidental bombing of the Chinese Embassy in Belgrade.

Throughout 1999, however, Chinese officers attended counternarcotics and general law-enforcement training courses at the joint U.S.-Thai International Law Enforcement Academy in Bangkok. This important regional forum brought together police and other law-enforcement officials from throughout the region to improve regional technical abilities and establish ties among regional counternarcotics and law-enforcement officials.

The Road Ahead. Improved and expanded cooperation on narcotics enforcement is in the interest of both the United States and China. The United States will seek to expand our fruitful operational-level relationship with China and to encourage a resumption of our mutually beneficial high-level dialogue on counternarcotics issues. Although the transshipment of Burmese heroin remains the problem of most immediate concern to the United States, we will monitor closely, and assess the potential impact on the United States of, the alarming rise in methamphetamine seizures in China.

HONG KONG

I. Summary

Hong Kong's close geographical proximity to areas where drugs are cultivated, as well as its well-developed commercial transport infrastructure, have historically made it a natural transit point for drugs moving from Southeast Asia to the U.S. Although the U.S. continues to view Hong Kong as a major drug transit/staging area, it appears that Hong Kong's role as a transit/staging area for the shipment of heroin and methamphetamine into the U.S. has diminished over the last three years. This change could be attributed to the rapid development of economic and transportation infrastructure in southern China over the past five years. Development in mainland China includes the construction of new deep-water ports and road systems that dramatically reduced shipment costs and risks to movers of contraband who elect to ship from southern China rather than through Hong Kong. In addition, the counternarcotics efforts of Hong Kong's law-enforcement agencies have proven to be a strong deterrent to drug trafficking through Hong Kong. In the last three years counternarcotics officers made no seizures in Hong Kong of heroin en route to the U.S. Hong Kong residents were deeply involved in a significant heroin case in Australia, however, and counternarcotics officials in neighboring countries continue to report that Hong Kong criminal elements are involved in narcotics trafficking in the region.

Hong Kong adopted a multi-pronged strategy to combat drug trafficking and abuse consisting of effective law enforcement, anti-drug education and publicity programs, treatment and rehabilitation programs, research efforts, and international cooperation. Hong Kong's role as one of the world's major financial centers makes it an attractive venue for laundering money. Although Hong Kong is a source/transshipment point for precursor chemicals such as potassium permanganate, its role has begun to diminish. The 1988 UN Drug Convention, to which China is a party, applies to Hong Kong.

II. Status Of Country

Hong Kong is not a producer of illegal narcotics. Hong Kong's close geographical proximity to the Golden Triangle and mainland China, as well as its well-developed commercial transport infrastructure, have historically made it a natural transit point for drugs moving from Southeast Asia to the United States. Because of Hong Kong's geographical, commercial, and economic profile, coupled with Hong Kong's highly developed port facilities that historically have been used by narcotics traffickers to transport illicit drugs from Asia to the U.S., Hong Kong continues to be designated as a major drug-transit point. Hong Kong's strong law-enforcement efforts over the past several years on the one hand and the rapid development of an economic and transportation infrastructure with rapid growth in direct trade in southern China on the other indicate that Hong Kong's role as a major drug-transit center has been diminishing. The lack of recent seizures of drugs destined for the U.S., despite Hong Kong's stringent enforcement regime, suggests a reduced role for Hong Kong as a transit point for drugs. Nevertheless, drugs secreted in any of the millions of containers transiting Hong Kong each year may escape detection, despite Hong Kong's vigorous enforcement efforts. Moreover, organized criminal gangs and syndicates, many involved in narcotics trafficking, continue to operate from Hong Kong. A recent large heroin seizure in Thailand, for example, yielded investigative leads indicating involvement of Hong Kong criminal elements in managing and financing the trafficking of a series of large heroin shipments to the U.S. During 1999, Hong Kong law-enforcement officials continued to cooperate fully with their U.S. counterparts on all investigations related to illicit drugs and money laundering.

In the first half of 1999, a total of 9,928 drug abusers were reported to the central registry of drug abuse, representing a decrease of 7 percent compared to the first part of last year. Authorities believe most narcotics entering Hong Kong are destined for domestic consumption. In the first half of 1999, the most commonly abused drugs were heroin (87.5 percent), cannabis (7.8 percent), amphetamines (6.3 percent), and triazolam (4.4 percent). There was an increase of 1.8 percent in the abuse of crystal methamphetamine in the first half of 1999.

Hong Kong's role as a major financial center continues to make it vulnerable to the illicit use of its financial institutions for laundering drug-related proceeds. Money laundering in Hong Kong involves not only drug proceeds, but also funds stemming from other criminal activities, such as tax evasion. The level of money laundering from tax evasion and other criminal financial activity is believed to be significant (albeit not quantifiable). Hong Kong continues to tighten controls to prevent money laundering.

Although Hong Kong is a source/transshipment point for precursor chemicals, such as potassium permanganate, ephedrine and pseudoephedrine, its role has diminished because of the recent reclassification of potassium permanganate from Schedule 3 to Schedule 2 on the "Control of Chemicals Ordinance."

III. Actions Against Drugs in 1999

Policy Initiatives. In accordance with the resolution passed at the Special Session of the UN General Assembly held in June 1998, Hong Kong amended its legislation to tighten control of potassium permanganate by upgrading it from Schedule 3 to Schedule 2 on the "Control Of Chemicals Ordinance." The new legislation requires a license from the Commissioner of Customs and Excise to import, export and manufacture potassium permanganate. In addition, the transshipment, removal, and storage of potassium permanganate are strictly controlled.

In response to another resolution passed by the UN Commission on Narcotic Drugs, Hong Kong plans to amend its legislation to tighten the control of norephedrine and expects to have amended legislation completed by mid-2000.

As of April 1, 1999, Hong Kong significantly tightened control of the following additional substances by moving them from Schedule 4 to Schedule 2 of the "Dangerous Drugs Ordinance": morphine, acetyldihydrocodeine, codeine, dihydrocodeine, ethylmorphine, nicocodine, norcodeine, pholcodine. In addition, amfepramone, cathine, etryptamine, mesocarb, and zipeprol were added to Schedule 1 of the Ordinance. Also in response to a recent decision passed by the UN Commission on Narcotic Drugs, in 2000 Hong Kong will tighten control of remifentanil and dihydroetorphine by including them in Schedule 1 of the "Dangerous Drugs Ordinance."

In April 1999 the government began to strengthen its anti-money-laundering regime by introducing legislation to impose a recording requirement for large cash transactions completed at remittance centers and through exchange agents. Remittance centers and exchange agents must record information on customers making transactions of HK$20,000(U.S. $2740) or more. The records must be retained for six years. The amendment is expected to go into effect in early 2000. The government has also introduced an amendment to strengthen the "Drug Trafficking (Recovery Of Proceeds) Ordinance" and "the Serious Crimes Ordinance." The amendment will improve the reporting requirement for suspected money-laundering transactions by reducing the threshold from reasonable grounds to "believe" to reasonable grounds to "suspect" money-laundering activities. The proposed amendment will also increase the penalties for money-laundering offences from a maximum of 14-years to 20-years imprisonment and for the failure to report suspicious transactions from 3-months to 12-months imprisonment.

During the second half of 1999, the government completed a six-month policy review of the "Drug Addicts Treatment and Rehabilitation Ordinance." As a result of the review, the government is drafting new legislation to bring drug treatment and rehabilitation centers under uniform control and to improve the quality of services.

Accomplishments. As noted above, Hong Kong tightened control over several precursor chemicals, including the cocaine precursor potassium permanganate, by moving them from Schedule 3 to Schedule 2 on the "Control Of Chemicals Ordinance" and introduced legislation to strengthen its anti-money-laundering laws. Hong Kong signed a Mutual Legal Assistance Agreement with Switzerland, and in May 1999 Hong Kong Customs and Excise entered into a cooperative agreement with the European Union.

Law Enforcement Efforts. During 1999, Hong Kong's law-enforcement community continued a focused, intelligence-based, operational approach. Resources were allocated in accordance with trends in drug manufacture, smuggling, trafficking, and consumption. Conforming to the government's "Enhanced Productivity Program," the Narcotics Bureau of the Hong Kong police force will be restructured in early 2000. The new structure will reflect the bureau's move towards intelligence-led investigations and will result in a greater allocation of resources to intelligence gathering and analysis. Liaison officers will be placed into one division, which will enhance communication with international law enforcement agencies, and will emphasize regional drug enforcement.

In the past two years, the Hong Kong police force has added 955 new officers and has spent over U.S. $3.7 million on adding to and upgrading its computer systems to improve the collation and dissemination of criminal intelligence. At the border and airport, additional police dogs have been deployed to assist in the detection of smuggled drugs. The number of police dogs increased from 124 to 133. Customs procured high-tech equipment, including ion scanners, x-ray checkers, mobile x-ray vans, and scanners, to detect microscopic traces of drugs on packages and to facilitate the efficient and effective inspection of baggage and cargo. High-tech equipment was also used in the air cargo clearance system for airport inspection, in the customs' control system for sea cargo inspection, and in the land boundary system for border checkpoints. A total of U.S. $64.1 million was budgeted for the procurement of high-tech equipment.

Heroin remains the drug of choice in Hong Kong. Heroin seizures through the end of October 1999 nearly equaled the total seized in calendar year 1998. As of October 31, a total of 205 kgs of heroin were seized. As of January 1999, the price of street-level heroin had risen dramatically, while the purity level had fallen, suggesting reduced supply. From January through October, Hong Kong narcotics officers seized 35.8 kilograms of cannabis, 16.7 kilograms of cocaine, and 98.1 kilograms of methamphetamine and arrested a total of 7,620 individuals for drug-related offenses.

Corruption. There is no known narcotics-related corruption among senior government or law-enforcement officials. Hong Kong has a comprehensive anti-corruption ordinance that is effectively enforced by an independent commission against corruption. The commission's record of enforcement efficiency is recognized worldwide.

Agreements And Treaties. In 1999 Hong Kong signed a Mutual Legal Assistance Agreement with Switzerland, and mutual legal assistance agreements with New Zealand, France, and Australia also came into force in 1999. Arrangements were completed to allow the U.S.-Hong Kong Mutual Legal Assistance Agreement to enter into force on January 20, 2000. Hong Kong also signed a "Surrender of Fugitive Offenders Agreement" with Sri Lanka, and transfer of sentenced persons agreements with the U.S. and another with Sri Lanka came into force in 1999. In May 1999, the Customs and Excise Department entered into a cooperative agreement with the European Union. The 1988 UN Drug Convention is applicable to Hong Kong.

Cultivation/Production. Hong Kong is not a producer of illicit drugs.

Drug Flow/Transit. Hong Kong officials believe that Hong Kong's role as a major drug flow/transit center continued to diminish in 1999. Seizures indicate that shipments of heroin and methamphetamine directly from Hong Kong to the international market seem to be few in number and of relatively small quantities, usually fewer than 10 kilograms. Although illicit narcotics transit through Hong Kong, the known volume of traffic has decreased significantly over the past few years. In addition, no coordinated effort or systematic approach to the shipment of drugs through Hong Kong's territory appears to be used; many seizures involved small quantities of narcotics carried by individual couriers. In 1999, there were no seizures in Hong Kong that appeared destined for the U.S. Hong Kong traffickers continue to control large portions of Southeast Asian narcotics traffic, however, arranging both the financing and shipment of narcotics and using various routes and methods throughout the region.

Domestic Programs. During 1999, Hong Kong's drug education and public awareness programs continued to focus on Hong Kong's youth and their parents. In March Hong Kong initiated a pilot program with several non-government organizations to conduct education talks at the primary school level. In addition, the government started the "Outstanding Anti-Drug Workers' Award."

In March Hong Kong initiated a review of its methadone treatment program to evaluate the program's effectiveness and to identify areas for improvement. In August the narcotics division began preparing the second three-year plan on drug treatment and rehabilitation services. The review will examine major developments in drug treatment and rehabilitation centers and will develop recommendations on improving the quality of the programs.

In 1999 Hong Kong announced that the U.S. $40 million "Beat Drugs Fund" set up in March 1996 awarded U.S. $2.4 million to 49 projects. Of that total, U.S. $1.8 million was awarded to preventive education and publicity projects and the balance was granted for treatment and rehabilitation services.

IV. U.S. Policy Initiatives And Programs.

Policy Initiatives. U.S. law-enforcement officials continue to conduct joint investigations with their Hong Kong counterparts to develop cases that can be prosecuted either in Hong Kong or in the U.S.

In October 1999 Hong Kong hosted the Second International Operational Meeting on potassium permanganate, which was co-sponsored by the U.S. Drug Enforcement Administration (DEA) and the Hong Kong Customs and Excise Department. Hong Kong sent a total of 12 law enforcement officials to the International Law Enforcement Academy (ILEA) in Bangkok to participate in two courses, one on clandestine laboratories and the other on precursor chemicals and methamphetamine investigations. In addition, 5 customs and excise officers attended a six-week ILEA supervisory criminal investigator course, which included instruction on regional drug enforcement. In December, local U.S. drug-enforcement officials and a criminal investigator from the U.S. Internal Revenue Service provided training to Hong Kong law-enforcement officials on money laundering investigative techniques. In September, one officer from the Hong Kong Customs and Excise Department attended the DEA-sponsored "operation jetway" training course.

Road Ahead. The U.S. Government encourages Hong Kong to continue playing an active role consistent with its international stature in combating narcotics and money laundering. The U.S. also encourages Hong Kong to strengthen the enforcement and implementation of existing laws and guidelines, especially regarding financial crimes and money laundering; to tighten business registration procedures to discourage "shell" companies, especially off-shore corporations; to introduce lower threshold reporting requirements for transactions at financial and banking institutions; to institute "structuring" provisions to counter

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Continuation of Southeast Asia and the Pacific

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