International Narcotics Control Strategy Report, 1997

Australia is not a significant exporter of illicit narcotics, nor a center for drug related money laundering. While Australia has the potential to be a transshipment point for Asian opiates to the US, there is little evidence that this is occurring to any significant extent. Australian law enforcement authorities have excellent working relationships with their US counterparts. In November 1997 Prime Minister, John Howard presented a new narcotics policy in which he pledged to "get tough on drugs."

Statistics from "The Australian Illicit Drug Report" and from the Department of Human Services and Health show that cannabis is the most widely used illicit drug, with approximately one-third of adults having used cannabis at some point in their lives. Although there is some importation of cannabis, the market is dominated by domestic production. Amphetamine continues to be the most commonly used illicit drug after cannabis. It is of major concern to law enforcement agencies in Australia in light of data suggesting that amphetamine users transition to heroin. Although heroin users make up a small percentage of the population, the use of heroin obviously concerns law enforcement authorities and health authorities. Heroin addiction is considered responsible for a large proportion of drug related crime and contributes to numerous social problems, not to speak of injuries and deaths related to overdosing. The main source of Australia's heroin continues to be Southeast Asia. The cocaine user population remains relatively small in Australia, but heroin and cocaine seizures and arrests have increased slightly over the past year. The use of LSD appears to retain some popularity in certain geographic regions and among particular groups, but the drug is not particularly prevalent compared to other drugs. "Ecstasy" continues to be popular among those involved in the "rave" and dance cultures, although there are some reports that "rave" parties are on the decline. "Rave" is a kind of intense dancing, on occasion to the point of exhaustion; it is an attraction at certain nightclubs all over the world. There are no reports of ecstasy manufacture in Australia. The majority of Australia's ecstasy comes from Europe and the United Kingdom. The distribution and use of the drug appears to be increasing in Malaysia and Indonesia, providing a likely trafficking route to Australia.

During 1997, debate over a proposal to establish heroin maintenance experiments with long-term addicts in several areas, including Canberra, attracted considerable public interest and media coverage. Ultimately, the Federal Government blocked the proposed project. But so called "harm reduction" policies continue to have their supporters, including support for de-criminalization of marijuana.

In November 1997, the Prime Minister issued a domestic policy statement entitled "Tough on Drugs". In his statement, the Prime Minister pledged Australian dollars 87.5 million over a three years period to fight the illegal drug trade. The Prime Minister characterized his plan as "an integrated and effective national effort to combat the menace of illicit drugs." The Prime Minister's statement reads, in part,

1) Attacking the drug barons spending $43.8 million to prevent illegal drugs entering Australia by more effective interception techniques.

2) Protecting our children spending $14 million to educate our children and the wider community about the extreme danger of drugs.

3) Rehabilitation and research spending $29.8 million to re-integrate drug users into the community and support frontline professionals such as GPS and hospital staff to adequately counsel users."

(Note: all the above figures are in Australian dollars, ($1 Australian = ca. $.65 US.)

Internationally, Australia continues to contribute to global, regional, and bilateral efforts to stem illicit drug trafficking and minimize the harmful effects of drug abuse. Australia is a significant donor and an active participant in international drug control fora such as the Commission on Narcotic Drugs and the Dublin Group.

Accomplishments: The Prime Minister has renewed the GOA commitment to antinarcotics programs. Three federal agencies and six state agencies devote considerable resources toward combatting the drug problem. The Australian Federal Police (AFP) and DEA (Drug Enforcement Administration) maintain representatives in each others' 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. The USG has no evidence the GOA facilitates the illicit production or distribution of illegal drugs, or engages in drug trafficking or the laundering of drug proceeds.

Agreements and Treaties: A Mutual Legal Assistance Treaty with the US was signed in 1997, and is awaiting advice and consent to ratification by the US Senate. A US-Australia Extradition Treaty is in effect. The US also has a Customs Mutual Assistance Agreement (CMAA) with Australia. 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. They also report increased use of boobytraps to protect areas of outdoor cultivation. The manufacturing of amphetamine and methamphetamine is increasing and there is some manufacture of small quantities of synthetic heroin known as "homebake." All of these illicit drug operations are targeted on the Australian domestic market and have no known effect on the US. Australia, Tasmania, specifically, is also a licit opium producer. The Australian Poppy Advisory and Control Board has instituted an excellent control regime to assure that there is no "leakage" from licit production to the illicit market. Australia is the third largest exporter of licit opium to the US after India and Turkey. Australia's exports of licit opium alkaloids to the United States market are restricted by a long-standing USG policy, called the "80-20 Rule" which requires that 80 per cent of licit opium bought by US pharmaceutical companies be purchased from the two "traditional" growers, India and Turkey. Australia has indicated interest in increasing its sales of licit opium to the US and the government has raised this issue regularly.

Drug Flow/Transit: According to DEA reporting, Australia continues to be an attractive target for Southeast Asian heroin trafficking organizations and South American cocaine trafficking organizations. However, there is little or no evidence of these drugs transiting Australia to the US

The primary USG goals remain the assessment of US-Australia trafficking trends and mutual assistance in gathering intelligence on drug trafficking groups and their effects on international markets. Cooperation between GOA and USG authorities is excellent, with the exchange of narcotics intelligence 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.

The Road Ahead: The US will continue to monitor transshipment issues in Australia, particularly those relating to trafficking trends between the US and Australia. The USG is also undertaking efforts to assist the GOA in dealing with the increasing problem of cocaine traffic.

Burma continues to be the world's largest source of illicit opium and heroin. Production declined slightly from 1996 levels. The 1997 crop estimates indicate there were 155,150 hectares under opium poppy cultivation which could yield up to a maximum of 2,365 metric tons of opium gum - enough to produce an estimated 197 metric tons of heroin and satisfy the US heroin market many times over. The Burmese government increased seizures of opium and heroin and destroyed more heroin refineries than in the past, and engaged in greater drug control cooperation with the USG and Thailand. Overall efforts, however, paled in comparison with the narcotics problem and continued to suffer from a lack of resources and political will. There was no discernible effort during the year to stop money laundering, suspected to be carried out on a massive scale. The government systematically encouraged leading drug traffickers to invest in infrastructure and other domestic projects.

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 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 free hand to continue their trade, although there are reports that the agreements provide for an end to the trade at some future date.

Among the top leaders of those ethnic groups believed by the USG to be involved in the heroin and/or amphetamine trade are: Sai Lin (Lin Mingxian) of the Eastern Shan State Army (ESSA); Yang Maoliang, Peng Jiasheng and Liu Goushi of the MNDAA; Pao Yuqiang, Li Zuru and Wei Xuekang of the United Wa State Army; Mahtu Naw of the Kachin Defense Army (KDA); Mong Sa La of the Monkoe Defense Army (MDA); and Yawd Serk of the Shan United Revolutionary Army (SURA), which was formerly allied with drug lord Chang Qifu's (Khun Sa's) Mong Tai Army. Chang Qifu disbanded his army in January 1996 in return for generous terms of surrender, which allow him to avoid criminal procedures. Reporting continues to suggest that Chang remains involved, at least indirectly, in the narcotics trade through his subordinates.

A number of ethnic groups announced opium free areas in 1997, but they did not offer details on how these objectives would be met. In the past, similar pledges have been unfulfilled. Toward the end of the year, there were reports of crop eradication in some of these areas.

There is reason to believe that money laundering in Burma and the return of narcotics profits laundered elsewhere is a significant factor in the overall Burmese economy, though 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 with it an alarming spread of the HIV/AIDS virus, especially in the ethnic minority areas that are the source of the drugs.

Burma provides over half of the world's supply of illicit opium and has done so for years. According to USG estimates, Burmese opium production has remained at high and stable levels for the past eight years, since doubling in 1989, the year after the State Law and Order Restoration Council (SLORC), now known as the State Peace and Development Council (SPDC) took power. This increase may be correlated with political accommodations the regime reached with several drug trafficking insurgent groups, and the regime's abandonment of effective eradication efforts. (As noted above, at the end of the year there were reports of renewed interest in eradication.) The US also ended its narcotics assistance in 1988, in response to massive human rights abuses and further disintegration of the rule of law.

Burma currently accounts for approximately 90 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 year, the GOB has increased its presence in this region, particularly the area formerly under the control of Chang Qifu. 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 counternarcotics interests in these areas are a secondary consideration. Moreover, these cease-fire agreements have had the practical effect of condoning money laundering, as the government encouraged these groups to invest in "legitimate" businesses.

In the past two years, as overt military challenges to Rangoon's authority from the ethnic groups have diminished 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. (The Wa, however, have not accepted a permanent GOB presence.) Perhaps at GOB urging, the MNDAA, the KDA, and the MDA in northern Shan State declared their intention to establish opium-free zones in territory under their control by the year 2000. Earlier in the year, ESSA leader Sai Lin had also declared an opium-free zone in the area known as Special Region-4 in northeastern Shan State. This region, however, has traditionally had low density opium cultivation. The Wa announced opium free zones in 1995.

The GOB, for its part, stated that it would support these 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. This information has been provided. In view of China's long border with the Wa area, the GOB asked China for assistance in curbing Wa trafficking.

Ethnic groups have made "opium free" pledges since 1989, but, with the exception of the Kachin, have shown no success in enforcing their stated intentions. In view of the extensive opium cultivation in northern Shan State, the area of greatest opium density, any reduction in cultivation would require considerable eradication, law enforcement and alternative development efforts by the authorities. Implementation of such a program would also require a spirit of cooperation between the government and ethnic groups. It is too early to assess these latest pledges.

Policy Initiatives. Burmese counternarcotics efforts improved during 1997, especially with regard to heroin and opium seizures as well as the destruction of heroin refineries. A quieter 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 Kokang area, in particular, is a major center of narcotics cultivation and refining. These efforts must be stepped up if they are to have a significant impact on the overall trafficking problem.

With support from DEA and US 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. To this end, they agreed in principle to establish a joint anti-drug task force in Tachilek, Burma, and Mae Sai, Thailand. This approach, which has been under consideration for several years, has the potential to permit coordinated enforcement operations in one of the most active trafficking areas in Southeast Asia.

The GOB also apprehended and rendered to Thailand, Li Yunchung, a former associate of Chang Qifu who had bribed his way out of a Thai jail and fled to Burma. Li had been awaiting extradition by the Thai to the United States on narcotics charges. Acting on intelligence provided by DEA through the US Embassy in Rangoon, Burmese authorities arrested Li in April and formally turned him over to Thai authorities in May. The GOB understood that the Thai would extradite Li to the United States. This was the first time the Burmese had returned to Thailand a high profile drug trafficker sought by the US.

The Burmese continued to refuse the rendition of drug lord Chang Qifu on the 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. Chang Qifu confirmed in a public interview his plans to fund construction of a new Rangoon-Mandalay highway valued at some $250 million; a Burmese cabinet member confirmed the accuracy of Chang's statement. 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 with the US due to standard international legal principles calling for punishment of traffickers and other international criminals. In addition, Chang Qifu reportedly remains involved in the drug trade through his subordinates, thereby violating the reported terms of the surrender agreement.

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 the living standards in the ethnic areas and providing viable economic alternatives to opium cultivation. Little effort had been made by the end of 1997 to link this plan, conceived in 1990, to measurable reductions in opium cultivation in the ethnic areas.

The GOB and UNDCP completed in late 1996 a 12-month pilot integrated rural development project in the Wa region initiated to take advantage of the United Wa State Army's unilateral decision announced in 1995 to establish five "opium poppy-free zones" in its area of control in order to bring about a gradual reduction of opium cultivation. The pilot project was designed to test the feasibility of a planned five-year, 15 million dollar rural development project aimed at opium income and crop substitution. In contrast to the 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 the provision of educational and health facilities in the Ho Tao and Mong Pawk districts of the Wa region.

Accomplishments. Overall, the Burmese drug control situation remained bleak during 1997. The Burmese effort to seize heroin and opium improved markedly in percentage terms during 1997, but, even so, the total seized was less than one per cent of Burma's estimated annual opium/heroin output. The combined police and military narcotics task forces seized a record 1401 kilos of heroin, a more than two-fold increase over 1996 seizures, which totaled 493 kilos. Seizures of opium gum rose to 7884 kilos, compared with 1300 kilos in 1996. The seizure of 5.04 million amphetamine tablets roughly equalled last year's totals; the two-year trend in seizures of precursor chemical, acetic anhydride, was up sharply, although 1997 seizures fell from the level in 1996. The authorities destroyed 33 heroin refineries during the year, compared with 11 the previous year. Most of the refineries were located using information provided by DEA from the US Embassy in Rangoon. In November, the authorities made the largest heroin seizure ever recorded in Burma - 297 kilos near Muse in northern Shan State on the Chinese border.

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, by the end of the year, these provisions had remained apparently unused as Burmese police and judicial officials had 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, which is not a sufficient explanation of the near total failure to address money laundering, which is believed to be carried out on a massive scale.

Formally, the Burmese government's 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. The CCDAC, which is under the 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 army personnel posted in outlying areas, are involved in the drug business. Army personnel wield considerable political clout locally, and their involvement in trafficking is a significant problem. In April, the authorities arrested 11 officers - including one lieutenant colonel who received a 25-year prison term - for colluding with drug traffickers in the operation of a heroin lab in northern Shan State. The Burmese have said that they would welcome information from others on corruption within their ranks.

The lack of a vigorous enforcement effort against money laundering also leaves Burma vulnerable to the growing influence of traffickers through the use of drug proceeds in legitimate business ventures. 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. It is believed that drug profits formed the seed capital for these otherwise legitimate enterprises.

Agreements and Treaties. Burma is a party to the 1961 Single Convention, the 1971 UN Convention on Psychotropic Substances and the 1988 UN Drug Convention. However, the Rangoon regime maintains its reservation on extradition of Burmese citizens to other countries. The United States does not have a mutual legal assistance treaty (MLAT) with Burma. It is the opinion of the US Government that a US-U.K. extradition treaty, which was accepted by the post-independence Burmese government in 1948, remains in force and is applicable for the US extradition of drug fugitives from Burma. The GOB continues to refuse to recognize the applicability of this treaty. In May, the GOB, with UNDCP, signed a six-nation (Burma, Cambodia, China, Laos, Thailand, Vietnam) memorandum of understanding on a sub-regional action plan aimed at controlling precursor chemicals and reducing illicit drug use in the highlands of Southeast Asia. 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 remains by far the world's largest producer of opium. Potential production decreased slightly from 1996 levels; opium cultivation declined an estimated 5 percent and production declined an estimated 8 percent. After cultivation increased by 40 percent and potential production doubled in 1989 following the SLORC coup, cultivation and production have remained at this high level over the ensuing eight years. Since the early 1990's the areas of most intense cultivation have gradually shifted from southern to northern Shan State. Although cultivation has expanded in areas under government control, the bulk of the opium crop has been in areas controlled by ethnic minority groups such as the United Wa State Army, the Myanmar National Democratic Alliance Army (Kokang Chinese), the Mongko Defense Army (Kachin), the Kachin Defense Army, and the Palaung National Organization, with which the Burmese military junta has sought cease-fires since 1989. In the last two years, however, the GOB has begun to increase its presence in areas previously under ethnic control. Government eradication efforts increased at the end of 1997 with the launching of a campaign in Northern Shan State. In addition, the GOB announced plans to conduct a baseline survey of opium cultivation from January to March 1998, aimed at determining actual opium production (as opposed to potential production the USG measures) throughout the country.

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 narco-insurgencies. As a result of increased deployment of troops in northern Shan State and more aggressive law enforcement efforts, the GOB destroyed a record, but still small, number of labs. A growing amount of methamphetamines 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. Heroin and methamphetamines produced by Burma's ethnic groups are trafficked largely through unmarked transit routes crossing the porous Chinese and Thai borders, and to a lesser extent the Indian, Bangladesh and Lao borders, as well as 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 and other countries is on the increase.

Traffickers continued a trend noted last year of moving 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 continued to grow, but were used to a lesser extent. Acetic anhydride, an essential chemical in the production of heroin, is imported primarily from China, as is ephedrine, the principal chemical ingredient of methamphetamines.

Demand Reduction. Drug abuse is a growing problem in Burma. Official estimates put the drug addicted population at approximately 60,000, but UNDCP and NGOs working in the health sector estimate the actual population at 400,000-500,000. The GOB announced plans to undertake a nationwide baseline survey of drug abuse in early 1998, which is designed to provide a more accurate census of the addict population. Heroin is cheap in Burma, 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. In November, the GOB gave Cabinet approval to a $300,000 UNDCP-funded demand reduction project to be implemented by the NGO, "World Concern", in Kachin State.

Direct material USG counternarcotics aid to Burma has remained suspended since 1988, when the Burmese military brutally repressed the pro-democracy movement. USG-supported initiatives such as an aerial eradication program have not been carried out since 1988. However, the USG funds, under congressional authority, a two-year, $500,000 crop substitution project being carried out by the NGO "Committee of 101 Veterans Inc." in the Kutkai area of northern Shan State. The aim of the project is to increase farm incomes by improving yields of corn and other crops so that farmers have economic alternatives to opium cultivation. Preliminary results of the project's first harvest indicate the feasibility of increasing corn yields by 3-5 times.

Currently, the USG engages the Burmese government on counternarcotics on a limited level. DEA, through the US Embassy in Rangoon, shares drug-related intelligence with the GOB and conducts joint drug enforcement investigations with Burmese counternarcotics authorities. Various US agencies have joined Burmese counterparts in conducting opium yield surveys in the mountainous regions of the Shan State in 1993, 1995, and 1997. Results from the surveys give both governments a more accurate understanding of the scope and magnitude of Burma's opium crop.

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

prosecute drug trafficking organizations and their leaders, such as Chang Qifu, 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 render them through third countries, as was done in the Li Yunchung case;
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 money laundering legislation;
provide strong support to multilateral drug control projects in the Shan State.

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 US concerns over Burma's commitment to effective counternarcotics measures, human rights, and political reform. DEA's liaison with Burmese police and military--conducted mainly through DEA's office in Rangoon--will continue with a focus on providing intelligence on enforcement targets and coordinating investigations of international drug trafficking groups. During the year, the USG encouraged contacts between Burmese and Thai law enforcement agencies and facilitated joint anti-drug operations.

The Road Ahead. Based on experience in dealing with large-scale 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 significantly drug production and trafficking. The USG is prepared to consider resuming appropriate assistance contingent upon the GOB's unambiguous demonstration of a strong commitment to counternarcotics, rule of law, punishment of traffickers and major trafficking organizations (including asset forfeiture and seizure), countercorruption, eradication of opium cultivation, destruction of drug processing laboratories, enforcement of money laundering legislation, and respect for human rights.

Cambodia is used as a transit point for Southeast Asian heroin and is a source of marijuana for export. It experienced violent internal conflict in early July of 1997 between military forces loyal to its two major parties brought together in a coalition government. First Prime Minister Prince Ranariddh fled the country and a number of his political supporters were killed. USG assistance programs for other than humanitarian purposes have been suspended.

Prior to the outbreak of fighting, Cambodia had taken steps toward effective control of drug trafficking and transiting in Cambodia. The National Assembly had passed a comprehensive counternarcotics law on December 3, 1996. A new National Anti-Drug Unit, formed in November 1996, was to have been the model for development of similar units throughout Cambodia. This unit was the focus of USG training and equipment assistance, which has been suspended since July.

Following the July 5-6 conflict, remnants of the old anti-narcotics police unit have been restored and reorganized with new leadership. It is, nonetheless, not unlikely that drug traffickers may already be taking advantage of instability and using Cambodia with greater frequency as a transit point for illicit narcotics.

Prior to the outbreak of armed conflict in July between the coalition parties, high-level political bickering and finger-pointing over narcotics policy hampered law enforcement efforts. More recently, the combination of the drug law, a lower level of political in-fighting and the apparent support of high-level government officials appears to have energized enforcement efforts.

Cambodia is not yet a party to the 1988 UN Drug Convention or any of the other UN narcotic conventions.

Cambodia shares borders with Thailand, Laos and Vietnam. Cambodia faces an active, but diminished, Khmer Rouge insurgency and fighting by resistance forces loyal to ousted First Prime Minister Prince Ranariddh on its northern and western borders. Laws and legal institutions, ignored following the July fighting, now appear to be functioning again. Cambodia has approximately 30 banks, but the National Bank only recently received legal authority to regulate them. The Royal Cambodian Government (RCG), recovering from over 20 years of warfare and internal strife, is heavily dependent on external assistance, and most ministries, including those charged with police functions, lack sufficient funds to cover even salaries. The lack of funds for training and operations makes Cambodia an attractive target for drug traffickers and money launderers operating in Southeast Asia. Solid information about the full extent of money laundering in Cambodia is still lacking. The size of reported seizures, coupled with anecdotal evidence, lends credence to other information suggesting that Cambodia is a viable trafficking route and appears to be emerging as a magnet for ethnic Chinese groups involved in drug trafficking, money laundering, illegal gambling dens, counterfeiting US and other currencies, and alien smuggling.

Marijuana is produced in the northern, central and southeast provinces, in large part for export. There is no accurate estimate of the amount of land committed to marijuana production. Reportedly over the past year, the importation and sale and consumption of the drug "ecstasy" has become a problem, notably in the urban areas such as Phnom Penh. International trafficking in this drug is also growing rapidly.

Cambodian enforcement authorities focus their efforts principally on heroin trafficking, the eradication of domestic marijuana, and trafficking in "ecstasy" and methamphetamine. In 1997 the presence of Chinese heroin trafficking networks in Cambodia seemed to expand, while the presence of West African groups seemed to diminish. Target countries for the trafficking include the United States, Canada, Hong Kong and Europe.

Policy Initiatives. In 1996, Cambodia's constitutional monarch signed a decree establishing a National Counternarcotics Authority whose chairmen are Cambodia's two Prime Ministers and whose Vice-Chairman is the Minister of Justice. This authority was to have become operational in mid-December 1997. Additionally, the Ministry of Justice, with the assistance of a USG-funded advisor, concluded a draft of anti-narcotics legislation which was passed by the Parliament on December 3, 1996. The legislation contains a provision outlawing the laundering of drug proceeds. The legislation commits the RCG to becoming a party to the 1961 Single Convention on Narcotics Drugs, the 1971 Convention on Psychotropic Substances and the 1988 UN Drug Convention.

Accomplishments/Law Enforcement Efforts. During 1997, the RCG adopted a more aggressive enforcement posture. Anti-narcotics enforcement agencies appear to have conducted increasingly thorough investigations during the year, targeting trafficking organizations rather than individuals. They have shared intelligence and have responded promptly to requests for assistance. Active involvement of the police, whose raids on night clubs and other known venues of the sale and consumption of designer drugs, has increased in frequency. Elimination of the sale, transport and financing of narcotics remained a focus of anti-narcotics activities by the authorities. Asset seizure in drug cases is not widely practiced in Cambodia, although the seizure of vehicles is routine. Arrests of narcotics traffickers were reported frequently in Phnom Penh and other provincial areas where nightly patrols of discotheques netted police 11,517 amphetamine ("ecstasy") tablets and other drugs and drug paraphernalia. Typically the drugs were brought into Cambodia from abroad. These efforts have been undertaken despite the fact that enforcement agencies often lack even minimal resources. National and municipal police charged with anti-narcotics law enforcement activities generally lack basic training and access to basic law enforcement techniques and drug enforcement measures, including drug identification. Drug enforcement units still have no secure communications equipment or facilities.

Corruption. On several occasions in 1997, military and police personnel were arrested for involvement in narcotics-related activities. There is some indication that an effort is being made to identify and target corrupt military officials involved in drug trafficking. Unproven, and apparently uninvestigated, allegations of corruption at high levels in the government remain a cause for concern and continue to tarnish Cambodia's international standing.

Agreements and Treaties. Cambodia is not a party to any of the UN narcotics conventions at this time. Extradition cooperation with the United States in narcotics-related cases is not possible, as there is no formal extradition relationship between the United States and Cambodia. However, Cambodia has assisted the US this year, and in the past, in deportation requests. Mutual legal assistance between Cambodia and the United States Drug Enforcement Administration (DEA), the United States Customs Service and other USG agencies is generally good.

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

Policy Initiatives. USG policy initiatives prior to July of 1997 included funding training and equipment for counternarcotics enforcement units, a drug analysis laboratory (not completed at the time conflict broke out), and offering support for an adviser to the Ministry of Justice to assist with passage of the new drug law. A law enforcement coordinator to be assigned to the Embassy was also under consideration when the July conflict broke out. The suspension of all but humanitarian assistance has halted USG counternarcotics- and law enforcement-related assistance efforts.

Bilateral Cooperation/The Road Ahead. The RCG has stated that it continues to welcome bilateral cooperation in training by US authorities such as DEA and other elements of the USG. DEA personnel had visited Cambodia monthly to consult with Cambodian anti-narcotics forces and provide customized training until the outbreak of the July 5-6 conflict, which led to the cutoff of US bilateral assistance. Political in-fighting and the finger-pointing accompanying it, however, as well as attempts by the various parties to use allegations about narcotics involvement on the part of opponents to draw USG personnel into appearing to support one or another faction, vitiated the value of those consultations and training efforts. In addition, little has been done by the RCG to assuage international concerns about possible high-level narcotics-related corruption, with the result that Cambodia's commitment to counternarcotics efforts is, today, open to serious question.

China intensified its efforts to combat drugs in 1997, declaring a nation-wide anti-drug campaign in April. As part of the campaign, China committed more resources to counternarcotics programs, focusing special attention on anti-drug education. The campaign resulted in greater law enforcement vigilance and increased seizures of opium, heroin, and precursor chemicals. The rise in the amount of chemicals seized was particularly dramatic, as improved monitoring led to a four-fold increase over the amount seized in 1996. The Chinese Government also took steps to strengthen anti-drug legislation, and for the first time specifically identified money laundering as a crime. China also engaged in closer cooperation with US law enforcement agencies. China transferred a Burmese national to US custody in April to stand trial for drug trafficking, agreed with the United States to establish reciprocal drug enforcement offices in each other's capitals, and agreed to establish a direct e-mail link with the Drug Enforcement Administration (DEA) to facilitate the exchange of information on drug cases. China is a party to the 1988 UN Drug Convention as well as to the 1961, 1971 and 1975 Conventions.

China is one of the most prominent drug transshipment countries in Asia. As a result of China's close proximity to the Golden Triangle, drug traffickers have found that China is a convenient path by which to move narcotics, particularly heroin, to destinations in the West. Most of the heroin, perhaps as much as 90 percent, comes from Burma, which shares a 2000-kilometer border with southwestern China. Drug traffickers from other Southeast Asian nations, such as Vietnam and Laos, have also used China as a transit route, albeit with less frequency.

Chinese police report that they have found only a few drug laboratories or processing facilities. None of these produced large quantities of drugs nor did they have the equipment to produce advanced, synthetic drugs. Chinese laws stipulate that drug trafficking is a crime punishable by death.

Chinese officials have stated that they have yet to uncover a major case of money laundering related to drug trafficking. The country's loose banking system, however, makes it a prime target for possible exploitation by drug criminals. As a reflection of the seriousness with which the Chinese Government regards the potential for money laundering, on October 1 China implemented a new law specifically addressing this crime.

China is a major producer of precursor chemicals. The ephedra plant, from which the precursor ephedrine is made, grows in the wild in northern China. China also legally exports the drug precursor potassium permanganate, which is used to make cocaine. In the past few years, China has become one of the most vigilant monitors of precursor chemical exports, and other countries frequently seek out China's advice on this issue at international conferences. China monitors all 22 of the chemicals on the UN's watch list and one province, Yunnan, even goes further and monitors 28 chemicals. One indication of increased Chinese vigilance toward precursor chemical exportation was the seizure this year of 300 metric tons of precursor chemicals intended for illegal shipment overseas, a four-fold increase over the amount seized in 1996.

Social and economic changes in China in recent years have resulted in a sharp increase in domestic drug consumption. Chinese media reported that more than 70 percent of the counties and municipalities in China had discovered drug abuse in their communities. The most commonly used drugs were heroin, opium, stimulants and depressants. Chinese law enforcement authorities were alarmed this year by the discovery of the drug "ecstasy" in some large cities. Police reported eight cases nationwide. In each case, the synthetic drug had been smuggled into China from Hong Kong or Burma.

China has met or is actively seeking to meet the goals and objectives of the 1988 UN Drug Convention. China has been an active participant in all UNDCP conferences and has proposed programs to assist certain countries combating drugs. China's counternarcotics efforts are coordinated by a coalition of 18 Chinese Government bodies called the National Narcotics Control Commission. This group directs policy, enforcement, research and international cooperation. The law enforcement side of China's drug policy is the responsibility of the Ministry of Public Security--China's police force. Upon the reversion of Hong Kong to the sovereignty of the PRC in July, the PRC made the 1988 UN Drug Convention applicable to Hong Kong for the first time.

Policy Initiatives. The Chinese Government implemented a nationwide anti-drug campaign in April 1997, resulting in a greater number of arrests and an increased amount of drugs seized. This campaign included media and education efforts as well as law enforcement vigilance. The central government increased its counternarcotics budget to 34 million RMB (about 4.2 million USD) from about 30 million RMB (about 3.8 million USD) the previous year. Each province also contributed additional funds to combat drugs. Yunnan Province, the area of China hit hardest by the drug trade, earmarked 10 million RMB (about 1.25 million USD) for drug control programs within Yunnan. In the past, Chinese counternarcotics efforts were focused on controlling drugs via law enforcement programs. In 1997, the Chinese tried to strike a better balance in its approach to counternarcotics by establishing prevention education programs. In this vein, the government used labor associations, women's groups, and youth groups to spread information about the danger of drug use.

In March, China amended its criminal law to include more than 250 new statutes, including several having to do with drug offenses. In addition to specifically noting that money laundering was now a crime, the law also added methamphetamine trafficking to the list of specific drug offenses punishable by severe penalties. Heroin and opium trafficking were specified in previous Chinese laws. China also specified that illegal trade in precursor chemicals would be punished severely.

Accomplishments. The anti-drug campaign was a principal reason for the across-the-board increase in the amount of drugs seized by police. The most dramatic results were in the area of precursor chemicals. In the first ten months of 1997, police seized more than 300 metric tons of illegally-exported chemicals, four times the amount during the same period of 1996. This reflected increased efforts by Chinese police to monitor more effectively the production of chemicals. Police seizures of heroin and opium also both increased by about 15 percent.

Law Enforcement Efforts. While there was no single case in 1997 as large as the 1996 600-kilogram heroin seizure in Guangdong Province, police reported that in most areas of China, there were increases in the amount of drugs seized and the number of arrests. As a result of China's nationwide anti-drug campaign, the media frequently focused on successful law enforcement operations and significant seizures. The national budget for counternarcotics programs grew by about 15 percent over the previous year as a result of the anti-drug campaign.

Corruption. Corruption in China is becoming increasingly pervasive. Rapidly changing economic conditions coupled with economic liberalization have spawned a climate conducive to corruption and greed. Inconsistent implementation of anti-corruption laws has also hampered efforts to control graft. The Chinese Government, however, has passed specific laws dealing with officials found guilty of the use, manufacture, or delivery of narcotics, and there is no evidence that senior government officials are involved in the drug trade. China's policy strictly forbids any drug trafficking and high-level officials have rigorously attacked the spread of the drug trade in Chinese society. Nonetheless, the juxtaposition of low-paid law enforcement and other government personnel with the lucrative drug business, particularly in those areas along drug transit routes, creates the potential for corruption.

Agreements and Treaties. China is a party to the 1988 UN Drug Convention, as well as the 1961 Single Convention, 1972 Protocol, and the 1971 Convention on Psychotropic Substances. China has made a strong push to sign mutual legal assistance agreements and extradition treaties with foreign countries. It now has signed more than 30 such agreements with 24 countries. In 1997, China signed a mutual legal assistance agreement with India, with special attention to narcotics trafficking. China and the United States continue to discuss a customs mutual assistance agreement. In October 1997, in a Joint Statement at the Presidential Summit, China agreed to establish a Joint Liaison Group with the US for law enforcement cooperation in specific areas, including narcotics trafficking, and to begin consultations aimed at concluding a mutual legal assistance agreement.

Cultivation/Production. There is limited opium 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. China is also the producer of precursor chemicals used for the manufacture of both legal and illegal drugs. Chinese police closely monitor all precursor chemicals on the UNDCP watch list, especially ephedrine and potassium permanganate, which are produced and exported in large quantities. China also appears to be the source of "Black Pearls," round, black pills which contain varying amounts of the internationally controlled psychotropic benzodiazepine, diazepam. The pills are sold as Chinese herbal medicine and are believed to be reaching the US via Hong Kong.

Drug Flow/Transit. Heroin from the Golden Triangle transits China in quantities which USG experts believe significantly affect the United States. Chinese officials note that more than 90 percent of the heroin that flows through China comes from Burma. The 2000-kilometer border that China shares with Burma is considered China's friendliest. In recent years, as Chinese officials have encouraged trade with Burma, this porous border area has become the principal entry point for the vast majority of drugs entering China. The Chinese Government has urged Burmese officials to curtail the drug flow. In July, Vice Minister of Public Security Bai Jingfu visited Burma and pledged cooperation in helping the Burmese fight narcotics production. China has also voiced its support for international programs aimed at weaning Burmese farmers away from drug cultivation.

Domestic Programs. China has begun to institute anti-drug education programs in its school system following recognition that a large portion of drug users are juveniles. The government also tried to strengthen drug awareness by disseminating information via the media. In 1997, the Chinese press frequently featured stories on drug prevention. China has also created more drug treatment and rehabilitation centers. There are now more than 610 such facilities in the country. There are also some 75 drug treatment centers at "re-education through labor" facilities. The Ministry of Health pursues the integration of customary detoxification methods with traditional medicines, acupuncture, and other Chinese-developed treatments. It has also sought assistance from foreign countries in developing rehabilitation programs. The most common method of quitting drugs, however, is still "cold turkey." Anecdotal evidence suggests that the official figure of 520,000 addicts significantly underestimates the magnitude of drug abuse in China. The Chinese Government has not revised its 1995 figure on the number of registered drug addicts in the country. Officials say that the number will likely be adjusted in 1998. Chinese health officials acknowledge that most drug abusers do not seek treatment and are not discovered by law enforcement officials.

Policy Initiatives. The US Government continues to: 1) seek a closer dialogue with China on the international and regional dimensions of the narcotics problem; 2) encourage the exchange of information with Chinese counternarcotics officials on international trafficking networks and narcotics-related cases, with the aim of increasing our mutual interdiction capacity; and 3) encourage regional cooperation and counternarcotics projects.

Bilateral Cooperation. Bilateral drug enforcement cooperation improved in 1997. In April, the Chinese Government agreed to a USG request to transfer the Burmese drug fugitive Li Chia-cheng, who had been detained in Yunnan Province, to the United States to stand trial. During the October Summit between Presidents Clinton and Jiang, the United States and China agreed to open reciprocal drug enforcement offices in each other's capitals. This should further enhance information sharing and law enforcement cooperation between the two countries. China has also agreed to establish a real-time e-mail link with Washington to exchange information more rapidly on drug trafficking and traffickers.

In 1997, Chinese officials continued to participate in INL- or DEA- funded seminars and training programs. In August, China hosted two DEA seminars on chemical control. China also sent law enforcement officials to the United States to take part in airport interdiction training programs. In 1997, working-level Chinese law enforcement officials continued to exchange information on international drug trafficking cases with USG law enforcement officials.

The Road Ahead. With the October agreement to establish reciprocal drug enforcement offices, further close cooperation is expected between the United States and China in 1998. The October 1997 Presidential Summit also produced agreement to establish a joint liaison group on law enforcement and specifically included narcotics trafficking as one of the issues to be addressed. U.S-Chinese adherence to these agreements will send a strong signal about mutual commitment to resisting the inroads the drug trade and transnational criminal organizations have made in both Chinese and American societies.

The Hong Kong Special Administrative Region (HKSAR) continues to focus its attention on both money laundering and the transshipment of drugs. In 1997, Hong Kong conducted an interagency review of all laws and practices related to money laundering, which resulted in strengthened money laundering guidelines for Hong Kong financial institutions, securities firms, and the insurance sector. The reversion of Hong Kong to the sovereignty of the People's Republic of China on July 1, 1997, necessitated a number of actions to establish a new framework, both domestic and international, to address law enforcement cooperation. The HKSAR passed enabling legislation to implement extradition and mutual legal assistance agreements with other countries. The US- Hong Kong Extradition Agreement entered into force in January 1998. The new US-Hong Kong Mutual Legal Assistance Agreement is awaiting Senate action. With Hong Kong's reversion to Chinese sovereignty, the 1988 United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances has for the first time been made applicable to Hong Kong.

Hong Kong's role as a major financial center makes it vulnerable to the illicit use of its financial institutions for laundering drug-related proceeds. Similarly, Hong Kong's geographical location and its large and active port make possible the illegal transshipment of containerized narcotics to the US and other markets.

Policy Initiatives. Key initiatives undertaken by the Hong Kong SAR in 1997 included the passage of several pieces of enabling legislation, which laid the groundwork for post-reversion law enforcement cooperation with other countries on extraditions (the Fugitive Offenders Ordinance) and criminal investigations (the Mutual Legal Assistance in Criminal Matters Ordinance). Hong Kong also enacted the 1997 Drug Trafficking Order, which allows for the enforcement of confiscation orders made in countries that are signatories to the 1988 UN Drug Convention and is designed to enhance Hong Kong's ability to recover the proceeds of drug trafficking. In addition, Hong Kong amended the Dangerous Drugs Ordinance, providing for the imposition of heavier sentences for adults who exploit persons under the age of 18 in illegal drugs trade.

Hong Kong made further progress with the anti-drug initiatives which were adopted during the local "summit" meetings on drugs held in 1995 and 1996. A total of 125 initiatives have been put forward in the course of the two summits, and 118 of these initiatives--95 percent--have been met.

Hong Kong also conducted a review in 1997 of its "Beat Drugs Fund," which was established to fund counternarcotics initiatives by voluntary agencies. This review resulted in the tightening of the vetting mechanism for applications, a decision to provide briefing sessions for applicants, and the establishment of a monitoring mechanism to ensure that grants are used for their intended purposes. Hong Kong is also reviewing the Drug Addicts Treatment and Rehabilitation Ordinance, which oversees the establishment of centers for treatment and rehabilitation of drug abusers.

As part of its efforts to meet the goals and objectives of the 1988 UN Drug Convention, Hong Kong amended Schedules I and II of the Control of Chemicals Ordinance to place the salts of 17 chemicals under licensing control. Also as part of its precursor chemical control efforts, Hong Kong follows the recommendations in the 1988 Convention for issuing pre-export notifications to destination countries of precursor chemical shipments so that their international movements can be monitored for diversion.

Accomplishments. In 1997, Hong Kong stopped three suspicious chemical shipments, a success that was noted in reports issued by the International Narcotics Control Board.

Law Enforcement Efforts. Hong Kong has over 900 law enforcement officers in the Customs and Excise Department and police force dedicated to full-time drug enforcement. No major restructuring of these personnel took place during 1997. The Police Narcotics Bureau has set up specific teams for liaison with counterparts in different regions of the world and teams which are specifically tasked to concentrate on a particular drug, such as the drug "ecstasy". Due to the increased popularity and use of "ecstasy" among Hong Kong's youth, Hong Kong authorities stepped up their law enforcement measures, resulting in a significant increase in tablet seizures. Close cooperation between Hong Kong law enforcement agencies and the Public Security Bureau of Guangdong Province resulted in a substantial quantity of heroin seized in the mainland which would otherwise have entered Hong Kong. Through October 1997, Hong Kong narcotics officers had seized 157.9 kilograms of heroin, 1.456 kilograms of raw opium, 2.494 kilograms of prepared opium, 106 kilograms of cannabis, 32 kilograms of cocaine, 62.7 kilograms of "ice," and 43,064 methamphetamine tablets. Through November, 9,525 persons were convicted of drug-related offenses.

Corruption. There is no known narcotics-related corruption among senior government or law enforcement officials in Hong Kong. Hong Kong has a comprehensive Anti-Corruption Ordinance that is effectively enforced by an Independent Commission Against Corruption that reports directly to the Chief Executive.

Agreements and Treaties. A network of international agreements helps Hong Kong achieve its counternarcotics goals. At present, Hong Kong's Customs and Excise Department has entered into cooperative arrangements with customs authorities in the United States, the United Kingdom, Canada, Australia, New Zealand, Belgium, France, India, and Korea. Hong Kong has signed bilateral mutual legal assistance agreements with the United States, Australia, and France, and has initialled agreements with Switzerland, New Zealand, and the Philippines. Extradition agreements have been signed with the United States, Australia, the Netherlands, Canada, Malaysia, Indonesia, India, the Philippines, Singapore, and the United Kingdom and one has been initialled with New Zealand.

The US-Hong Kong Extradition Agreement--signed by both parties on December 20, 1996--was ratified by the US in November 1997 and came into force in January 1998. The bilateral Mutual Legal Assistance Agreement was signed on April 15, 1997 and awaits advice and consent to ratification by the US Senate.

Hong Kong continues to maintain close links with the United Nations, the World Health Organization, the Financial Action Task Force, Interpol, and the World Customs Organization. Hong Kong has welcomed the second review of its system by the Financial Action Task Force, which will take place in the spring of 1998. As part of the preparations for this exchange, Hong Kong has carefully reviewed its existing body of narcotics-related laws and practices.

Drug Flow/Transit. US counternarcotics officials believe that Hong Kong traffickers control large portions of Southeast Asian narcotics traffic, arranging both the financing and shipment of narcotics through Asian ports, including Hong Kong. The bulk of heroin seized in Hong Kong in 1997, however, appeared destined for the local market. In 1997, there were no heroin seizures in Hong Kong that appeared destined for the US market and no major seizures in the US either originated or transitted Hong Kong.

There are signs that the direct importation of cocaine by Hong Kong traffickers from South America may be on the rise; through October, Hong Kong authorities seized 32 kilograms of cocaine, double the 15.8 kilograms seized in 1996. Most of the couriers arrested at Hong Kong's airport continue to be from Latin America.

Hong Kong is a source/transshipment point for precursor chemicals such as ephedrine and pseudoephedrine, one of the precursor chemicals used in the production of methamphetamines. There are numerous chemical supply outlets in Hong Kong capable of supplying multi-ton quantities of these chemicals.

Domestic Programs. Hong Kong has in place an active preventive public education program designed to discourage drug use, especially among the young. Part of the annual "Beat Drugs Fund" allocation goes to preventive education. Of the 1997 USD 1.5 million allotment, approximately USD 350,000 was allocated for preventive education and publicity projects; an additional USD 1.17 million went towards treatment and rehabilitation services.

Hong Kong's anti-drug preventive education and publicity programs in 1997 included efforts to:

educate young persons that there is no difference between "hard" and "soft" drugs in terms of harmful effects, and to better equip them with refusal skills;

alert parents to the importance of strengthening parent- child relationships and the role that they can play to steer their children away from drugs; and encourage people, particularly younger people, to adopt a drug-free life style, and to point out that whatever their problems may be, there are alternatives to drugs.

In the first ten months of 1997, a special team within the Narcotics Division visited over 330 primary and secondary schools and technical institutes to provide preventive education talks that reached over 56,000 students. The Education Department supplements these talks by involving parents and students in anti-drug projects; in February, Education Department officials hosted an international conference on drug education in schools. Three new public service announcements were broadcast to promote an anti-drug culture among young people. In addition, 23 district anti-drug campaigns were organized by district "Fight Crime" committees.

US Policy Initiatives. The USG stresses joint investigations with Hong Kong law enforcement officials to develop prosecutable cases--either in Hong Kong or in the US-- against major Hong Kong-based traffickers. In the coming year, US Drug Enforcement Administration (DEA) personnel will assist the Hong Kong Customs and Excise Department with the further development of Hong Kong's chemical control program and work with Hong Kong to identify and monitor suspicious container shipments as part of a continuing effort to maintain the high degree of support in the area of precursor chemical control enforcement, monitoring, and legislation. USG officials will continue to encourage Hong Kong authorities to strengthen their laws governing money laundering and asset forfeiture.

Bilateral Cooperation. Hong Kong and USG investigators cooperated on several international narcotics investigations in 1997, resulting in a number of arrests and drug seizures. In two drug-related financial investigations, the Hong Kong Customs and Excise Department facilitated the forfeiture of USD 1.8 million and the Hong Kong Police provided assistance which led to the restraining of USD 2.1 million in Hong Kong.

In August, US, Hong Kong, and Mexican authorities coordinated a controlled delivery to Mexico of approximately 150 kilograms of pseudoephedrine which originated in China. Mexican authorities seized the shipment, and the investigation is continuing.

Hong Kong Customs and Excise authorities provided two instructors to assist DEA's diversion training team in conducting two one-week seminars in China. Hong Kong Customs and Excise and Hong Kong Police Narcotics Bureau officials accompanied US investigators to the annual Asian Organized Crime Conference in Florida and to the International Crime Conference in Hawaii. DEA sponsored several Hong Kong Customs and Excise officials attending international chemical control conferences in Prague, Vienna, and Lisbon. Local DEA officers continue to provide monthly briefings at the Hong Kong Police Command School.

The Road Ahead. The USG will continue to encourage Hong Kong to play an active role on narcotics and money laundering issues consistent with its international stature. In practical terms, this means: 1) improving the enforcement and implementation of existing laws and guidelines, especially regarding money changers and remittance agents; 2) increasing police funding and staffing for the aforementioned, as the police are now tasked with this function; 3) enhancing the legal framework to include tighter company registration procedures to discourage "shell" companies (especially off-shore corporations); 4) requiring reporting of transactions exceeding specified amounts and putting in place "structuring" provisions to counter evasion efforts; and 5) establishing and enforcing currency entry/exit reporting requirements. The US will also continue its emphasis on the chemical control program, in particular, regarding precursor chemicals.

While Indonesia is not a major producer of narcotics or a narcotics-derived money laundering center, it is increasingly used as a transit point for Southeast Asian heroin destined for Australia, the United States, and Europe. While drug shipments via Indonesia do not currently appear to affect the US significantly, Indonesia's attractiveness to drug traffickers has grown as interdiction efforts in the rest of the region have become more sophisticated and more effective, while border controls in Indonesia have remained weak. Increases in tourism and international trade, with the corresponding growth of air and shipping traffic through Indonesia, also contribute to this trend. Indonesia's criminal code does not include controls on money laundering. These factors, along with pervasive corruption and lack of professionalism among police and customs officials, impede law enforcement efforts. Indonesian law enforcement authorities have a good working relationship with the United States Drug Enforcement Administration (DEA), the United States Customs Service and the State Department Bureau of Diplomatic Security's regional security officer. In 1997, the Indonesian Parliament ratified the 1988 UN Drug Convention and also passed new anti-narcotics laws which conform to international norms established by that Convention.

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

In recent years Indonesian authorities have focused increasingly on the elimination of consumption of and trafficking in "ecstasy". Official anti-narcotics concern over designer drugs, notably "ecstasy," has eclipsed government concern with more traditional narcotics (marijuana). 1997 also saw the continued expansion of heroin trafficking networks through Indonesia with Southeast Asian, South Asian and Nigerian connections. Target countries included the United States, Australia and West European states. In November 1997, police in Jakarta shot to death a Nigerian allegedly involved in the smuggling of six kilograms of heroin. According to the Indonesian police, a total of seven other Nigerians were arrested in November for heroin smuggling. The press reported numerous other arrests for heroin trafficking during the year, an indication of Indonesia's growing role as a heroin trafficking center. Arrests in neighboring countries of couriers bound for Jakarta provided further evidence of the increasing utilization of Indonesia as a transit point for heroin moving westward.

Policy Initiatives. In January 1997, the Indonesian Parliament ratified the 1988 UN Drug Convention. The Indonesian Parliament has also approved legislation outlawing psychotropic drugs, including "ecstasy," and providing for penalties of up to seven years imprisonment for marijuana possession and a maximum of 20 years in jail for marijuana trafficking. In September, the Parliament passed new anti-drug legislation which replaced the previous 1976 law. The new legislation conforms to the criteria set forth in the 1988 UN Drug Convention.

Accomplishments/Law Enforcement Efforts. During 1997, police continued frequent raids on night clubs and other likely venues for the sale and consumption of designer drugs and other illicit narcotics. Elimination of the sale, transport and financing of narcotics remained a stated objective of anti-narcotics activities by the authorities, particularly vis-a-vis the domestic market. Asset seizure in drug cases is not widely practiced in Indonesia but is now permitted by the new 1997 legislation. Arrests of narcotics traffickers were reported frequently in Jakarta and the Kuta Beach area of Bali. Arrests of foreigners in connection with narcotics use, possession and trafficking was frequently noted in the Indonesian media.

Corruption. There are many indications that police officials themselves are involved in drug trafficking in Indonesia. In addition to reports from street sources that police authorities are assisting "ecstasy" traffickers, on several occasions in 1997 military and police personnel were arrested for involvement in narcotics-related activities. There were also reports that persons arrested for narcotics trafficking could easily bribe police to permit them to "escape." One such case, reported in the press, involved a South African citizen arrested in January. Following his escape from police custody in February, ten policemen were under investigation.

Agreements and Treaties. While there is no formal extradition relationship between the United States and Indonesia, in practice US and Indonesian authorities have cooperated effectively in resolving narcotics-related criminal cases. Indonesia is a party to the 1961 UN Single Convention and its 1972 Protocol and the 1971 UN Convention on Psychotropic Substances and has ratified the 1988 UN Drug Convention. Indonesia is also a party to the World Customs Organization's International Convention on Mutual Administrative Assistance for the Prevention, Investigation and Repression of Customs Offences' "Nairobi Convention" Annex X on assistance in narcotics cases.

Cultivation and Production. As their limited resources permit, the Indonesian National Police, in particular the Narcotics Unit, and Indonesian Customs continue their efforts to combat narcotics smuggling. There is no confirmed information on the amount of acreage under marijuana cultivation in Indonesia. As in previous years, however, the illicit cultivation of marijuana in Aceh Province is the target of periodic eradication campaigns. According to press reports, in April of 1997 police discovered a large cannabis plantation in Bandar Aceh and arrested 13 individuals. Three more plantations in the Aceh area were reportedly raided in September.

Drug Flow/Transit. As anti-trafficking efforts by governments in the region grow in sophistication, there has been a tendency, noted in previous INCSRs, for traffickers from the region, South Asia and Nigeria to look to Indonesia, where border controls remain relatively lax and officials are easily bribed. Rapid growth in tourism, shipping and air traffic accompanying Indonesia's rapid development has expanded the potential Indonesia offers as an illicit narcotic transit point. Reports in local language newspapers also indicate increased heroin use among young Indonesians, however, indicating some diversion of trafficked heroin to local use.

Domestic Programs. Increased police targeting of domestic users, supported by regular press coverage of interdiction activities, has reflected the government and the public's growing concern about domestic consumption patterns. It is not clear, however, whether the increased number of narcotics arrests reported in the press actually reflects increased police effectiveness in countering drug trafficking, or merely an awareness that from a public relations standpoint the police at least need to appear to be addressing the problem. Demand reduction is a growing concern in Indonesia as the use of "ecstasy," particularly among Indonesia's young urban elite, mushrooms.

Policy Initiatives. The US Embassy in Jakarta and the DEA and Customs Attaches in Singapore coordinate cooperation with the Indonesian Government on narcotics matters. (The DEA office in Jakarta was closed in 1987 and there is no resident Customs Attache at Embassy Jakarta.) The USG particularly supports the adoption of anti-money laundering legislation.

Bilateral Cooperation. In 1997, DEA funded the participation of two Indonesian narcotics officers at the Asian Regional Drug Enforcement Seminar in Singapore.

DEA Singapore sponsored a ten-day narcotics enforcement training course in Jakarta which was attended by officials from the Indonesian National Police, Customs Office, Department of Health, Attorney General's Office, and Immigration Office.

US Customs continued to work with Indonesian Customs officials on the development of computer data bases to assist in the tracking of foreign yachts through the archipelago.

During 1997, the Government of Indonesia continued to cooperate with the DEA on narcotics cases involving the arrest of US citizen drug traffickers in Indonesia. In one noteworthy case, an agreement was reached with the Indonesian authorities to share proceeds from confiscated drug trafficker assets.

The illegal drug of choice in Japan is overwhelmingly methamphetamine. According to National Police Agency (NPA) officials, approximately 94 percent of all drug offenses in Japan involve violation of the Stimulant (methamphetamine) Control Law. Other abused drugs in Japan, in descending order, are marijuana, cocaine, heroin, opium, and MDMA ("ecstasy"). Drug use among juveniles has risen rapidly in recent years. Japan is not a major producer of drugs. Nearly all are smuggled in from foreign sources. Japan produces many precursor chemicals, all of which also have legitimate industrial uses.

Japan criminalizes only drug money laundering. USG law enforcement officers report that drug and money laundering investigations initiated in the US periodically show a link between drug-related money laundering activities in the US and bank accounts in Japan. The extent of such activity is, however, unknown.

Japan is not, and is unlikely to become, a significant producer of narcotics. However, there is a growing user market in Japan, especially among juveniles, and increased trafficking activity within the illegal immigrant population. Narcotics trafficking in Japan is a source of income for Japanese organized crime. Organized crime members sometimes try to sell their product overseas, including in the US The FBI and other USG law enforcement offices coordinate closely with the NPA in trying to prevent this activity.

Japan is suspected of being a major money laundering center, and police believe criminal organizations are behind much of the drug trafficking and money laundering in Japan. Laws criminalizing drug-related money laundering and authorizing execution of controlled drug deliveries were enacted in 1992. Although the 1992 law also authorizes the reporting of suspicious transactions by Japanese financial institutions, such reporting rarely occurs.

Policy Initiatives. An amended foreign exchange control law, which takes effect in 1998, will require travelers entering and departing Japan to report to customs authorities physically transported currency and monetary instruments. All currencies will be reportable under the new legislation. The threshhold reporting amount has not yet been established.

Accomplishments. In 1997, Japan continued its sponsorship of many annual international drug enforcement and prevention programs, including the Asia-Pacific Operational Drug Enforcement Conference, a seminar on control of drug offenses, and a training course on drug prevention activities. Japan is also an active participant in all major conferences conducted throughout the world each year which concern narcotics trafficking and related crimes. Japan is also an active member of the UNDCP Major Donors Group, and finances and participates in many UNDCP programs.

Law Enforcement Efforts. Police anti-narcotics efforts tend to focus on Japanese organized crime groups, the main smugglers and distributors of drugs. However, police and prosecutors have been hesitant to pursue cases in which a conviction is not almost certain prior to trial. In addition to smuggling and distribution activities, law enforcement officials are paying increased attention to drug-related financial crimes.

1992 legislation created a system to confiscate illegal profits gained through drug crimes, criminalized money laundering, and authorized execution of controlled narcotics deliveries. Seizure provisions apply to tangible and intangible assets, direct illegal profit, substitute assets, and criminally derived property commingled with legitimate assets. Although statutorily authorized, seizure power has seldom been used. Japan has not established a forfeiture fund into which proceeds of assets forfeited to the government could be channeled for law enforcement or other official uses.

Agreements and Treaties. Japan is a party to the 1988 UN Drug Convention, and participates in the Financial Action Task Force (FATF) and Asia Pacific FATF. Japan presented its formal response to the second round of FATF mutual evaluations in December 1997. The US and Japan have cooperated in extradition matters since the bilateral Extradition Treaty took effect in 1980.

Japan has no narcotics-specific bilateral agreements with the US or any other country. US Customs and FBI representatives report that cooperation on an informal basis is generally good. The lack of a mechanism for compulsory international cooperation hurts Japanese and foreign law enforcement efforts 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. The USG and Japan are engaged in discussions concerning negotiation of a Mutual Legal Assistance Treaty (MLAT).

At the Denver Summit in June 1997, customs administrators from Japan and the US signed a Customs Mutual Assistance Agreement (CMAA), which will cement and further enhance the already excellent cooperation existing between the US and Japan on inquiries into suspected customs violations. This is Japan's first CMAA.

Cultivation/Production. Although not a significant cultivator or producer of controlled substances, Japan is a major producer of 60 types of precursor chemicals, all of which have legitimate industrial uses. Japan is one of only a handful of countries that produce ephedrine, which is used to create antihistamines, but is also an essential ingredient in methamphetamine. Japan is a member of the Chemical Action Task Force, and DEA reports Japan is conscientious about monitoring end users of precursors.

Drug Flow/Transit. Arrests of foreigners for violating drug-related laws are increasing. Filipinos, Iranians, South Koreans, and Thais are the major nationalities represented, although recently large numbers of West African nationals, primarily Nigerians, have joined this group. Almost all drugs illicitly trafficked in Japan are smuggled from overseas. According to the NPA, China and Thailand are the principal overseas sources. In May 1997, Japanese police seized 50-70 kilos of stimulant drugs that were smuggled into the country on a North Korean vessel.

Domestic Programs. Domestic demand is rising, especially among minors. According to police statistics from January to June 1997, abuse by minors of stimulants was up 26 percent from the same period in 1996. Most middle and high schools do not have drug education programs. Drug treatment programs are small and generally run by private organizations.

Policy Initiatives. The USG seeks negotiation and conclusion of an MLAT as one means of strengthening cooperation on counternarcotics and other law enforcement issues and is urging the opening of formal negotiations. In October 1997, DEA representatives met with members of the NPA's Drug Enforcement Division, the Ministry of Finance's Customs and Tariff Bureau, the Ministry of Health and Welfare's Narcotics Bureau, and the Ministry of International Trade and Industry's International Chemical Weapon and Drug Control Policy Office to discuss chemical control and diversion initiatives.

Bilateral Cooperation. Japanese cooperation with the United States on law enforcement matters is informal, but generally good. The Japanese cooperate fully with regard to USG fugitive transit requests.

The Road Ahead. A comprehensive crime bill, although aimed primarily at curtailing the activities of organized crime groups, is under active consideration and would significantly alter the current situation in Japan with respect to money laundering. Among the provisions contained in the crime package are: 1) authority to conduct legal wiretaps; 2) an expanded definition of money laundering which would add approximately 200 offenses, including non-drug related offenses; and 3) authority to establish a financial investigative unit to collect and analyze information on financial crimes. Domestic debate on the crime bill has focused on political opposition to the wiretapping proposals contained in the bill. The US believes passage of this legislation will lessen Japan's vulnerability to money laundering abuses.

The USG also hopes that Japan, as the chair of the UNDCP Major Donors Group, will make every effort to provide strong financial, as well as moral, leadership and support to UNDCP and other international counter narcotics efforts.

Laos remains the world's third largest producer of illicit opium, behind Burma and Afghanistan. For the 1997 growing season, the US estimated Laos' potential production at 210 metric tons, up 5 percent from the year before. Cultivation increased by 12 percent, with most of the increase in the northwest of the country. In crop substitution project areas funded by foreign donors, however, opium cultivation remained low. In May, Lao authorities seized 62.3 kilograms of heroin in Luang Prabang Province, the largest single seizure ever in Laos. In September, Laos ratified the 1971 UN Convention on Psychotropic Substances. Lao officials have indicated that the 1988 UN Convention may be ratified in 1998, after the necessary legislation has been passed. Laos has agreed to implement a US-funded eradication project, focusing first on areas that have received counternarcotics-related development assistance. The first Drug Enforcement Administration (DEA) agent permanently assigned to Laos is expected to arrive in early 1998. Laos has also emerged as an increasingly active player in regional counternarcotics efforts and has been selected to serve a four-year term on the UN Commission on Narcotic Drugs, beginning in January 1998.

Laos remains the third largest producer of illicit opium in the world. Lao opium is grown almost entirely by small-scale subsistence farmers, without fertilizers, irrigation, or other agricultural improvements. USG support for rural development crop control programs recognizes the importance of changing Lao farming practices before an improving economy or organization of opium cultivation by criminal syndicates boosts yields and overall production.

Laos' location next to the world's largest producer of opium and heroin, Burma, and its land borders with countries that combine important opium markets and ports on trade routes to Europe and America (China, Thailand, Vietnam, and Cambodia), make it an important route for drug trafficking. Without sufficient donor assistance to help it build the institutions necessary to effectively combat narcotics production and trafficking, Laos' strategic importance to the drug trade can only increase as its physical and communications infrastructure improves.

Policy Initiatives. The Government of Laos' (GOL) Counternarcotics Master Plan was developed with UNDCP assistance in 1993 and is directed at addressing all aspects of the drug problem in Laos. The Plan is ambitious; full and effective implementation will require foreign donor funding. Specific goals include: reduction of opium production to less than 70 metric tons (estimated internal consumption) by the year 2000; no further increase in opium addiction between 1996 and 2000; comprehensive drug legislation adopted between 1996 and 2000; and ratification of the 1988 UN Drug Convention (the 1971 Convention having been acceded to in 1997) between 1996 and 2000. Increased Lao commitment and international support are both necessary to achieve these goals. The GOL is seeking donors for two still unfunded crop control projects in its two most important opium producing provinces, Oudomxai and Phongsali. UNDCP continues to work closely with the GOL to carry out Master Plan goals.

Accomplishments. In September 1997, the GOL ratified the 1971 UN Convention on Psychotropic Substances, an important step toward compliance with the objectives of the 1988 UN Drug

Convention. In May 1997, police officers arrested 21 suspects and seized 62.3 kilograms of heroin and 74,000 amphetamine tablets in Luang Prabang Province. This was the largest heroin seizure since the beginning of US-Lao counternarcotics cooperation. The first forensic lab in Laos able to test confiscated drugs opened in Vientiane in 1997. Lab equipment and training were funded by UNDCP.

In July 1997, the GOL hosted a trilateral ministerial meeting with Burma and Thailand to address problems of illicit drug production and trafficking. The GOL and UNDCP signed an agreement for a new $4.8 million alternative development and crop control project in Nong Het District of Xieng Khouang Province, an important opium producing region. UNDP, FAO, WHO, UNICEF and other UN agencies will participate. A three-year extension of the UNDCP-funded crop control project in Luang Namtha and Bokeo Provinces was also signed. The GOL also signed bilateral counternarcotics cooperation agreements with Burma and the Philippines.

Law Enforcement Efforts. The INL-funded counternarcotics units (CNU) in Vientiane, Savannakhet, and Bokeo, along with other provincial police offices, reported the successful completion of 95 cases in 1997, resulting in the arrest of 233 suspects, including 12 foreign nationals. These cases involved seizures totalling 72.3 kilograms of heroin, 200 kgs of opium, 750,700 methamphetamine tablets, 263.6 kgs of processed marijuana, and 3.8 metric tons of dried marijuana. Increases in heroin and methamphetamine seizures were significant, with heroin seizures seven times the 1996 figure. Lao law enforcement officials also seized 18 motorcycles, 13 four-wheeled vehicles, cash, weapons, and marijuana processing equipment. By the beginning of the November/December eradication season, authorities had destroyed 18 tons of cannabis under cultivation in southern Laos.

Investigation into the Luang Prabang heroin case continues in several other provinces. While information from INL-supported CNUs contributed to the early arrests and seizures, the Ministry of Interior has taken direct control of the expanding case. This is the most complex trafficking case the Lao have dealt with to date.

Corruption. Given Laos' poverty and the very low salaries of Lao government employees, it is assumed that some officials and military personnel receive rewards from illicit drug trafficking. It is also possible that some officials, including at relatively senior levels, are aware of or involved in these narcotics-related activities. The GOL per se, however, does not encourage or facilitate the production or distribution of illicit drugs. Government officials have been punished for corruption, including specifically narcotics-related corruption.

Agreements and Treaties. The US and Lao Governments signed a Memorandum of Understanding (MOU) on counternarcotics cooperation in 1989. Bilateral crop control agreements have been signed annually since 1989, as have bilateral law enforcement project agreements since 1992. Both countries have expressed their intention to continue and expand this cooperation. In 1997, the US and Lao Governments agreed to extend their crop control agreement to include information gathering and eradication activities, as one way of enforcing the 1996 law banning opium production. Crop control and alternative development activities were also extended to a small project in Oudomxai Province. Although the Government of Laos does not have a mutual legal assistance or extradition treaty with the United States, it has agreed informally to cooperate in deporting drug traffickers. Laos is also signatory to an MOU on regional counternarcotics cooperation with UNDCP and China, Burma, Thailand, Vietnam and Cambodia. Laos acceded to the 1971 UN Convention on Psychotropic Substances in 1997 and is working with UNDCP to pass legislation necessary to bring it into compliance with the 1988 Drug Convention. UNDCP expects Laos to ratify the 1988 UN Drug Convention in 1998.

Cultivation/Production. Opium is produced in the ten northern provinces of Laos as a cash or barter crop - for food security reasons - and as a traditional medicine. The extreme isolation of most opium producing communities makes opium a vital crop on both counts. 1997 USG crop estimates indicate a 12 percent increase in cultivation to 28,150 hectares, and a 5 percent increase in potential production to 210 metric tons. The lesser increase in potential production came from a decrease in the baseline figure used to calculate yields from 8.0 to 7.5 kilograms per hectare. This was based on a small-scale yield survey conducted by USG personnel in February 1997; yield estimates in previous years had been based on regional rather than Lao-specific data. UNDCP plans a much more comprehensive yield survey, using USG-developed survey methodology, for the coming opium season. This will help to further refine yield estimates. The most significant increases in cultivation were observed in northwest Laos, where counternarcotics crop control efforts are new or non-existent. The GOL is actively seeking donor assistance for these areas. Cultivation in northeastern Laos, where past crop control efforts have been concentrated, remained constant or fell slightly.

Drug Flow/Transit. The GOL's ability 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. Effective control over borders with Thailand, Burma, China, Vietnam, and Cambodia exists only in the vicinity of major population areas, along principal land routes, and at established river crossings. The dramatic increase in amphetamine seizures in 1997 corresponds with the expansion of amphetamine consumption in Thailand. Heroin seizures were also up, mostly due to the Luang Prabang case. As roads are upgraded, and as interdiction efforts on Burma's borders with China and Thailand increase, Laos can expect to become an even more popular route for illicit drug flows.

Domestic Programs. Opium addiction is the main drug use problem in Laos, but is overwhelmingly a rural phenomenon in the north of the country. Most addicts are believed to have begun using opium for medical reasons. The 1996 UNDCP survey of opium production and use estimated an addict population of approximately 35,000, down from an estimated 42,000 in 1993. UNDCP attributed the drop to the higher price of opium. The Lao Government has put increasing emphasis on detoxification programs for addicts. The location of most addicts in remote, often inaccessible rural areas increases the cost and difficulty of treatment. A USG-funded UNHCR detoxification program for repatriated Lao refugees begun in 1997 in Luang Prabang Province is providing model procedures for use elsewhere. Several detoxification sessions were conducted at hospitals in the USG-funded crop control project area in Houaphanh Province. In May 1997, Daytop International conducted a second INL-funded drug treatment workshop for health care workers. Four more sessions are planned.

Policy Initiatives. The USG focuses on helping the GOL achieve two primary counternarcotics objectives: elimination of opium poppy cultivation, and suppression of illicit trafficking of narcotics and precursor chemicals. Crop control projects, as in Houaphanh Province, are one method of addressing the first goal. The USG works closely with UNDCP and with other donors of development assistance to ensure that counternarcotics objectives are included in all rural development programs in northern Laos. Trafficking suppression is pursued through support of special counternarcotics police units, and through support of Lao Customs. Additional support has been provided to the Lao National Commission for Drug Control and Supervision (LCDC), which has overall policy direction for anti-narcotics activities under the Office of the Prime Minister.

Bilateral Cooperation. In 1997, the USG and GOL agreed to begin the first stage of an anticipated crop control project in Oudomxai Province. An expansion of the Houaphanh crop control project is also being discussed. The GOL has agreed to a first-time eradication program in areas that have received counternarcotics development assistance. Implementation will begin in 1998. In response to a GOL request, the USG will help establish seven more counternarcotics units in key cities over the next few years. The US Customs Service conducted a second train-the-trainer course for Lao police and customs officers in May 1997. The first permanently assigned DEA agent is expected to arrive in Vientiane in early 1998. In the meantime, DEA/Udorn is providing support on a weekly basis and developing close relationships with the Vientiane Counternarcotics Office and with senior Ministry of Interior officials.

The Road Ahead. In January 1998, the GOL will begin a four-year term as a member of the UN Commission on Narcotic Drugs, which oversees UNDCP. The GOL has made clear that it is committed to achieving the counternarcotics objectives in its Master Plan. If it is to do so, it must change the practices of Lao farmers and upgrade its law enforcement capabilities before the inevitable modernization of Laos' society and economy exacerbates the problems of narcotics production and trafficking. The USG is committed to assisting Laos in this effort, and will offer continued support to alternative development projects, with particular emphasis on cooperation with other donors. The permanent presence of DEA and larger numbers of specialized counternarcotics law enforcement units, which the USG proposes to help fund, will aid Laos in the development of its interdiction capacity. The USG's commitment to Laos is made both in response to the determination shown by the GOL and in recognition of the fact that, given the continuing poverty and development challenges Laos faces, it is unlikely to achieve its counternarcotics objectives on its own.