ASIA'S DRUG MENACE AND THE POVERTY OF DIPLOMACY

Optimists on both sides of the Pacific hoped that the end of the cold war
would also hasten the end of Asia's undeclared drug war. Rapid economic
development would ease the grinding poverty that fostered both poppy
cultivation and narcotics addiction, political liberalization would root
out corrupt officials and impose the rule of law on criminal dealers, and
multilateral cooperation by Pacific Rim governments would crush Asia's
narcotrafficantes.

The optimists were wrong.

Rising incomes have stimulated demand for narcotics throughout the region,
creating a booming market for opium cultivators in the rural backwaters
left untouched by Asia's economic miracle. Politicians and police in Asian
democracies have shown themselves no more immune to "donations" from drug
syndicates than their counterparts in South or North America. Meanwhile,
lingering suspicion, bureaucratic distaste, and multilateral sloth impede
regional efforts to suppress the drug trade; the Association of Southeast
Asian Nations (ASEAN), the Asia Pacific Economic Cooperation (APEC) forum,
and the UN have been equally impo-tent in addressing the foreign policy
problem of narcotics.

THE MIRACLE'S OTHER SIDE Asia's rising economic tide has made the drug
problem worse, since the demand for narcotics increases with higher income
levels. High incomes also lead to more variety in drug consumption. Hmong
tribesmen in the Vietnamese highlands may still smoke raw opium, but urban
Asians can choose from a wide assortment refined narcotics that range from
heroin, cocaine and crystal methamphetamine (known as 'ice") to so-called
designer drugs-synthetic narcotics hallucinogens - such as Ecstasy. The
narcotics problem in Asia is not primarily an issue of drug smuggling from
the Golden Triangle to the United States but of new consumption patterns on
both sides the Pacific (the Golden Triangle is the traditional
opium-growing region that incorporates parts northern Thailand, eastern
Burma, and western Laos).

Laos is a classic example of this change in consumption habits: Laotian
addicts now consume almost half the estimated 200 metric tons of opium
produced in Laos each year, most of which used be exported. Overall, at
least 50 percent of the 3,000 metric tons of opium grown in Asia is
consumed within the region.[1] Ominously, Asia has become the largest and
fastest-growing narcotic market in the world, accounting for 40 percent
world consumption. The number of drug addicts the region is huge: 1.2
million heroin addicts in Thailand and 400,000 in Burma, and 500,000
addicts in Japan. China has 500,000 registered heroin addicts, but
estimates of the actual number range from 1 million to 2 million.

Along with higher incomes, rapid urbanization and internal migration are
fueling this explosion in demand. Asian megacities such as Jakarta,
Bangkok, and Guangdong are ringed with teeming slums where young men and
women are cut off from their rural roots and community support networks.
China has at least 100 million people drifting around the country in search
of work. The onslaught of "modernity" corrodes traditional values quickly,
and drug consumption is a tempting form of relief and recreation.

Soaring drug demand has been accompanied by supply-side improvements in
price, quality, and delivery. For example, heroin street prices in the
United States have fallen by two-thirds over the past 15 years, from $3,400
per gram in 1981 to $1,200 per gram in 1995, and purity has soared from 15
percent to 50 percent because of better production technology in Asia and
more sophisticated smug-gling around the Pacific.

PUTTING GLOBALIZATION TO WORK The Chinese criminal gangs that traffic most
of Asia's narcotics have moved drug production labs into the jungles of
Southeast Asia, near the opium harvest, taking advantage of better
equipment and more easily obtainable precursor chemicals used in the
refining process. These smaller portable labs can also be used to "cook"
methamphetamines (a smelly and potentially dangerous process) and
syn-thesize designer drugs. Taiwanese criminal syndi-cates have moved their
ice production sites to China's coastal provinces such as Fujian, just as
many legitimate Taiwanese chemical companies have moved their bulk
production to the mainland while supplying complex precursor ingredients
from Taiwan.

The entrepreneurs behind this production inno-vation, Chinese criminal
"triads" such as the Sun Yee On, Wo Hop To, United Bamboo, and the 14K
gang, are equally skilled in delivering the finished product throughout
Asia and to the United States and Europe. Narcotics are produced locally
but sold globally.

Two-thirds of the world's opium is grown in Southeast Asia, most of it in
Burma, whose annual output is estimated at 2,500 metric tons (which equals
250 metric tons of heroin), grown under the protection of local drug
warlords such as Khun Sa and his Mong Tai "Army." Once refined, the heroin
is transported south to Bangkok where it is shipped to the wider world, or
northeast across the border into China's Yunnan province and then overland
to Guangdong and Hong Kong, where the triads can tap into the global
shipping network. Chinese authorities were shocked in April 1996 when they
stumbled across 600 kilograms of heroin in Guang-dong on its way to Hong Kong.

The triads have formed strategic alliances with other criminal
organizations to distribute the entire pharmacopoeia of narcotics and to
launder the resulting cash flow. The triads, for example, supply ice to
Japanese yakuza or criminal gangs, such as the Inagawa-gai and the
Yamaguchi-gumi, who import rather than produce most of Japan's
methamphetamine supply They also assist the yakuza in recycling their
revenues offshore, fre-quently through real estate investments in Asian
cities or in Hawaii. The triads also work closely with Nigerian smuggling
rings that supply Europe with Asian heroin, and with Latin American gangs,
such as the infamous Cali syndicate, trading Burmese heroin for Colombian
cocaine to satisfy Asia's burgeoning crack market.

One of the engines of Asia's economic dynamism-free trade in goods and
liberalized financial transactions-also makes it easy for the triads to
smuggle narcotics and launder the revenues. In Taiwan, 3.8 million marine
shipping con-tainers arrive each year at the major ports of Keelung and
Kaohsiung. Of these, 1.8 million are labeled transit containers; Taiwan
Customs ignores these and merely samples the other 2 million containers on
a random basis, resulting in an inspec-tion-often cursory-of only about
300,000 containers.[2]

It is clear that even with the best of intentions, Taiwan's Customs
authorities are overwhelmed by the scale of their country's trade-it would
require an army of agents just to inspect the marine con-tainer traffic
(United States Customs estimates that it takes 5 agents 3 hours to fully
inspect a standard marine container). In the region's many free-trade
zones, such as the ports of Hong Kong and Macau, Masan and In in South
Korea, Batam in Indonesia, and China's special economic zones of Shenzhen,
Zhuhai, Xiamen, and Shantou, there is no customs revenue to be gained from
inspecting freight traffic, so the authorities do not even try to inspect
for drugs. Asia's stream of narcotics simply vanishes in the vast river of
Asian commerce.

Laundered drug money is even more difficult to trace. By "chaining" money
transfers between multiple institutions (that is, making multiple transfers
back-to-back), triads can effectively delete a paper trail. Even if law
enforcement authorities success-fully trace a transactions needle through a
funds-transfer haystack, they often end up stymied by bank confidentiality.
No longer an exclusive feature of the Channel or Cayman Islands banks, such
confidentiality is now offered to Asian customers at new offshore banking
facilities on the Pacific Islands of Vanuatu, Samoa, and Nauru.

But the triads do not need to travel so far. With its unregulated and
sophisticated financial markets, Hong Kong - the city built on the
nineteenth-cen-tury opium trade - remains the Mecca of money laundering in
Asia. The city's authorities have long turned a blind eye to this activity.
A senior Chinese official bitterly observed to the author in June 1996 that
"Soon we will recover Hong Kong from the British, who are already
complaining that we will wreck the colony's rule of law. What rule of law?
[This is] the transshipment point for most of Asia's narcotics, the place
where most of the drug money is laundered, and where the triad criminals
hide their investments in bank accounts or flats on Vic-toria Peak. If we
move into Hong Kong in 1997 and clean up this nest of thieves, the Western
press will pillory us for trampling on the colony's civil rights."

MONEY'S CORROSIVE POLITICAL INFLUENCE Not only have economic growth, free
trade, and unfettered financial flows compounded Asia's narcotics problem,
but political liberalization and democratization throughout the region have
failed to deliver on the promise of imposing "law and order" on the drug
trade.

It is ironic that criminal triads have been among the first beneficiaries
of the transition from "hard" to "soft" authoritarianism in Vietnam and
China. When an authoritarian state begins to liberalize, it creates more
space free of government-space where criminals can thrive as easily as
other citizens under the protection of law and due process. Law enforcement
becomes essentially reactive: the police cannot simply swoop down on triads
or yakuza and arrest their members. Once jailed, due process makes it
harder to hold criminals; it also imposes rules governing evidence and
property seizure, and forces the state to at least go through the motions
of a trial.

The political transition of states such as China and Vietnam has also
compounded the pervasive corruption among police and customs officials and
in the justice system and the armed forces. It is a mark of China's
openness to the world trade system that customs officials no longer
strictly regulate what crosses its borders. This has been a boon to the
triads which, with modest gratuities to poorly paid Chinese officials, can
now transit China with ease en route to Hong Kong. Vietnam is increasingly
permeable for the same reason; the 1997 United States State Department's
International Narcotics Control Strategy Report concludes that "corruption
is endemic at all levels of the Socialist Republic of Vietnam's police and
military authorities."

Authoritarian states in Asia do not have monopoly on corruption:
politicians in the democracies are as cash hungry as their counterparts in
Latin America and the United States. Money is the mother's milk of
electoral politics in Japan, South Korea, Taiwan, Thailand, Malaysia, and
criminal syndicates are eager contributors to campaign coffers.

Why fight the police when you can buy political protection? The triads and
the yakuza closely studied Colombia's narcotrafficantes. They saw the
Medellin cartel, which virtually declared war on the government, killing
250 judges and even the minister of justice, provoked a campaign by the
government that ultimately crushed their syndicate. The Cali cartel
eschewed such violence. Instead quietly injected cash into the electoral
pro including contributions to the campaign of president Ernesto Samper,
and remained in business.

In Asia, the triads sometimes cross the between smuggling and participating
directly in politics, as in the case of Thanong Siriprechapo member of the
Thai Parliament who was extradicted to the United States in January 1996 on
narco-trafficking charges. The influence of drug money on Thai politics is
pervasive: parliament has refused to pass a bill that would make it more
difficult to disguise drug money, despite numerous entreaties from the
United States. This has led the Department to complain that "Thailand's
sophisticated banking system and an active quasi-legal non-bank financial
system provide a hospitable climate for money launderers."

GEOPOLITICAL ROADBLOCKS... Public opinion polls in Asia and North America
regularly put narcotics near the top of the list of international problems.
It is the most salient of all "global government" concerns, such as illegal
immigration or pollution, and easily the most intrusive in the daily life
and personal security of the average citizen. Narcotics busts, tales of
addiction, and violent drug-related crimes grab headlines on a regular
basis. But governments on both sides of the Pacific have been curiously
slow in adding narcotics to the diplomatic agenda, unable to move beyond
pious expressions of concern to tackle these problems together. What
happened to the anticipated Golden Age of multilateral cooperation that was
supposed to unfold in Asia in the post-cold war era?

The passing of the cold war superpower standoff did not change Asian
politics as dramatically as it transformed the political landscape of
Europe. Two unresolved national unity problems - between China and Taiwan,
and between the two Koreas - fuel a high level of suspicion in the region.
And two failed states - Burma and Cambodia - are locked in violent internal
struggles for power even as they provide a haven for narcotics production
and orga-nized crime.

The Burmese junta known as the State Peace and Development Council
(formerly SLORC) remains locked in a civil war that has been waged in the
country's northeastern provinces for decades, opposed by the Mong Tai Army,
the Eastern Shan State Army, the Kachin Defense Army, and the so-called
Myanmar National Democratic Alliance - which field tens of thousands of
irregulars, heavily armed with automatic weapons and SAM-7 missiles.
Narcotics money keeps these sepa-ratist armies in business, and the junta
itself is too weak, too illegitimate, and too corrupt to put them out of
business.

The Chinese government supports the Burmese junta for geopolitical reasons:
Burma provides a window to the Indian Ocean for China's military, and it is
a useful counterbalance to potentially hostile ASEAN states on China's
southern borders. ASEAN, despite its ambivalence about the junta and its
concern with the drug trade, has embraced Burma's military leadership as a
counterbalance to Chinese influence in Southeast Asia.

The United States, appalled by the junta's violent 1988 repression of
Burma's indigenous democratic movement and its imprisonment of
pro-democracy leader Aung San Suu Kyl, has kept the junta at arm's length.
Yet the United States Drug Enforcement Administration (DEA) retains a
3-person liaison office in the Burmese capital of Rangoon. Officials in
Washington face a wrenching dilemma: Which is worse, the brutal junta or
the narcotrafficking separatist groups? Which is better, standing by the
human rights champions of Burma's democracy movement, or suppressing the
flow of heroin to American cities?

China remains central to Asia's narcotics problem, as it does to Asia's
other transnational problems, such as illegal migration and environmental
pollution, because of its sneer size and the turbulence of its
transformation from "hard" to "soft" authoritarian politics.

The Communist authorities in Beijing have long feared the triads as
potentially subversive organizations, a suspicion that goes back to 1927,
when Chiang Kai-shek's Nationalist government used triad gangsters to
slaughter Communists. Since it came to power in 1949, the Communist Party
has taken a strong stand against narcotics, beginning with a nationwide
suppression campaign that detoxed 20 million addicts between 1950 and 1952.
Today the authorities in Beijing are deeply con-cerned about a recent
heroin plague and mounting disorder in southern provinces such as Yunnan,
Guangxi, and Guizhou. In 1992 the government sent People's Liberation Army
(PLA) troops with armored vehicles and tanks to regain control of the
border town of Pingyuan, which had been taken over by narcotraffickers.

However, China's economic growth since 1978 has been built on granting more
authority to the country's regions, especially the southern coastal
provinces. In the absence of the rule of law, and as the prestige and
legitimacy of the Com-munist Party decline, "local corporatism" -
interlocking interests between the local party apparatus, the local
administrative bureaucracy, and the local state security organs - has
become the de facto government in much of China. This creates an
environment in which crim-inal enterprise and narcotrafficking flourish.

Beijing finds it difficult to suppress China's grow-ing narcotics business
with an iron fist. In addition to resistance from local corporatist
interests, the fist itself may be unreliable. Corrupt elements of the
Public Security Bureau and the PLA are widely involved in the drug trade.
Beijing's official tolerance of PLA involvement in private business has
tempted many officers with the quick profits to be made from narcotics
production and distribution. As China's senior party leaders compete to
solidify their personal networks of support among the PLA, cracking down on
military complicity in the drug trade is not an attractive policy option.

As a result, although low-level criminals are periodically arrested and
often executed as part of nationwide anticrime campaigns, these campaigns
rarely do much harm to the narcotics trade or higher-level traffickers. A
lack of faith in the integrity of Chinese law enforcement has made
cooperation with foreign law enforcement difficult.

This distrust is reciprocated; according to the United States State
Department's 1997 narcotics report, Chinese authorities refused to allow
the FBI and the DEA to establish offices in Beijing after an American court
"ordered the release of alleged Chinese drug trafficker Wang Zongxiao, who
had originally been escorted to the U.S. by Chinese police in 1989 to
testify as a witness on the understanding that he would return to China."

The Wang case is a classic example of the pitfalls that hinder both
bilateral and multilateral cooperation to solve transnational problems such
as narcotics. The legal and institutional bases for cooperation in law
enforcement are weak in Asia. For example, the United States lacks an
extradition treaty with many countries in the region, such as Burma and
Indonesia, and even where a treaty exists, as with Thailand, it requires
enormous pressure to extradite an alleged trafficker for trial in the
United States. Conversely few American judges are eager to entrust an
American citizen facing a drug charge to the tender mercies of Asian police.

85AND MULTILATERAL ROADBLOCKS Bilateral attempts to deal with narcotics
are inevitably infused with bilateral tensions, and narcotraffickers can
easily elude bilateral crackdowns by slipping through third countries;
therefore much faith has been placed in the efficacy of multilateral
institutions to construct a common framework of policies to suppress demand
and interdict smugglers. The UN has passed a series of conventions and
protocols on narcotics, culminating in the UN International Drug Control
Program in 1991, which consolidated a variety of efforts. In 1996 the UN
also coordinated a memorandum on controlling the trade in narcotics
precursor chemicals and on trafficking with Burma, Cambodia, China, Laos,
Thailand, and Vietnam. Unfortunately funding for the UN programs has been
sparse, and few would argue that they have made much of a dent in Asia's
narcotics markets.

ASEAN has also dealt with narcotics, and the ASEAN ministers periodically
issue statements deploring the problem. A special ASEAN forum was created
to focus on the problem, but it has done little other than host regional
seminars on treatment and law enforcement. Lack of funding is one problem,
but a more serious roadblock is ASEAN's consensus decision-making style.
With some high officials in Burma, Cambodia, and Thailand compromised by
the narcotics trade, it is not difficult to see how ASEAN's progress on
narcotics would be glacial.

APEC has a similar problem. Its larger umbrella covers not only Asia's
drug-producing region also the big markets - China, Japan, and the United
States. Beijing has adamantly opposed expanding APEC's charter to deal with
problems such as narcotics for fear that other, more sensitive political
issues, such as Taiwan or the South Chin islands dispute, might make their
way onto the agenda.

Once narcotics become a multilateral agenda item, diplomats are not
comfortable with the topic. Narcotrafficking can be fairly technical, and
controlling it requires close cooperation between enforcement agencies,
which are rarely internationalist in any country. Nor does a diplomat want
to be "typed" as a narcotics specialist.

Moreover, there are few organized domestic constituencies to applaud
multilateral successes in narcotics control or to press governments to
negotiate multilateral agreements. The nongovernmwnt organizations (NGOS)
that have been vocal and frequently successful in lobbying for multilateral
agreements on the environment or for labor standards have been
conspicuously absent from the narcotics debate.

Many groups also oppose tough regulations to crack down on smuggling or
money launding, especially business firms whose shipping or financial
interests would be complicated by such regulations. Suppressing the supply
of narcotics in requires more government and more regulations, not less; it
requires movement against the current liberalization and deregulation that
has powerful advocates in the United States and Asia.

The apathy of officials, the silence of NGOs, and resistance from the
business community in the Asian narcotics debate reflect the deep
ambivalence toward drug policy that impedes solutions in Asia as well as in
the United States. What combination of supply and demand suppression will
be effective against the narcotics menace? Is it merely a fool's errand to
spend money and political capital on interdiction efforts if the underlying
demand for narcotics is so huge? Can demand suppression be dealt with
independently of problems such as illegal migration, poverty and poor
health care in the United States and Asia?

Finally are the Asian nations, authoritarian and liberal alike, prepared to
pay the price of interfering with free trade and finance that effective
interdiction will require, and - above all - declaring war on the criminal
syndicates that have so deeply twined themselves with Asian politics?

[1]These production and consumption figures are based on Stephen Flynn's
chapter, "Asian Narcotics: Rethinking the War," in James Shinn, ed., Fires
across the Water: Transnational Problems and Asian Politics (New York:
Council on Foreign Relations Press, forthcoming).

[2]See Flynn, op. cit.

Checked-by: Mike Gogulski