Transcript The Global Economy of Illegal Drugs

25-26 June 2001
Queen Elizabeth II Conference Centre
London, United Kingdom
Mick Keelty
Commissioner
Australian Federal Police
Presented by
Dr Sandy Gordon
•Historical factors.
•Expansion of production in the mid1990s, including in Burma.
•Implications for Asia and the rest of the
world.
Amphetamine-type Stimulants
(ATS)
•Methamphetamine tablets—ya ba
•Methamphetamine crystals—ice
•MDMA, MDEA etc—ecstasy
Historical factors
WY
Ya
Opium
Ba
Ice
Methamphetamine
A traditional
Methamphetamine
in
product
tablet
form
of
the
in crystal form
Golden Triangle
ATS Production
Global ATS seizures 1990 - 1998
Seizure distribution
Reasons for rise in ATS use in Asia and
production in Burma
•Economic development throughout Asia.
•Associated growth in Asian ATS market.
•Structural changes in heroin and ATS
production in Burma and northern Thailand.
•Economic reform in China.
•Expanded use of a trafficking route through
China.
•Economic relativities of heroin and
ATS production.
Economic development throughout Asia
•East Asia/Pacific region has grown
more rapidly than any other region.
•GDP grew by 8% on average
in the 1980s and 7.4% in the
1990s, compared with 3.2% and
2.5% respectively for the
World.
— but not without harm
•Rapid urbanisation and development increased
work hours in building, transport and service
industries. ATS boost stamina for work.
•Increased competition leads to pressure on
students to achieve—hence use of ATS to
improve performance.
•Growing wealth leads to the capacity to
experiment with and purchase a range of drugs.
•Urbanisation and modernisation lead to the
breakdown of the traditional family structure
and the rise of mass entertainment in nightclubs,
dance parties etc—advent of a ‘drug culture’.
•Mass media and the Internet have contributed
to the spread of these ideas.
Structural changes in illicit drug production
•In January 1996 Khun Sa ‘surrendered’ to
Burmese authorities. His Mong Tai Army
rapidly reduced its production of heroin.
•United Wa State Army (UWSA) used the
opportunity to increase production.
Cultivation moved north, away from Thai
border.
•Mid 1990s, Thailand increased its crackdown on heroin trafficking across ThaiBurmese border.
•China’s Yunnan Province became a primary
trafficking route for Wa heroin, assisted by
common ethnicity.
Relative importance of the trafficking route through China
Quantity of Heroin Seized (China and Thailand)
(1989-October 1996)
4.5
4
3.5
3
2.5
Tonnes
Seizures in China
2
Seizures in Thailand
1.5
1
0.5
0
1989 1990 1991 1992 1993 1994 1995 1996*
Year
Tonnes of Heroin Seized in China and Thailand 1989-1996* (* year to October 1996)
Laboratories
Thailand - Meth. Lab Uncovered
1992-1997
20
15
10
5
10
12
2
15
14
16
0
1992 1993 1994 1995 1996 1997
Year
Changes in China
•Economic liberalisation in China
left some state owned chemical
facilities desperately seeking
markets.
•At the same time regulatory
mechanisms were weakened.
•The existing heroin trafficking
routes were used in reverse to
convey precursors to Burma.
Production and risk
Mixed with
caffeine
Ephedra plant
Ya Ba
tablets
Ephedrine Methamphetamine
hydrochloride
Purification
to ‘Ice’
Factory synthesis
Opium
Morphine
Heroin
Reduced risk
• Methamphetamine does
not require agricultural
production, which is
• visible from aircraft or
satellites
• susceptible to drought,
floods, frost etc
• reliant upon skilled
labour.
• Methamphetamine
facilities more mobile.
• Not subject to opium
eradication deals with then
SLORC Government.
Economic factors: profitability
and demand
This section argues that there was no
substitution effect of methamphetamine
for heroin in Burma

rather, a new market for methamphetamine
was developed alongside the heroin
market.
Transition
Conversion of raw
materials at
production site
Thai/Burma border
area to Thai/Lao
border
Thai/Burma border
area to northern Thai
regions
Thai/Burma border
area to Bangkok
region
Thai/Burma border
area to central
Thailand
Thai/Burma border
area to southern
region
Methamphet.
Tablets
Mark-up %
Heroin
Mark-up %
1900
54
214
(assumes 14% yield
from opium)
Heroin cheaper at
Thai/Lao border than
at Thai Burma border.
30
99
36
152
Not available
266
71
18
Is there a substitution effect?
Based on the above information, we think not.
It appears that methamphetamine production
in Burma arose for four reasons:




burgeoning demand in Thailand
the fact that the Thais cracked down on Thai
domestic production
the relative profitability of the two drug types
to spread risk.
Meanwhile, the demand of heroin to other
markets such as China continued to grow
In Kunming, China, wholesale heroin is
approximately the same price as northern
Thailand.
But, since there is a poor market for
methamphetamine, that substance is
considerably cheaper than in northern
Thailand

being about US$1200 per kilo in Kunming,
compared with US$5800 per kilo in northern
Thailand.
Afghanistan vs Golden Triangle production
As a proportion of potential world yield (UNDCP data)
7000
Tonnage
6000
5000
World
4000
Afghanistan
3000
Golden Triangle
2000
1000
0
1991
1992
1993
1994
1995
1996
1997
1998
1999
Year
Data Source: UNDCP
Trafficking routes
Methamphetamine
Intended destination
Ranong,Thailand
Intercept ed at
Koh Surin Island
Heroin
Intended destination
Singapore
See
enlargement
below
Trends
Spread of Burmese produced
methamphetamines beyond Thailand.
Spread of MDMA

with possible production of higher quality
product in East Asia.
Poly-drug trafficking trend.
Spread of Burmese
methamphetamine
WY brand reported in North East India.
Filtering through Laos, Vietnam, China,and
used increasingly in Burma itself

they are also used by Thai workers in Singapore
and Malaysia.
Some has reportedly turned up on the West
Coast of the US and Europe

but we have not yet seen them in Australia.
MDMA
MDMA—mainly
European-sourced—
has been increasingly
seized in Australia at a
greater rate than other
seizures
use has also been
increasing in the US.
As Asia becomes richer,
it too is vulnerable to
this trend.
And could emerge as
an important
manufacturing location

which would have global
implications.
30.00
25.00
Percent

Annual numbers of seizures & amounts
seized of MDMA as a percentage of total
illicit drug seizures at/near Australian
customs border.
20.00
% of number
% of amount
15.00
10.00
5.00
0.00
1995 1996 1997 1998 1999 2000 2001
Year
Poly-drug trafficking
It makes sound economic sense for the Wa
and other producers and traffickers to
combine consignments of different drugs in
the same shipment



we have already referred to the joint shipment
seized by Thai authorities in the Andaman Sea
in Australia, operation PATAKA involved 15 kg of
heroin and 125 kg of MDMA (source unknown, but
possibly pressed in China)
and the Hong Kong based syndicates regularly
deal in methamphetamines and heroin

Even offering one drug when the other for some reason
cannot be obtained.
Implications
Growing levels of harm to individuals associated with
methamphetamine and ecstasy use
 noting continuing research from Johns Hopkins
University in the US and in Germany suggesting
brain damage associated with both long and short
term use of ecstasy; and that
 ice is an especially harmful drug, being typically
80% pure and associated with long lasting highs
with considerable psychoses and morbidity.
There is also a high level of social cost associated
with criminality, violent behaviour, family breakdown
and corruption in law enforcement due to the large
amounts of money involved.
Implications (2)
Not only is there convergence in the
trafficking of different drug types
throughout the region, but also there is
convergence of crime types.

For example, drug smugglers are
increasingly involved in a range of crimes,
including: people smuggling, credit card
fraud, counterfeiting and prostitution.
Implications (3)
There are also regional security implications,


tension between Thailand and Burma with
occasional cross-border military activity
press accusations between the Philippines and
China.
This paper has argued that amphetamine
production in Burma did not displace heroin


therefore, should climatic conditions return to
normal, heroin production in Burma may again
rise, with implications for the global market
possibly going some way to filling any shortfall
arising out of the situation in Afghanistan.