Barrels of precursor chemicals seized by Myanmar police and military in Shan State. Photograph: Myanmar Police/UNODC/via Reuters
Beijing has gained momentum in its bid for regional dominance in Southeast Asia. Fuelled by notions of Chinese largesse, high-tech industrial and infrastructure development, and an ongoing surge of tactical investments pouring into the region in recent years, it is no wonder that attitudes toward China in some countries are shifting. Yet not everyone is convinced. In fact, when it comes to contributing to global peace, security, and governance, China faces a trust deficit in its own backyard.[1] From allegations of Chinese ‘debt-trap diplomacy’[2] in Cambodia, Myanmar, and Laos to a series of ongoing territorial disputes in the South China Sea, justifications for Southeast Asia’s mounting distrust with China are in no short supply. Adding to this is the region’s escalating battle against synthetic drugs. While the world has shifted its attention to the COVID-19 pandemic, the illicit production and trafficking of synthetic drugs and precursor chemicals in Southeast Asia continues at record levels. With an estimated market size of over US$61 billion, seizures of methamphetamine and other synthetic drugs in the region have increased year-on-year over the last decade, turning record-breaking busts into the new norm while drug prices hit historic lows – and much of this points to China.
Representing what is believed to be the world’s leading methamphetamine producing region, the highly unregulated, militia-controlled borderlands of the Golden Triangle[3] are largely dependent on a steady supply of diverse precursor chemicals from China, and to a lesser extent India, Bangladesh, Thailand, and Vietnam.[4] Most recently, in May 2020 the Myanmar police announced an unprecedented series of seizures totaling more than 193 million methamphetamine tablets, 440 kg of crystalline methamphetamine, a possible 3,700 litres of methylfentanyl, and almost 163,000 litres and 35.5 tonnes of precursor chemicals in what is now confirmed as Asia’s biggest-ever drug bust. While top officials maintain that the chemicals seized had originated from an unconfirmed neighbouring country, Myanmar police documents reviewed by Reuters suggest that most of the seized drugs, precursors, and equipment had come from China.[5] This, however, is no smoking gun. On the contrary, China has more chemical-producing factories than anywhere else on Earth and, despite its clear effort to curb illicit outflows, has long been marked as a source country from which large volumes of precursor chemicals are shipped to foreign drug markets for synthetic drug production. Nowhere is this more apparent today than in northern Myanmar.
China’s precursor regulatory system
The illicit distribution of precursor chemicals to the Golden Triangle is complex and must be understood in the broader context of China’s rapid economic development and its centralized governance model. From the outset of liberalization, China’s chemical industry has been designated as one of the economy’s pillar industries, enjoying tax incentives, policy support, and commercial location advantages all within a loose regulatory environment with minimal market intervention. As with other key industries at this time in China, this approach led to remarkable growth in a very short period of time – and it did not occur without its growing pains. The rise of the chemical industry was accompanied by numerous challenges concerning the regulation of production and usage which still pose many risks for precursor diversion from China. By 2005, more than 45,000 different kinds of chemicals were being produced, imported or exported, some of which were banned or severely restricted internationally.[6] Heightened oversight was desperately needed and, in response, the Regulation on the Administration of Precursor Chemicals was swiftly introduced to inhibit chemical diversion for drug production. This represented China’s first sweeping regulatory framework for normalising the production, operation, purchase, transport, import and export of chemicals. A new administrative approval and licensing scheme was then instituted and imposed on chemical producers nationwide, with transgression punishable under strict Chinese criminal law. Nevertheless, the penetration of the market economy into this regulatory system seems to have generated weak regulations that fall short in normalising supply behaviourism, resulting in a system that some claim actually ‘creates’ delinquency and ‘forces’ the complicity of chemical companies instead.[7]
Indeed, many producers surveyed in China report finding the approval system cumbersome, bureaucratic, and negatively affecting the autonomy and flexibility of their commercial operations.[8] The market is left with many unauthorized buyers who have no legal channels to obtain chemicals while manufacturers are left with excess supply. This may leave some chemical company personnel inclined to sell chemicals to unauthorized parties as there is a lack of regulation governing storage, sales and transportation.[9] Not to mention, suppliers can charge an attractive premium for the risk incurred through their informal dealings.
In addition, in a recent study analyzing 534 closed illicit supply cases involving 1481 convicted individuals, findings suggested that “some chemical, pharmaceutical and biotechnological companies, especially individuals and small companies encountering difficulties in applying for licenses in local administrative departments, may continue to produce and sell chemicals without licenses.”[10] Recent regulatory amendments made in 2016 and 2017 have resulted in more chemicals being rejected for export by Chinese authorities as a result of absent licenses, with a recent report showing a rejection increase from 559,000 kg in 2006 to 2,562,000 kg in 2016.[11] For this reason, the existing regulatory system may stunt local revenue growth, in turn hindering the promotion of local officials and driving some to overlook commercial unit crimes that enable dangerous precursors to be diverted for the production of illicit drugs.[12] On this last point, several scholars have pointed out that the readiness of China’s central government to reward or punish local officials is primarily based on their economic performance and success in promoting the local economy.[13] Promotion is consequently tied to economic development, and has become a significant concern for local officials.[14] This creates a serious dilemma that likely impedes the effective regulation of chemical enterprises in China, ultimately creating a situation in which local officials prefer to use fewer administrative regulations to provide more space for companies and their business activities to develop.[15]
Synthetic drugs: an agile, escalating threat
While major challenges with China’s precursor chemical regulatory regime are apparent, shortcomings in other areas of legislation and policy enforcement, namely that concerning the production of dangerous synthetic opioids like fentanyl, are also present, recently drawing in the attention of authorities at home and abroad. This peaked with a high-level meeting between Chinese President Xi Jinping and US President Donald Trump at the 2018 G20 summit in Buenos Aires in which China agreed to designate fentanyl as a controlled substance following allegations that China was its main source. In turn, Chinese authorities went after fentanyl, and they seemed to have done so very quickly and effectively.[16] While the problem remains substantial, the global fentanyl market (and specifically production in China) has clearly been hit hard. Chinese drug laws now go as far as covering new, previously uncontrolled chemical analogues of fentanyl that were being produced to sidestep existing restrictions, placing most variants of fentanyl on the list of controlled substances as their own drug class. With that said, while seizures from China to the US have dropped off considerably in recent months, there are signs that the supply is simply being rerouted through Canada and Mexico. The strain on production generated by China’s latest crackdown will also have serious implications for neighbouring Southeast Asia and its rampant, evolving illicit drug market, especially as opportunistic organized crime syndicates look to get back to business as quickly and securely as possible.
With this in mind, the Golden Triangle’s close proximity to China makes it an attractive alternative for Asian drug syndicates looking to produce fentanyl and other synthetic opioids. As with China’s earlier ‘zero-tolerance’ policy[17] and law enforcement efforts against the illicit production, trafficking, and use of a wide variety of recreational drugs (most notably methamphetamine), the country’s latest crackdown on fentanyl may too displace the synthetic opioid market and bring further illicit drug production into Southeast Asia. Illicit drug production and other forms of organized crime are known to migrate into places with deep governance problems like the Golden Triangle, and there is growing concern that things will only worsen. Southeast Asia is already facing one of the world’s most intense drug crises and has become a playground for drug gangs, and it is now witnessing a steady rise in potent synthetic opioids.[18] For instance, in January 2018, Canadian authorities reported the first fentanyl seizure trafficked from Thailand via express cargo.[19] A year later, Thailand made its first fentanyl discovery in a batch of street drugs in Bangkok.[20] Even more tellingly, while there were only three synthetic opioids identified in all of East and Southeast Asia in 2014, the number has now risen to 28.[21]
Unlike China, countries in Southeast Asia lack the forensic capacity to identify these new synthetic substances and precursors, and run the serious risk of being unable to manage the situation as it escalates. Making matters worse, given East and Southeast Asia’s large and longstanding heroin market, there is also a high probability that organized crime groups like the infamous Sam Gor syndicate (also commonly referred to as The Company)[22] will start pushing synthetic opioids into the regional heroin supply in an attempt to lower costs and maximize profits.
The case for strategic Chinese leadership
So, what then is the road forward in the fight against this rapidly escalating public health and security threat in Southeast Asia? Moreover, and perhaps more curiously, what role should China play and why? In answering the first question, it is clear that recent developments demonstrate the critical need of strengthening national capacities to persistently enforce existing laws. They also highlight the importance of developing and implementing a regional precursor control strategy and improving the forensic capacity of all countries in Southeast Asia to help identify chemicals and end products. It is also vital that more reliable information on the chemical profiles of seized drugs be generated to better understand the types of chemicals being used for their illicit manufacture. Doing so requires closer monitoring and analysis as well as more effectively identifying emerging trafficking routes and modus operandi of illicitly trafficked and diverted precursor chemicals. Greater cooperation is also needed from the private sector (specifically the pharmaceutical and chemical industries) to inform authorities about suspicious orders and shipments, as China is already doing in some parts of the country.[23] Nevertheless, China has a strategic interest in going further on the precursor trafficking front, especially at a time when Southeast Asia’s escalating synthetic drug problem is drawing in greater regional political concern and more international attention.
To this end, China has a wide set of possible options. First and most pressingly, it should prioritize the issue of precursor control domestically. The country’s National Narcotics Control Commission (NNCC) has already proven its ability to crack down firmly on drug production and distribution in the past, however bolstering its efforts on illicit precursors will require allocating greater public resources to precursor control. Further, it is necessary for Chinese authorities to increase the use of both the Pre-Export Notification (PEN) Online System and Precursor Incident Communication System (PICS). Doing so would strengthen the exchange of information between China and neighbouring countries on seizures, export shipments and stopped shipments of precursor chemicals, illicit laboratories and associated equipment, as well as improve the real-time alert system so that precursors are stopped before reaching manufacturing facilities. At the same time, the ongoing COVID-19 pandemic has set the stage for large-scale consolidation within China’s chemical sector.[24] As larger businesses prepare to acquire smaller ones (those which have been shown to be most often involved in precursor production and distribution), this development will create an opportunity for Beijing to revisit the precursor problem by calling for enhanced private sector cooperation and addressing critical gaps in regulatory compliance and enforcement in local governance.
Beyond this, China’s interests could also benefit from increasing cross-border collaboration on drug and chemical trafficking issues with several Southeast Asian countries, specifically Myanmar and Laos. For instance, it is important to increase monitoring in the northern border areas of Myanmar such as Kachin, bordering China, which is poised to become a new trafficking route as authorities on both sides continue cracking down on the illicit drug trade in neighbouring North Shan State and the southwest of Yunnan province. Such measures are particularly needed considering organized crime’s high degree of adaptability to law enforcement efforts in the region. Although no major precursor chemical seizures or drug production sites have been reported in Kachin in recent years, the situation could quickly and dramatically deteriorate. This could also be true for other vulnerable areas between China and Laos, especially as Beijing’s latest Belt and Road Initiative railway project is set to run right through the Mohan-Boten border which is already an area with extensive illicit trafficking and smuggling. As such, China should opt into better utilizing the UNODC border liaison offices in Kachin and Boten and engage in greater cross-border intelligence sharing and capacity building activities between Yunnan and local Myanmar and Lao law enforcement personnel. Getting ahead of organized crime groups and traffickers by proactively strengthening efforts in both these borderlands may soon prove to be a wise and worthy strategic investment for China. However, whether Beijing fully realizes the stakes at play is yet to be seen. One thing that is certain though is that the measures taken in coming months and years will prove critical in Southeast Asia’s effort against synthetic drugs, and they will also play a role in shaping the region’s attitude towards China. After all, the fact that the world’s most popular brand of crystal methamphetamine is mass-packaged in bags of Chinese ‘Guanyingang’ loose-leaf tea hardly does Beijing any favours.
Source: Australian Federal Police (June 2019)
Conclusion
China’s outward projecting foreign policy demands remaining on good terms with Southeast Asia. In recent years, promises of a “community of shared future” full of “win-win” situations and “people to people connections” have marked a shift in Chinese strategic posture, and Beijing has made it clear that it is intent on convincing ASEAN member states that it is a valuable and trustworthy partner. At the same time, Southeast Asia’s escalating synthetic drug crisis provides a significant opportunity to step up and start building a culture of accountability to help swing perceptions in China’s favour. Recent efforts against methamphetamine and fentanyl have confirmed China’s ability to disrupt drug production quickly and effectively within its own borders, but Beijing must now push further to address and prioritize the lingering issue of precursor chemical production, distribution, and transnational trafficking into the neighbouring areas of the Golden Triangle – and it must move quickly. Should China fail to do so, it risks causing serious damage to its image in Southeast Asia. This is particularly true given the ongoing reshuffling of government imperatives and resources towards the COVID-19 pandemic, which may jeopardize recent efforts to strengthen drug prevention and treatment programmes while enabling organized crime groups to reinforce their foothold in the region. There are also mounting concerns that illicit economic activity will spike up as the pandemic has brought the global economy to a halt. This may stimulate the regional drug market in new ways as a wave of poverty and unemployment sets in, leaving those affected desperately seeking any means of subsistence they can find. With that said, the issue of synthetic drugs in Southeast Asia is complex, and countries in the region are hesitant to point a finger. Should the situation continue to deteriorate, however, it is not difficult to envision where the brunt of the blame will fall.
John Wojcik is a consultant and researcher in Bangkok, Thailand at the United Nations Office on Drugs and Crime Regional Office for Southeast Asia and the Pacific. The opinions expressed are the author’s own and do not reflect the views of the United Nations and other organizations.
[1] Mun, Tang Siew, Moe Thuzar, Hoang Thi Ha, Termsak Chalermpalanupap, Pham Phuong Thao, and Anuthida Qian. The State of Southeast Asia: 2019 Survey Report. Report. ASEAN Studies Centre, ISEAS – Yusof Ishak Institute. January 29, 2019. Accessed July 8, 2020. https://www.iseas.edu.sg/media/latest-news/in-the-news-state-of-southeast-asia-2019-survey/.
[2] The Hudson Institute. “Remarks by Vice President Pence on the Administration’s Policy Toward China.” News release, October 4, 2018. Briefings and Statements. Accessed July 8, 2020. https://www.whitehouse.gov/briefings-statements/remarks-vice-president-pence-administrations-policy-toward-china/.
[3] The Golden Triangle is the area where the borders of Thailand, Laos, and Myanmar meet at the confluence of the Ruak and Mekong Rivers. It has been one of the largest opium-producing areas in the world since the 1950s, and today represents what is believed to be the world’s leading methamphetamine producing region, although this is largely limited to the unregulated borderlands of Northern Myanmar.
[4] Transnational Organized Crime in East Asia and the Pacific: A Threat Assessment. Report. Bangkok: United Nations Office on Drugs and Crime, 2019.
[5] Allard, Tom. “Exclusive: Huge Fentanyl Haul Seized in Asia’s Biggest-ever Drugs Bust.” World News, May 18, 2020. Accessed July 8, 2020. https://www.reuters.com/article/us-myanmar-drugs-exclusive/exclusive-huge-fentanyl-haul-seized-in-asias-biggest-ever-drugs-bust-idUSKBN22U0Q8.
[6] CCICED (2006) Environmental Problems of Chemicals and Strategic Countermeasures in China. Beijing: China Council for International Cooperation on Environment and Development.
[7] Qin Z and Fang L (2006) On the characteristics and investigation of cases of smuggling and trafficking chemicals apt to making drugs. Journal of Political Science and Law 6: 59-64. DOI: 1009-3745(2006)06-0059004.
[8] Qin Z and Zhao T (2007) On existing problem and strategy on the regulation of poisonable chemicals. Journal of XinJiang Police Officers’ Academy 2: 17-21. DOI: 1672-1195(2007)02-0017-(04).
[9] Zhao, Minqi. 2019. “The Illicit Distribution of Precursor Chemicals in China : A Quantitative and Quantitative Analysis.” INTERNATIONAL JOURNAL FOR CRIME JUSTICE AND SOCIAL DEMOCRACY 8 (2): 106–20.
[10] Ibid.
[11] NNCCC (2017) Annual Report on Drug Control in China 2017. Beijing: National Narcotics Control Commission of China.
[12] Zhao, Minqi. 2019. “The Role of China in the Illicit Supply of New Psychoactive Substances.” Ghent, Belgium: Ghent University. Faculty of Law and Criminology.
[13] Blanchard O and Shleifer A (2001) Federalism with and without political centralization: China versus Russia. IMF Staff Papers 48: 171-1; Li H and Zhou L-A (2005) Political Turnover and economic performance: The incentive role of personnel control in China. Journal of Public Economics 89: 1743-1762.
[14] Yu X (2015) Regulation on precursor chemicals related crimes. Chinese Journal of Drug Abuse Prevention and Treatment 21: 276-280. DOI: 10.15900/j.cnki.zylf1995.2015.05.009.
[15] Zhao, Minqi. 2019. “The Illicit Distribution of Precursor Chemicals in China : A Quantitative and Quantitative Analysis.” INTERNATIONAL JOURNAL FOR CRIME JUSTICE AND SOCIAL DEMOCRACY 8 (2): 106–20.
[16] Hannah Beech and Saw Nang. “Raids Reveal Massive Fentanyl Production in Myanmar.” Asia, March 19, 2020. Accessed July 8, 2020. https://www.nytimes.com/2020/05/19/world/asia/myanmar-drug-raid-fentanyl.html.
[17] Zhao, Minqi. 2019. “Supply Reduction Policy against New Psychoactive Substances in China : Policy Framework and Implementation.” INTERNATIONAL JOURNAL OF LAW CRIME AND JUSTICE 60. https://doi.org/10.1016/j.ijlcj.2019.100374.
[18] While fentanyl is not an NPS, its emergence alongside NPS with opioid effects has been observed in many parts of the world.
[19] SDR – confidential Canadian customs source I believe
[20] Mccabe, Samantha. “Southeast Asia’s Looming Fentanyl Crisis.” Opioid Epidemic, December 19, 2019. Accessed July 8, 2020. https://southeastasiaglobe.com/southeast-asias-looming-fentanyl-crisis/.
[21] Synthetic Drugs in East and Southeast Asia: Latest Developments and Challenges – 2020. Report. Bangkok: United Nations Office on Drugs and Crime, 2020.
[22] Sam Gor, also known as The Company, is an international crime syndicate, based in Asia-Pacific. The organization is made up of members of five different triads. Sam Gor is understood to be headed by Chinese-Canadian Tse Chi Lop.
[23] Five-Year Global Plan of Action to Combat Emerging Synthetic Drug Threats. Report. March 1, 2019. Accessed July 8, 2020. https://www.issup.net/knowledge-share/publications/2019-05/five-year-global-plan-action-combat-emerging-synthetic-drug.
[24] Chang, Joseph. “Players Gear up for Chemical M&A Resurgence in H2 2020 – Bankers.” ICIS Explore. June 09, 2020. Accessed July 08, 2020. https://www.icis.com/explore/resources/news/2020/06/09/10517402/us-chem-shares-fall-as-general-market-takes-break-from-rally; “McKinsey Greater China Podcast.” June 05, 2020. Accessed July 8, 2020.