TNAG-0560-FCO40-655-Review-of-narcotics-problem-in-Hong-Kong-1975 — Page 31

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5. Effect on Opium Production. Since March 1973, the price of opium has risen 400%, but there is no evidence that the rise in price has resulted in a rise in production. In fact, among some

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tribes a price rise often means a fell in production, and Bince nearly all opium is cultivated by the family unit without hired labour. production is limited to the labour resources of the individual family and cannot be auch increased. Over ten years a. steady rise in opium prices would probably bring other families and villages into opium production, but this would be a slow process restricted by agricultural and cultural considerations, the immense conservatism of the Shan peasant, an his profound distrust of opium prices which have always been known to fluctuate as unpredictably as the weather.

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6. Effect on Opium Prices. Any long term purchase of Chan opium would, however, certainly raise the price of opium on the black market, and this could tempt, some merchants to try to snupple part of the crop. To prevent this, the proposers have offered to permit inspection and to cooperate to prevent snuggling. They are, in principle, willing to attack any opium convoys not abiding by the terms of an agreement signed by them, but they point out that this would cost a great deal in recources and man- power and that they are being paid nothing more than the market price for their opium. The success or failure of any Shan narcotics deal will eventually hang on this issue, but I believe it would be better left to a later stage when some sort of negotiating confidence has been established on both sides. If even 30% of the opium crop should be snuggled in the initial years of an agreement, it would still be an improvement on the 955 which now evades the police. And every year thefinformation gained through the agreement should make future smuggling more difficult.

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Information. Probably the greatest benefit to be derived from these proposals is a toehold in an area that has been completely closed to research. The Chan leaders believe that an eventual solution can only come from an accurate and thoroughl researched understanding of the opium problem and are, therefore, willing while negotiations seem promising to provide almost information or data-collecting facilities that they are asked for In the long term this knowledge and expertise, rather than any short term device such as pre-emptive buying, will eliminate the problem.

2. Effect on Civil Disorders. It is important to note that under these proposals the Shans will only be receiving the market price for opium that they would have otherwise sold on the black market . The effect will be to divert narcotics from an illicit, to a licit, purchaser, but it will not, in any way, provide additional finance for civil disorder.

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Adhesion Camell

Baughch 24th 5.