A new prescription: New Zealand’s plan to regulate designer drugs is better than trying to ban them and failing

A new prescription: New Zealand’s plan to regulate designer drugs is better than trying to ban them and failing

Aug 10th 2013 |From the print edition

AS THE world’s drug habit shows, governments are failing in their quest to monitor every London window-box and Andean hillside for banned plants. But even that Sisyphean task looks easy next to the fight against synthetic drugs. No sooner has a drug been blacklisted than chemists adjust their recipe and start churning out a subtly different one. These “legal highs” are sold for the few months it takes the authorities to identify and ban them, and then the cycle begins again. In June the UN reported more than 250 such drugs in circulation.

An unlikely leader in legal highs is New Zealand. Conventional hard drugs are scarce in the country, because traffickers have little interest in serving 4m people far out in the South Pacific. Kiwis therefore make their own synthetic drugs, which they take in greater quantity than virtually anyone else. The government shuts down more crystal-meth labs there than anywhere bar America and Ukraine. But the business has adapted. First it turned to benzylpiperazine, which a third of young New Zealanders have tried. When that was banned in 2008, dealers found plenty of other chemicals to peddle. Today the most popular highs are synthetic cannabinoids, which pack a harder punch than ordinary cannabis.

Sick of trying to keep up with drugmakers, the government is trying a new tack. Last month a law was passed which offers drug designers the chance of getting official approval for their products. If they can persuade a new “Psychoactive Substances Regulatory Authority” that their pills and powders are low risk, they will be licensed to market them, whether or not they get people high. Drugs will have to undergo clinical trials, which the government expects to take around 18 months—much less than for medicines, because the drugs will be tested only for toxicity, not for efficacy. Drugs that are already banned internationally, such as cocaine and cannabis, are ineligible. Only licensed shops will sell the drugs, without advertising and not to children.

The arguments for legalisation—that it protects consumers, shuts out criminals and saves money while raising tax—are familiar to readers of this newspaper. Yet it requires careful regulation to ensure that its outcome is not worse than widely ignored prohibition. New Zealand must now get the details right. The government has yet to define “low risk”. Set the bar too high and the policy will be prohibition by another name; too low and potentially lethal products will be on sale legally. (They are already, in the form of alcohol and tobacco, but consistency is hardly a feature of drug policy.) Nor does anybody know what level of taxation will most effectively deter consumption without encouraging a black market. Similar debates are under way in Uruguay, which is poised to legalise cannabis, and in Colorado and Washington state in America, which voted to do so last year.

Trust the health ministry over the mafia

These tricky questions may look like weaknesses in the policy. In fact, they are its strength. While New Zealand and Uruguay are discussing what level of toxicity or what dosage is acceptable, every other country is leaving the matter to drug dealers, who do not care about quality control and who peddle to children on the same terms as adults. As New Zealand ponders what rate of tax to levy, in the rest of the world the business is tax-free. A hard road lies ahead for New Zealand and its fellow policy innovators. But every dilemma they face is a reminder that, unlike other jurisdictions, through government they are regulating the drugs business, not the gangs.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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