U.S. Hunger For Opioid Alternative Drives Boom in Borneo Jungle

(Bloomberg) -- Deep in the lush jungles of Indonesian Borneo is the remote region of Kapuas Hulu, a dizzying 12-hour drive along narrow, twisting roads from the nearest city. Until recently, most villagers eked out a living working at nearby rubber plantations or gold mines.

Now, thanks to the opioid epidemic in the U.S., one of the hottest local commodities is a controversial plant called kratom that fans call a natural alternative to synthetic painkillers but U.S. regulators say isn’t safe. Demand from the U.S. has turned Kapuas Hulu into a boom town: Newly affluent residents have built additions to their houses and workers drive the latest model Honda motorcycles.

Outside of the village, on a piece of land hacked out of one of the world’s oldest rain forests, entrepreneur Abdul Hamid oversees a plantation owned by villagers that grows 2.5-meter-high kratom trees. Workers pick the leaves and process them at a facility in town. Hamid sells the final product to dealers who then export to the U.S. and foreign markets via Facebook, Twitter, Instagram and online stores.

“Kratom runs the economy here,” said Hamid, who put the number of people employed in kratom-related businesses at 60,000.

As the death toll from opioid overdoses rises, Americans looking for different ways to relieve chronic pain or to wean themselves off painkillers have turned to kratom, a coffee-like evergreen that Southeast Asian farmers have long chewed to relieve pain.

Falling prices for key commodities like rubber and palm oil have caused economic growth in Indonesia -- Southeast Asia’s largest economy -- to hover at 5 percent, well below the government’s target of 7 percent. In Borneo, an island that’s mostly Indonesian territory, hundreds of local businesses have sought to bypass the commodity plunge by moving into kratom.

The good times, however, are now no longer a sure thing because of pressure from the other side of the Pacific Ocean. The U.S. Food and Drug Administration has warned about the harmful effects of kratom products and associated them with 44 deaths in
the U.S.

Most of the product consumed in the U.S. comes from Indonesia, where the government bans local consumption but allows exports. (While the plant is also native to Thailand and Malaysia, the governments there ban its distribution.)

While the U.S. has not implemented a complete ban, the FDA is fighting kratom on multiple fronts, having issued import alerts, seized products, ordered recalls and published warnings. According to the Pew Charitable Trusts, several states and cities including Alabama, Arkansas, Indiana, Wisconsin, Denver and San Diego have banned kratom.

Kratom has an effect on the brain similar to that of opioids, and in a May 22 statement FDA Commissioner Scott Gottlieb said it “may actually contribute to the opioid epidemic and puts patients at risk of serious side effects.” In recent months, the FDA has issued warning letters against three U.S. kratom distributors for alleged illegal sales and linked a salmonella outbreak that has infected 199 people in 41 states to contaminated kratom products.

The salmonella infections and the FDA restrictions represent the biggest threat yet to what had been a booming industry in Indonesia. According to the Botanical Education Alliance, an organization that lobbies for kratom products, there were about 10,000 kratom vendors in the U.S. in 2016, with annual revenue over $1 billion.

Although the Indonesian industry sells globally, it operates in an area where maintaining strict cleanliness standards isn’t so easy. In Kapuas Hulu, after women with wicker baskets hanging around their necks collect leaves by hand, barefoot workers in shorts and T shirts sort them in small factories, often handling the leaves without gloves. Near processing facilities in the provincial capital, Pontianak, chickens and ducks run freely and garbage rots in the tropical sun.

The Indonesian-processed kratom usually reaches Americans in pill or powder form. Last year exporters in and around Pontianak -- the part of Borneo that is the industry’s hub -- sold as many as 400 tons of kratom products per month, according to Suhairi, chairman of the Indonesia Kratom Entrepreneurs Association (who, like many Indonesians, has one name). Now, because of the salmonella scare, he said monthly volume is down to 100 tons.

A 50-year-old father of two, Suhairi is co-owner of exporter CV Equator Botanical, having quit his civil servant job in Pontianiak in 2015 to go into the kratom business. “I decided to focus on one business that could provide more income for me and my family,” Suhairi said. “I asked my friends about kratom and I imagined that money was very easy for them.”

Most of Equator Botanical’s sales are to exporters based in Jakarta, but the company says it also sells direct to buyers in the U.S. who find it on Facebook.

The Indonesian industry acknowledges that there are some risks of addiction from kratom. Some exporters are shipping to third countries like Peru for added processing before sending products to the U.S. To keep business growing, some processors are increasing the cleanliness in the crushing and drying process and are using ultraviolet lights to kill bacteria.

“Thank God, after we implemented that and reassured our buyers, sales returned to normal,” said Mukminin Arief, 32, owner of Butterfly Botanical, a kratom processor and exporter in Pontianak. Still, staying in business isn’t cheap.

“I need cash flow of at least 10 billion rupiah ($708,000) per month for buying leaves, paying employees, packaging and processing,” said Hamid, who has a master’s degree in politics and used to be in the timber business. Rubber used to put food on the table and pay for school tuition, but it was kratom that brought motorcycles and cars into the neighborhood, he said.

One of his employees, 45-year old Nurhayati, quit her job at a rubber plantation two years ago and now makes 1.2 million rupiah ($84) a month packaging crushed leaves into plastic bags. “It’s the best job in town,” she said.

--With assistance from Emma Ockerman, Eko Listiyorini and Anuradha Raghu.

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net, Thomas Kutty Abraham Anjali Cordeiro

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