Philippines: Drugs are bigger problem than rebels.

MANILA, Jan 22 (Reuters) - The Philippines faces a more serious threat from illegal drugs than from communist rebels or Islamic militants, and the trade threatens to influence elections next year, the head of the anti-narcotics agency said on Thursday.

Dionisio Santiago, a retired general, said he believed the illicit drug trade, worth an estimated 300-400 billion pesos a year ($6-8 billion), was the nation's biggest security threat.

"This is an international problem," Santiago told foreign correspondents in Manila, adding authorities were concerned by reports that drug money could fund politicians in the May 2010 presidential and congressional elections.

"I have been telling you a long time ago that there is narco-politics already in the country. No less than the interior secretary said, with the elections 2010 nearing, he is worried drug money may come into play."

Santiago, who spent much of his military career in the intelligence service, said he had information that politicians at local and national level were involved in the drug trade, protecting and even financing syndicates.

Last week President Gloria Macapagal Arroyo assumed the role of the country's anti-drug czar to oversee the government's all-out war against the spread of illicit substances such as amphetamines and marijuana. Santiago said the president had ordered him to crack down on all groups and individuals engaged in the cultivation, manufacture, distribution and sale of illegal drugs. "She said she couldn't care less whether they are administration or oppositon politicians," he said.

Santiago said his agency had also received reports that communist and Muslim rebels were turning to drugs to raise funds to sustain their rebellions. Based on intelligence reports, around 17 percent of proceeds from about 90 marijuana production bases were used to fund Maoist-led New People's Army activities, including buying weapons and training and feeding around 5,000 cadres. Santiago said clandestine drug laboratories had also been found in areas where Muslim separatist guerrillas were active.

Last year, a 6-hectare marijuana plantation was discovered on the restive southern island of Jolo. He said about 30 million pesos worth of marijuana had also been seized on another southern island from the Abu Sayyaf group of rebels in 2008. "It's not much compared to what rebels in Colombia do, but you could just imagine how many guns could that money buy for the Abu Sayyaf," Santiago said. (Reporting by Manny Mogato; Editing by Raju Gopalakrishnan and David Fox)