One booming Chinese Cybercrime Industry Town in Myanmar
Re-post from The People’s Map of Global China, by PLATO CHENG
Original title and source: Shwe Kokko Special Economic Zone / Yatai New City
TL;DR: The first known project claiming to be associated with the Belt and Road Initiative (BRI) but publicly disavowed by the Chinese government, the Yatai New City is an example of how globalised Sinophone criminal networks take advantage of the BRI brand and engage in illegal activities in geopolitical ‘black spots’ in the Global South. Jointly developed by a Karen warlord operating under the auspices of the Myanmar army (Tatmadaw), Saw Chit Thu, and a Chinese fugitive with a Cambodian passport, She Zhijiang, it aims to turn the former’s headquarters, Shwe Kokko village in the Karen (also known as ‘Kayin’) state of Myanmar, into a ‘smart new city’ ostensibly catering to the development of the IT industry, but actually a safe haven for online gambling/fraud operators.
In Myanmar's Karen State, Ex-Insurgents Create a Haven for Chinese Casino Bosses (irrawaddy.com)
The New Yatai City project takes advantage of the disaggregated sovereignty in Myanmar’s borderlands, the armed autonomy of a local warlord, Thailand’s modern connectivity, as well as the ambiguity of the BRI brand to build a ‘Silicon Valley’ for Sinophone cybercriminals, which presumably refers to the blockchain technology used to facilitate the transactions within the City. The area near Shwe Kokko village used to be a stronghold of the Karen National Liberation Army (KNLA). Following an intra-Karen split, the Burmese army (Tatmadaw) took over the area in 1995 with the help of a former local KNLA officer, Saw Chit Thu. As a reward for his service, Saw Chit Thu was allowed to run the area undisturbed and control the border with Thailand. With the earlier population mostly displaced to refugee camps right across the Moei river in Thailand, the area was settled by Saw Chit Thu’s people, their entourages, his estimated 6,000 troops, as well as people who bought land from them. A new village called Shwe Kokko was then established.
Ever since the turn of the millennium, both armed groups and national governments in Southeast Asia have tried to tap into the multibillion dollars Chinese online gambling market. Starting from the early 2010s, the market has been dominated by online operators based in Cambodia and the Philippines. Saw Chit Thu’s main partner in the project, Tang Kriang Kai, also known as She Lunkai, She Zhijiang, or Dylan Jiang, is a former People’s Republic of China (PRC) citizen who made his fortune in the online gambing business in the Philippines and then reemerged as an ‘overseas Chinese’ when he was granted Cambodian citizenship by a royal decree in January 2017. Instead of keeping a low profile, She Zhijiang has conducted a spectacular public relations (PR) campaign since his appearance in Shwe Kokko, fashioning himself as a successful and patriotic member of the overseas Chinese business community and his project as an important component of the BRI.
Among other things, in July 2019 Yatai signed a cooperation agreement with a company affiliated with the China Centre for International Economic Exchanges, a top government think tank, drawing the latter’s involvement in the planning of the China–Myanmar Economic Corridor to imply Shwe Kokko’s connection with Beijing’s initiative. She Zhijiang has also teamed up with a group of other Hong Kong and PRC individuals to advance the project, including PRC nationals Ma Dongli and Li Feng, shareholders of the PRC-based Yatai Zhihui Fazhan (Beijing) Company, as well as Zhong Baojia, an ‘overseas Chinese entrepreneur’ who has been a member of the Hainan Committee of the Chinese People’s Political Consultative Conference (CPPCC) and has been involved in introducing investors into the casino zone.
By the late 2010s, both Cambodia and the Philippines were subject to increasing pressure from the Chinese government to rein in the excesses of the online gambling/fraud industry. In order to survive, the sector, especially its more fraudulent sections, needed a highly accessible place where the influence of the Chinese authorities is minimal. Shwe Kokko perfectly fit the bill. It is a personal fiefdom run by Saw Chit Thu’s Border Guard Forces (BGF), which are nominally under the Tatmadaw but practically act as his personal army. This means that although technically under Burmese sovereignty, the area is beyond the effective control of the Burmese state, with no Burmese immigration or customs control on the border and Burmese officials forbidden from entering the area without informing the BGF in advance. In addition, the location has access to the wider world through Thailand’s electric grid, telecommunication network, roads, and airports, while physically and legally separated from it by a river.
One of the city’s key selling points was originally a relationship with the Singapore-based company BCB Innovation Pte Ltd, which developed an application known as Fincy, as well as a blockchain to record all transactions in Shwe Kokko. The Fincy Application went online in 2020 without any approval from the Myanmar government, and was used to facilitate gambling transactions and money transfers into Shwe Kokko. After this was exposed in August of 2020, BCB announced that Fincy was officially withdrawing from the project.
Yatai claims that investment into the project will reach 15 billion USD, although the 59 villas that it has obtained approval from the Myanmar Investment Commission (MIC) to build would cost only 25 million USD. Construction that has taken place so far is estimated to cost around 500 million USD.
The Moei river, separating Thailand from Myanmar. Credit (CC): @arcibald, on Flickr.com.
Employment & labour rights: The resident Chinese-speaking online gambling/fraud operators in the Yatai New City provide jobs that are very highly paid by local standards to people with basic Chinese and computer literacy. However, these positions come with stringent rules and strict controls. According to an investigation by the Chinese media Caixin (republished here in English), the project has attracted Chinese-speaking workers from Myanmar and Thailand, as well as mainland China. These workers are paid more than 900 USD/month and given free accommodation. However, if they want to quit in less than six months, they need to pay compensation to their employer and have no legal recourse under either Myanmar, Thai, or Chinese laws.
Armed conflicts: The Myanmar government has launched an investigation into the Yatai New City project amid increasing media scrutiny. This unavoidably disturbed Saw Chit Thu’s autonomy and has led to clashes between the Tatmadaw and BGF. It was reported in January 2021 that Saw Chit Thu and his soldiers, being pressed by the Tatmadaw, are on the verge of resigning from their Tatmadaw assigned posts. If this is to materialize it will further aggravate the tense security situation in the area and potentially create more active conflicts.
Governance: Before the February 2021 coup, the Tatmadaw was investigating at least three senior officers for taking bribes from the BGF to turn a blind eye on the Yatai New City project. Following the coup, the Tatmadaw has ceased all pressure on the project. In May, it was reported that the Tatmadaw and the BGF were in discussions about restarting the project as a joint-venture.
The construction of the Yatai New City started in early 2017 and online gambling/fraud operators have been moving in since late 2017. In 2018, the long-established aid worker community in Mae Sot, Thailand, started to notice the increased presence of Chinese-speaking and looking people in the area, and became suspicious. Initial English-language media reports mistakenly identified the company involved as Jilin Yatai Group, a Chinese local government-controlled company that shares the anglicised spelling of the name with Yatai, the actual company behind the project, which only worsened the suspicion that it was a scheme of the Chinese state. Influential commentators also relayed the misinformation. For example, the Chiangmai-based veteran journalist and a long-time Myanmar watcher Bertil Lintner claimed the Yatai project to be a stratagem by the Chinese government to build an ‘outpost’ for the BRI, alluding to ‘regional intelligence analysts’. This narrative was then picked up by the US Congress, which, in the 2019 Senate appropriations bill, claimed that the PRC was trying to colonise the ‘Karen territory’ with ‘320,000 Han Chinese’ settlers, and allocated millions of dollars to counter the PRC’s influence in the area, and directed the ‘[United States Agency for International Development]… to support Karen and Thai activists in increasing transparency … surrounding this project.’ This clause was eventually removed from the final appropriations act.
To appear more legitimate, the ‘Myanmar Yatai International Holding Group’, the locally registered subsidiary of Yatai International Holding, applied to the Myanmar Investment Commission (MIC) and received permission for a project to build ‘59 luxury villas’. The company then used this permission to claim that they were the ‘only Chinese company to be certified by the MIC in Myanmar’s history’. They also market their project as an important node on the so-called China–Myanmar–Thailand Economic Corridor, a concept invented by the company but which sounds similar to China’s state-led cross-border economic corridors under the BRI.
The Karen state government claims to have ordered Yatai in early 2019 to stop construction beyond the MIC-approved scope and Saw Chit Thu stated in August 2019 that the work had stopped. The Myanmar Union government announced in June 2020 that it had formed a tribunal to investigate ‘irregularities’ in Shwe Kokko. After communicating on the issue with senior general Min Aung Hlaing in July 2020, the Chinese Embassy in Yangon issued an official statement in August, voicing support for Myanmar’s investigation and stating that the Shwe Kokko project was ‘a third-country investment’ and ‘ha[d] nothing to do’ with the BRI. Later in August, in a post on WeChat, Yatai denied any wrongdoings and blamed some of their tenants for ‘probably’ running illegal businesses without their knowledge. The company also reiterated its efforts to serve the BRI. In October, it was reported that the Tatmadaw was investigating at least three senior officers in connection with the Shwe Kokko project.
In December, stories emerged about clashes between the BGF and Tatmadaw. The tension intensified in January 2021 with Tatmadaw pressuring Saw Chit Thu to resign from the BGF and his soldiers threatening to resign with him. Following a Tatmadaw military coup on 1 February 2021, Saw Chit Thu declared that his forces would not take sides. Since then, the situation has evolved significantly and the Tatmadaw and the KNLA are engaged in the intense conflict. Whereas the KNLA has offered protection to anti-junta demonstrators, the BGF is providing support for the Tatmadaw crackdowns as well as operations against the KNLA. In May, Frontier Myanmar reported that BGF loyalty to the Tatmadaw has paid off, and its casinos and illegal trade gates on the Thai border have reopened. There is also talk of the Shwe Kokko project resuming as a joint venture with the Tatmadaw. According to one BGF member quoted by Frontier Myanmar: ‘Before the coup, the military didn’t allow us to continue the Shwe Kokko project, but now we’ve heard that they will allow us to resume it as a joint venture with the Tatmadaw. They will also stop the investigation launched by the NLD government.’
The project is just one example of a series of projects under construction that are driven by murky Chinese business networks, often involving Mainland China (or Macau / Hong Kong)-born individuals who have acquired citizenship in a Southeast Asian country. Although it has received the most media attention, there are several major projects in Karen state. As reported by United States Institute of Peace (USIP), all utilise links to military or armed groups, operate in violation of local gambling laws, and resort to unregulated digital payment and currency platforms, which are known to be an important tool for illicit financial flows and money laundering. According to China’s Ministry of Public Security, at least 1 trillion yuan (145.5 billion USD) worth of funds flow out of China into gambling every year, aggravating the country’s economic and financial security risks. These projects can therefore be expected to remain in the headlines throughout 2021.
Pa-Oh women on the road (Myanmar 2013). Credit (CC): Paul Arps, on Flickr.com.
See original article for in-depth sources.