Connecting Regions of Asia.

Chinese Crime Networks Partner Myanmar Armed Groups

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Along the banks of the Moei River that separates southeastern Burma from Thailand, three new cities are emerging on the traditional lands of Burma’s ethnic Karen. Not long ago, the area was wracked by intense combat between the Myanmar army and Karen nationalists. Today, hotels, casinos and condos are sprouting in unauthorized “special economic zones” owned and operated by murky Chinese business networks in partnership with local, mutually hostile armed groups. Of the three deals behind these cities, two were signed between January and March while the world focused single-mindedly on the spreading coronavirus. In total, 157 square kilometers of Burmese territory have fallen under control of Chinese enterprises tied to gambling, money laundering, cryptocurrency, and even criminal networks.

A Chinese worker tries to communicate with Burmese workers near new oil storage tanks for a Chinese oil and gas pipeline project, on Myanmar's Maday Island, May 4, 2013. (Sim Chi Yin/The New York Times)
A Chinese worker tries to communicate with Burmese workers near new oil storage tanks for a Chinese oil and gas pipeline project, on Myanmar’s Maday Island, May 4, 2013. (Sim Chi Yin/The New York Times)

Although the first of these developments began three years ago, the pace picked up in August of 2019 when Chinese and Cambodian police began cracking down on Chinese firms behind internet wagering, illegal casinos, and gang violence in Cambodia’s Sihanoukville.

Civilian residents of Karen State have reacted with alarm to this invasion, fearing that it will overwhelm the state’s civilian institutions, entrench criminal activity in its economy, undermine economic and development reform, and disenfranchise the native population. How, they asked, were the investors managing to evade regulation by the Myanmar government? Why would military and civilian leaders fail to recognize the threat to peace posed by allowing non-state armed groups to partner with suspect foreign interests?

This is not simply a local problem. These projects represent a major challenge to U.S. interests. They include individuals with a deep history of involvement in known triads—Chinese organized crime groups—active in the U.S. and now expanding into Myanmar’s Karen State, bringing criminal activity to the heart of Myanmar’s peace process. For decades, the United States has centered its interests in Myanmar on promoting sustainable democracy, more recently investing heavily in the pursuit of a stable peace, an end to conflict and equitable economic development. This development clearly flies in the face of U.S. objectives.

Conflict in Karen

To understand what’s happening in Karen State requires a brief review of multi-faceted conflict in the area.

The Karen National Union (KNU) and its armed wing, the Karen National Liberation Army (KNLA) have been at war with the Myanmar government since 1949. Over the years, several factions broke away from the largely Christian KNLA to form their own armed groups, most notably the Democratic Karen Buddhist Army (DKBA) in 1994. In 2009, the Myanmar army announced a plan to incorporate ethnic armed organizations into a “border guard force,” which would be permitted to develop their own territory as proxies of the military. Factions of the Democratic Karen Buddhist Army joined this scheme, under the leadership of Karen border guard leader General Saw Chit Thu—a figure behind two of the new city projects. Under the military’s direction, Chit Thu’s force has participated in organized attacks against ethnic armed organizations in both Karen and Mon States.

Meanwhile, the KNU signed a Nationwide Ceasefire Agreement (NCA) with the Myanmar government in 2015. With the peace process now stalled, KNU leaders are considering different avenues to autonomy, and their commitment to the NCA has become precarious. Tensions between the KNU and the army and its border guard force have erupted in fighting between the two sides as recently as February.

In short, these three deals with Chinese investors involve armed groups on both sides of the conflict in potentially lucrative development projects representing a total proposed investment of $36 billion. Promotional materials for the latest project indicate an expected 10-fold return on land transactions alone. Similarly, the Yatai Company’s promotional materials show a total valuation of the Yatai/Shwekoko project reaching $202.2 billion by 2027. Combined, the three projects promise to bring hundreds of thousands of people—presumably Chinese—into one of the world’s most fragile conflict hotspots.

Behind the Developers

The Chinese enterprises behind these three projects have several things in common: Their leadership have links to criminal networks or actors involved in illicit activities; they have pre-existing organizations engaged in casinos and crypto currencies; they claim—apparently falsely—to be associated with Beijing’s Belt and Road Initiative and flaunt connections with key Chinese government agencies; their activities in Cambodia led to a crackdown by the Cambodian and Chinese governments.

Each of the projects has different sets of investors, working with various configurations of Karen armed groups.  

  • The Yatai New City Project (Shwekoko) results from an agreement signed in July 2017 by the Karen border guard force (BGF) and the Hong Kong-registered Yatai International Holdings Group (IHG). Yatai IHG has positioned the BGF, and the national armed forces behind it, to generate a handsome income through Chinese investors forced to leave Sihanoukville by the crackdown on illegal casino activities. The company’s founder has significant business interests in Cambodia, Philippines, and Palau, with a focus on blockchain and entertainment. The city is advertised as the “only area in Shwekoko that is authorized to operate casinos,” and its business plan identifies casinos as the top source of revenue, expected to reach $11.4 billion by year 10. The city will be built to accommodate a population of 450,000.
  • The Saixigang Industrial Zone Project is also designed to house Chinese businesses being forced out of Cambodia by the China–Cambodia law enforcement program. (In Chinese Saixigang translates roughly as “Surpass Sihanoukville”—the stated objective of its proponents.) The key figure behind the project is one of Asia’s most notorious former triad leaders, Wan Kuok-kui, whose 14K triad was implicated in 14 murders in Macau, leading to his arrest and conviction in 1999. The 14K mafia remains active, with an estimated 20,000 members engaged in illegal activities spanning the globe. According to experts on Chinese criminal organizations, it has a deep presence in the United States in the heroin trade, illegal gambling, extortion and human trafficking. After his release from prison in 2012, Wan, who now heads the Dongmei Group Company, entered into real estate development in Cambodia, later launching a cryptocurrency named the “triad coin.” Wan’s Dongmei Group, which was established in partnership with a Malaysian businessperson, is the key investor in the Saixigang Zone.
  • The Huanya International City Project, located in Karen National Union-controlled territory in the city of Myawaddy, involves Saw Roger Khin, a member of the Karen National Union Executive Committee and head of the KNU Defense Department. Its Chinese investors include the Huanya Company and the Association of Business Federations of Sihanoukville. One company has already begun construction of a casino in the zone. The fact that the KNU Economic Committee has not approved this project raises questions about whether Saw Roger Khin is acting on his own or whether, as some observers suggest, the KNU’s involvement is motivated by its competition with the border guard force for lucrative revenue streams as a hedge against the possible failure of its relationship with the military under the Nationwide Ceasefire Agreement. In fact, the KNU may not fully understand the criminal background of some of the Chinese investors and their apparent intentions to control large parts of the Karen State. In the case of the Shwekoko project, for example, the key investor, under the alias Dylan She, already refers to Yatai City as “his city” and seems to have largely ignored Myanmar government efforts to regulate his activities there.

Global Concerns

These three projects present a range of concerns for Karen state, Myanmar as a whole, and more broadly, Myanmar’s relations with the rest of the world.

In Sihanoukville illegal gambling fueled a massive property bubble, pushing the local population out of the city. The city’s gradual Sinification further drove out locals, as it became difficult to engage in business without Chinese-language ability. Casinos brought with them members of the Chinese mafia, who sometimes violently attacked local police or managed to co-opt them.

The growing lawlessness finally forced the Cambodian government to plead with Beijing for assistance in a crackdown. Meanwhile, Cambodia gradually lost its access to international finance as a result of rampant money laundering. Given the size and scope of the Chinese investors’ plans for these cities and the fragility of Karen State, the negative effects could be even more potent than in Sihanoukville.

None of these projects has received proper approvals from the Myanmar Investment Commission or the National Economic Coordination Commission, nor have they been reviewed by the national legislature, the Union Parliament. Some have already started to host unregulated gambling, including online gambling. While the Union government is planning to legalize gambling in some form, the new law has not been passed and casino licenses have not been issued, contrary to what the Chinese investors are saying publicly in their promotional materials.

Belt and Road Connections?

In their public narratives, the three companies claim to be operating under the umbrella of China’s Belt and Road Initiative (BRI), risking the reputation of the Chinese government in Myanmar and internationally. Besides casting an aura of criminality over the BRI, these actors are likely to generate considerable costs for Chinese law enforcement.

Failure to act now to help Myanmar curtail these projects could easily create the impression that Beijing seeks to discourage Western investment by permitting the corruption of Myanmar’s economy and banking system. Some Chinese officials may also see the spread of complex Chinese criminal networks throughout the country as a prelude to securing a permanent foothold on Myanmar’s Indian Ocean coast: Rampant criminality might ultimately push Naypyitaw to invite in China’s police and state-owned enterprises to control the situation, as happened in Cambodia. Such a scheme could explain why Chinese authorities have supported the Yatai Company’s efforts to build influence with the Karen State government via large donations of pandemic-related medical supplies.

COVID-19 and Dimming Prospects for Peace

Myanmar, like the rest of the world, is absorbed in responding to the global coronavirus crisis. The Chinese investors in these projects, by contrast, are plowing ahead with construction of housing estates and casinos. Without U.S. and allied support to help Myanmar resist this form of investment, the government will lack the capacity to fend it off. Instead, armed actors will gain influence, Karen’s hopes for autonomy will fall victim to foreign ownership, and new forms of violent conflict could engulf this fragile territory.

(( Jason Tower AND Priscilla A Clapp have written this article for United States Institute of Peace ))

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