Chinese Name: 水沟谷经济特区/亚太新城
Location: Shwe Kokko village, Myawaddy township, Karen state, Myanmar
Type of Project: Real Estate
Project Developer(s): Yatai International Holding Group Limited (registered in Hong Kong, headquartered in Bangkok, with an associated entity registered in Beijing)
Main Contractor(s): MCC International Incorporation Limited, subsidiary of China Minmetals Corporation
Known Financiers: n/a
Cost: 500 million USD (realised so far, but the company promotional materials states that planned investment amounts to 15 billion USD)
Project Status: Operational
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 Belt and Road Initiative (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 gambling 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 conducted a spectacular public relations (PR) campaign after 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 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.
Finally justice seems to have caught up with She Zhijiang. In 2020, Caixin reported that he was a fugitive on the run from criminal charges in China for operating illegal gambling platforms dating back to 2014. His company denied these reports, but in August 2022, She was arrested in Thailand under an Interpol red notice. Immediately after, media reports indicated that Thai authorities were discussing his extradition with China. At a regular press conference of China’s Ministry of Foreign Affairs on 16 August, ministry spokesperson Wang Wenbin was asked about the arrest of She Zhijiang. Although he did not confirm the arrest or extradition, he said: ‘No matter what corner of the world a criminal suspect runs to, China will initiate law enforcement cooperation with relevant countries and bring the suspect to justice.’ After his arrest, an official from Myanmar Yatai International told The Irrawaddy: ‘It won’t have any impact on Shwe Kokko. He may be arrested for his activities in other countries.’ Colonel Chit Thu told the newspaper on 15 August that the project was currently halted and could not say how it would be affected by the arrest of She, although he also repeated: ‘I think he was arrested for what he was involved in before the Shwe Kokko project.’
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.
In June 2022, an investigative report by Frontier Myanmar found that the project ‘has clearly enjoyed a reversal in fortunes’, observing that multi-storey hotels with signs in Burmese and Chinese had been built, in contrast to the construction sites they viewed on a previous visit two years ago. An official from the Department of Immigration in Myawaddy informed Frontier that there were 1,225 Chinese nationals legally residing at Shwe Kokko, with an unknown number believed to be working there illegally. The area remains under the tight control of the Border Guard Force, and information on what is going on inside the zone is scarce. However, Frontier found evidence that the now global industry of Chinese-led online scams has taken up roots there. According to an accountant working in the zone, companies are recruiting people to work in online scams there, sometimes on false pretences, luring workers with promises of high-paying jobs in casinos or online marketing. In what has become a common story across the region, especially in Cambodia, those who wish to leave are held against their will and forced to pay ‘compensation to leave’.
18 August 2022: Added information regarding arrest of She Zhijiang by Thai police.
23 June 2022: Added information on project moving forward after the 2021 coup, as reported by Frontier Myanmar.
15 May 2021: Updated by the editors to reflect developments in Karen State as conflict between KNLA and Tatmadaw intensified following February coup. With BGF offering its support to the Tatmadaw, media reports indicate the investigation into the project may be dropped, and that it may restart as a BGF-Tatmadaw joint venture.