In Myanmar's Karen State, Ex-Insurgents Create a Haven for Chinese Casino Bosses

By Aung Zaw 28 August 2020

MAE SOT, Thailand—Along Karen State’s border with Thailand, I have witnessed first-hand the development of the conflict between Karen insurgents and Myanmar soldiers over the past three decades.

Countless journalists, aid workers, researchers and diplomats have traveled to the border area to see for themselves the war zone and those who inhabit it—the refugees and prisoners of war, the injured rebels and soldiers, the landmine victims and captured spies, and the wounded souls. In the past, villagers who strayed too close to the combat zone could suddenly find themselves, along with hundreds of others, suddenly hauled to the frontline and forced to work as porters. A seemingly endless stream of horrifying tales emerged from the region; stories of terrible maltreatment, of people dying of hunger and malaria, and of porters being used as human shields on the battlefield.

We journalists covering the conflict met and interviewed political prisoners and politicians fleeing repression in Myanmar for refuge in the “liberated zone”—the Karen insurgents’ headquarters in Manerplaw. From there they continued to what was then the sleepy Thai town of Mae Sot, across the border from Myawaddy.

The Irrawaddy’s founding editor-in-chief Aung Zaw (left) interviews the late KNU leader General Saw Bo Mya near the Thai-Myanmar border in 1998.

In the late 1980s, the Myanmar military (or Tatmadaw) launched several military offensives and took over Kawmoora, which had been a stronghold of the Karen National Union (KNU).

In those days, taking over a mountain or mopping up a strategic hill would take months, if not years, and many lives would be lost on both sides. Today, veteran Karen fighters say, the Myanmar army no longer dispatches infantry units in such situations; instead, it sends in Russian-made helicopter gunships armed with missiles to take down insurgent outposts.

Nerdah Mya (third from right in an army sweater), the son of the late KNU leader General Saw Bo Mya, with Karen rebels in the jungle in Karen State in the early 2000s.

The last major battle between the two sides was fought in 1995 along the Thai-Myanmar border. After the fall of Manerplaw, which served as a base for an umbrella group of forces opposed to the military regime, the famous Kawmoora base also fell to the army’s onslaught. In the decades since then, the Karen armed movement has gradually transformed into something altogether different.

The DKBA & Saw Chit Thu

As the leaders of the KNU fled their Manerplaw headquarters, the Karen armed movement splintered into several groups.

One of these, the Democratic Karen Buddhist Army (DKBA) led by Saw Chit Thu, decided to throw in its lot with the Myanmar military; in return he was given control of Kawmoora. In 2009 this process was completed as Saw Chit Thu’s forces were transformed into a Border Guard Force (BGF) under the ultimate command of the Myanmar armed forces.

Saw Chit Thu’s aim in joining the BGF was to stabilize his group’s relations with the military regime, then known as the State Peace and Development Council (SPDC). He and his officers calculated that it would be good for business.

KNU troops during the 70th annual Karen Revolution Day at the Karen National Union’s headquarters in Paan District, Karen State in 2019. / Htet Wai / The Irrawaddy

Indeed, this was the subject of the cover story of the August 2010 issue of The Irrawaddy magazine, which asserted that Saw Chit Thu and his group were by that time interested solely in business, and gave an account of the personal business empire the Karen commander was then building.

Such a transformation suited the Myanmar military just fine; a similar process had already occurred on the northern border with China, where notorious insurgent groups including the Wa and Kokang, having reached ceasefires with the junta in 1989, were granted total freedom and “autonomy” to open casinos and engage in drug trafficking and other illicit trades. This is all fine too. When these groups launched their illicit activities, they did so with the blessing of the military junta, which at that time was known as the SLORC (the State Law and Order Restoration Council—the predecessor of the SPDC).

The Border Guard Force celebrates its ninth anniversary at Shwe Kokko on Aug. 20, 2019. / Htet Wai / Irrawaddy

Among his many commercial interests, Saw Chit Thu, as commander of BGF Special Battalion No. 999, is heavily involved in cross-border trade. It was with the aim of advancing these commercial interests that in June 2009 he launched an attack on Brigade 7 of the Karen National Liberation Army (KNLA), the armed wing of the KNU. The campaign displaced over 4,000 Karen villagers and created confusion and chaos in the region. Saw Chit Thu’s aim: to open up new territory in which he could build an economic zone.

Shwe Kokko

Over the past few years, Saw Chit Thu’s longstanding dream of presiding over a business empire has been realized.

Today, he is a millionaire warlord (and a gambler), ensconced in a large mansion he has built for himself in Shwe Kokko in Myawaddy Township, the site of a huge megaproject in which he has a key stake. He travels in bulletproof vehicles with armed bodyguards. And recently he has found some well-heeled new friends: Chinese “investors”.

An artist’s rendition of a new city project planned by the KNU and Huanya.

These shadowy Chinese investors arrived in the BGF-controlled area adjacent to the Thai border in 2017 and 2018, lured by plans for a gigantic economic development project. Since then, concrete structures, casinos, high-end villas, duty-free complexes and hotels have mushroomed in the area. Thai, Chinese, Karen and many others have flocked into the region.

In this part of Karen State, the sound of gunfire has fallen silent, only to be replaced by the hum of construction equipment brought in to build casinos – perhaps not what the local Karen population and other residents had been waiting for all these decades.

Putting a perverse twist on the late Thai Prime Minister Chatichai Choonhavan’s famous call to turn conflict-ridden Indochina “from a battlefield into a marketplace,” Saw Chit Thu and like-minded Karen leaders have turned the battlefield of Karen State into a giant casino resort, a deeply unpopular project that is a hub for not only gambling, but also money laundering and cryptocurrency peddling, as well as criminal networks.

Without the blessing and quiet approval of higher authorities, however, Saw Chit Thu would never have gotten such a megaproject off the ground. It is also believed that a well-known businessman counted among the top 10 tycoons in Myanmar was involved in sealing the deal between the Chinese and powerful figures in Naypyitaw.

Lack of transparency 

In September 2017, Saw Chit Thu and the Myanmar Yatai Company signed a partnership agreement for the Shwe Kokko urban development project, which was itself based on an idea originally put forward by the China Federation of Overseas Chinese Entrepreneurs.

In 2018, the Myanmar Investment Commission (MIC) approved an investment proposal of US$22.5 million (about 30.1 billion kyats) for Shwe Kokko; the proposal called for the construction of 59 villas on 10.3 hectares (or 25.5 acres) of land of land in Myawaddy Township within three years.

The KNU’s Saw Roger Khin (in sunglasses) is flanked by three Chinese men during the foundation stone-laying ceremony for a new city project with Huanya.

Yatai International Holding Group (IHG) is the main shareholder, and Saw Chit holds 20 per cent. Since the agreement was signed, thousands of Chinese workers have been brought in to construct the project.

However, IHG claims in its promotional materials that the development is worth $15 billion and will be built on 180,000 acres (about 73,000 hectares) in Karen State, with industrial, tourism and entertainment facilities, as well as a hi-tech zone specializing in block chain research. (Block chain is the technology that underpins cryptocurrencies like Bitcoin.) IHG refers to the project as the China-Thailand-Myanmar Special Economic Zone.

Shady investors 

According to reports published by the United States Institute of Peace (USIP), the project’s Chinese backers, who claim to be engaging with Myanmar as part of Beijing’s massive Belt and Road Initiative (BRI) infrastructure project, are in fact shady figures who were recently forced to relocate from Cambodia and elsewhere in Southeast Asia after law enforcement crackdowns on their businesses, which centered largely on illegal gambling operations targeting Chinese nationals and which attracted Chinese criminal gangs and other undesirables to those countries.

These illicit businessmen left Cambodia after the country’s Prime Minister Hun Sen announced a ban on online gambling due to the industry’s links to money laundering and other crimes. In part, Hun Sen was responding to Chinese pressure on the government of Cambodia to shut down the online casinos. These shadowy “investors” have since relocated to Karen State. Yatai International is registered in Hong Kong and has its headquarters in Bangkok.

A signing ceremony between the KNU and Huanya for a new city project.

The project has come in for criticism amid accusations of poor transparency, land grabs, confusion over the scale of construction and the steady inflow of Chinese money, not to mention concerns over illegal activities and concerns among local residents about the impacts that casinos will have on their communities.

In July, U Sein Bo, a Lower House lawmaker from Myawaddy, directed a question to the MIC during a session of Parliament, requesting a detailed update on the progress of the project.

U Sein Bo told The Irrawaddy at the time, “Locals do not really support the project. Most of them want the project to be suspended permanently if it involves casino businesses. We already have a lot of tension between locals and Chinese in Myawaddy. There were a series of protests by the locals last year demanding a crackdown on the influx of illegal Chinese immigrants into Myawaddy. The locals are disgusted at the proliferation of Chinese-language signboards in the town.”

The “China Town” (as it is known locally) megaproject has attracted scrutiny far beyond Karen State, coming in for much critical media coverage and raising eyebrows in embassies in Yangon and even in the US Congress.

And Shwe Kokko is not the only such project in Karen State. The Saixigang Industrial Zone and the Huanya International City projects are also under way.

Beside Saw Chit Thu, a number of other Karen elites belonging to armed groups seemed to be involved in these projects. For instance, Mote Thon, one of the leaders of BGF Battalion No. 1022, is involved in Chinese-funded projects and has acquired land in Karen State. Sources say he has even deeper pockets than Saw Chit Thu, with part of his money kept in Singapore.

It is not clear how the KNU itself is involved in these new city projects. But it is believed that some KNU leaders and Huanya. International Holding Group have a plan to develop a new Chinese city project in the area controlled by KNLA Brigade 6.

Funded by Chinese investors, the Shwe Kokko new city project is seen under construction on Aug. 20, 2019. / Htet Wai / The Irrawaddy

Top-ranking KNU officials insist the organization has not entered any agreement related to the project and that the plan has nothing to do with the KNU itself, but added that “an individual” with links to the KNU is involved.

At a signing ceremony for the project in the KNLA Brigade 6 area in February this year, a banner—in both Chinese and English—read “KNU & HUANYA Cooperative Signature and Foundation Stone Laying Ceremony”. Saw Roger Khin, the head of the KNU’s Defense Department, attended the event in the company of Chinese investors.

Additionally, Nerdah Mya, the son of the late KNU leader General Saw Bo Mya, is involved in a separate new city project. (Like many close relatives of senior officers in the Myanmar military, many rebel leaders’ family members are deeply involved in numerous businesses, both inside Myanmar and overseas.) This project is to be located in the area controlled by KNLA Brigade 7, and reportedly involves investors from Australia and Singapore. The project is currently suspended, however, due to criticism of the Shwe Kokko project.

In any case, several senior Karen officials, including some from the KNU, have been accused of land grabs in connection with a number of hotel, resort and new city development projects in Karen State.

Conflict threat

Unsurprisingly, the presence of Chinese-run casinos in the center of an armed conflict zone in Karen State is raising serious concerns for the peace process.

According to the Brussels-based International Crisis Group (ICG), “A project that is deeply resented by local people, and alarming to a major armed group, Shwe Kokko could trigger armed conflict and shatter the fragile truce between the different Karen armed groups.” It also pointed to the economic consequences and social impact of the influx of Chinese workers into the area; Shwe Kokko is believed to be home to many Chinese illegal immigrants and the city’s online gambling venues are thriving.

To protect the project, it is believed that Chinese investors and BGF will need more arms to equip its guards and soldiers, fueling a spike in arms smuggling along the border.

Funded by Chinese investors, the Shwe Kokko new city project is seen under construction on Aug. 20, 2019. / Htet Wai / The Irrawaddy

In its report “Gambling Away Our Lands”, the Karen Peace Support Network (KPSN), an alliance of Karen community groups, raises legitimate concerns about the project, which it says “will have no benefit for local Karen people, and will serve only the interests of transnational mafias and Burma’s [Myanmar’s] ruling military.”

The group alleges that Shwe Kokko’s stakeholders must have cut a deal in Naypyitaw. KPSN said in the report that “there can be little doubt that before proceeding, the investors reached an agreement with Naypyidaw top brass, involving substantial kickbacks. For [Myanmar’s] army leaders, the project is a win-win: cementing control of … contested Karen territory, while gaining huge financial rewards.”

In June, the Myanmar government said it had formed a tribunal to investigate the project. The team visited the site but has yet to release its report.

U Tin Myint, the deputy Union government office minister, has been appointed to chair the tribunal. He said that so far, the government had not given official permission for casino businesses to operate in the city project area, though Myanmar enacted a new Gambling Law in May 2019 legalizing casino operations. However, only foreigners are allowed to gamble at such casinos. “Casino businesses are not allowed so far in Shwe Kokko. Let me be clear about this: We have not allowed any gambling activities in that area officially,” U Tin Myint said.

Since 2019, local media have reported that the construction activities in Myawaddy far exceed the approved scale of the project. Early this year, the Myanmar military ordered a halt to the casinos’ operations and to construction of the project. Later, following an onsite investigation, Karen State authorities ordered a temporary suspension of the project on the grounds that it breached investment regulations. Reports indicate that both construction and gambling are ongoing, however. In fact, IHG has even recruited more employees for its casinos and online gambling operation in spite of the imposition of COVID-19 restrictions in Myanmar. Many who are involved in monitoring the Shwe Kokko project are doubtful that government’s tribunal will get real information on the ground.

China backs probe

IHG’s website falsely claims that the project is a part of China’s ambitious BRI and that its goal is to make a significant contribution to the huge infrastructure scheme.

This week, the Chinese Embassy issued a statement saying China supports Myanmar’s move to investigate irregularities surrounding the project.

The statement referred to the government’s special panel set up to investigate the project “in accordance with laws and regulations.” It added, “China expresses its support [for] this.”

A resident of the Ei Htu Hta internally displaced persons camp is seen along the Moei River on the Thai-Myanmar border in Karen State in August 2018. / Aung Kyaw Htet / The Irrawaddy

According to the embassy, the project is a third-country investment and has nothing to do with the BRI. It stressed that the Chinese and Myanmar governments have a clear consensus on this.

But the Chinese government’s long silence on the project, until this week, not only raised suspicions, but also tarnished the image of existing BRI projects in Myanmar.

According to several published accounts, overseas Chinese involved in the Shwe Kokko project have hired a mainland Chinese state-owned contractor, and it is believed that Chinese government associations and state-owned enterprises have profited significantly.

Above the law?

This Shwe Kokko “China Town” project has brought a new power dynamic to Karen State, where several armed groups are active and the KNU is still split into two groups. The megaproject has altered the power equation among the Karen groups and therefore potentially poses a serious threat to Karen State’s already fragile peace process.

Indeed, the question of how—in the middle of an ongoing and delicate peace process—a syndicate of Chinese criminals has managed to spend two years partially constructing a massive project comprising casinos and luxury villas is an intriguing one.

How can both the civilian government and the military have failed to recognize the potential ills of this project—and the threat it poses to Karen State—and failed to stop it?

One of the more interesting developments in Myanmar in recent decades has been the phenomenon of Chinese and some other foreign criminal groups forging partnerships with armed organizations in order to expand their businesses, particularly in ethnic territories. It should be remembered that the BGF is under the command of the Myanmar military. Despite this, it has avoided government regulations and violated the country’s existing laws and regulations.

A Karen IDP family takes refuge at a monastery in Karen State’s Hlaingbwe Township in 2017. / Myo Min Soe / The Irrawaddy

Essentially, certain armed groups (including those in the north of the country) have free rein to engage in economic activities both legal and illegal. What is the basis of this privileged status? Are they above the law?

As the USIP pointed out in its report, the Shwe Kokko project has little social benefit for the local population and area, and is inconsistent with the country’s national interests as laid out in the Myanmar Sustainable Development Plan.

The report concludes with a warning that Myanmar’s law enforcement institutions—the armed forces and the police—are setting a dangerous precedent by allowing certain military-affiliated armed groups to operate under separate laws and regulations.

The government and military are supposed to safeguard the national interest and the nation’s sovereignty. But so far, the hard evidence leads us to conclude that the Shwe Kokko project amounts to nothing less than a violation of Myanmar’s sovereignty.

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