Private contractor gets China-Lao railway contract

January 12, 2011

 21st Century Economic Herald reports that a private company called Yunnan Xiaoxiang Pan-Asia Investment Co. got a BOT contract for constructing the Lao section of the much-talked-about China-Singapore “Pan-Asia” railway. The company, whose name suggests a connection to Hunan Province, was registered in 2010, and its chairman, Li Zhanqun, is unknown but claims to have spent many years in Southeast Asia. The company’s registered capital is $1 million, and the shareholders are three private individuals. There are currently many Hunanese migrants in Laos, but they tend to be very small businessmen.

The total investment in the Lao part of the railway is estimated at 40 bn yuan. According to Li, some of this will come from the $3 million provided to the Lao government by UNDP, about 15% will come from Chinese government aid, and the rest, about $2 bn, will be raised overseas. This clearly raises questions: first, China has not previously provided direct grants-in-aid of anywhere near this scale. Second, how and why would an unknown person able to and entrusted with raising two billion dollars overseas? It is almost certain that someone who does not want to reveal their identity is behind Li, but it is not clear why. Perhaps because the Chinese subcontractors who will carry out the construction and will certainly benefit from state loans would rather deal with a Chinese contractor? Or perhaps because the real investors are connected to high officials and do not want this revealed?

A Chinese manager at the Golden Triangle Special Economic Zone in Laos suggested that the investors might be gambling barons, like the owner of Malaysia’s Genting resort. He thought that, among the legal industries, only gambling tycoons have the cash to pay $2 bn, and it would be in their interests to get more Chinese gamblers via the railway.

But from my perspective the more interesting aspect of the deal is this: Li says that Xiaoxiang  will operate the railway and get all the income for it (he doesn’t mention the time period), and that in return for the investment it will also receive logging, mining and industrial concessions. He also says that the project will need 40-50 thousand Chinese workers. In other words, he pictures a massive concession along the lines of the China Eastern Railroad, constructed by Russia at the beginning of the 20th century, which remained under Russian control and whose employees enjoyed extraterritorial rights until the Japanese occupation in 1937. These Russians built and ran the city of Harbin, even though technically they had no concession rights, unlike, say, foreign powers in Shanghai.

So if the construction of the Golden Triangle SEZ, with a 99-year lease and Chinese management, recalls Hong Kong, the railway would hark back to another form of extraterritoriality.

The question is how much of this is true, and whether Peking likes it. The construction may well be embarrassing and unwelcome for the national government. Conflicts between Yunnan Province and Peking about how to deal with neighbouring countries are routine, with the former looking more at profit and the latter more at the long-term strategic fallout.


Chinese foreign ministry issues warning against gambling in Laos

March 26, 2010

Last December, according to reports in Chinese media, the Hubei Province Punlic Security Bureau dispatched a rescue team to Mengla in Yunnan on the Lao border to rescue “hostages” held by the Golden Boten City casino in Laos. The rescue team did not cross the border, but conducted negotations that resulted in the release of 10 out of 27 Hubei “hostages.” According to the article, the total number of Chinese “hostages” could be “in the hundreds.”

The head of the rescue team said that although Golden Boten City was in Laos and operating legally under Lao laws, “it is operated by Chinese people, it cheats Chinese people; the casino people organise others to gamble and to cross the border, [so] according to our country’s laws, they can be held responsible for such crimes as organising others to gamble, organising others to cross the  border, false imprisonment, debt enforcement by beating 赌场的人涉嫌组织赌博、组织偷越国境、非法拘禁、殴打逼债等多项罪名,按照我国刑法可以追究刑事责任”.  The Hubei Public Security Bueau plans to  petition the Ministry of Public Security, requesting “to eliminate this border casino that harms people” (铲除这个害人的边境赌场).

On 9 March this year, the Ministry of Foreign Affairs issued a warning to citizens not to gamble in Laos. The text names Golden City and says that it, and  other Lao-based casinos, recruit customers in China and “cheat” them into gambling by providing credit at usurious rates. Once they are unable to repay these debts, gamblers are detained, beated, and their families notified with the demand to pay. The ministry and the Chinese embassy in Laos have “repeatedly conducted work with the Lao side, requesting them to close down the casino” (多次做老方工作,要求老方关闭这些赌场)

The warning came after several television stations in China reported on Boten. An “escapee” from this “hell on earth” was interviewed on Beijing Television’s Feichang Kanfa (Unusual angle) programme on 12 January. The programme included footage supposedly taken by a victim that shows hostages being beaten and forced to kneel. Hong Kong-based Phoenix TV, owned by Rupert Murdoch and politically aligned with Peking, aired an hour-long programme on the subject on 4 March, using the same footage and featuring escapees (including some who weren’t even there to gamble) telling stories of inhuman treatment. Gamblers told of being lured to Boten by recruiters who offered them air tickets, accommodation, meals, and credit on gambling. Although the programme made it clear that the casino was run by Chinese, it claimed that the special zone’s security force, which was responsible for the mistreatments, was part of Lao police though it employed Chinese personnel — a very unlikely scenario.

The Internet reacted angrily, though on a small scale. On Tianya, a poster “strongly suggested” that “the People’s Liberation Army cross the border, attack and burn Golden Boten City and rescue nearly one thousand Chinese hostages!” He then, perhaps to generate more animosity toward Laos. added the Lao government’s protest against the Chinese invasion of 1979, during the China-Vietnam war. Another poster claimed that the casino people take gamblers from China to Laos illegally (toudu). (This charge is hard to evaluate since the casino’s customers never pass the Lao border post, which is located past the casino road.) This poster, too, blames the Lao government for allowing this investment and the continuing mistreatment of Chinese people, including the deaths of three “hostages” in February, and accuses it for closing one eye (he also writes that the Lao authorities have in the past demanded that the casino stop the use of IOUs). He warns that one day the Chinese government just might decide to send forces across the border, because — a familiar refrain — “the Chinese people are kind but they don’t stand for bullying”). He does not mention that the management of the casino as well as the security guards are Chinese. What is interesting is that the poster sees the extraterrioriality of the enclave as a bad thing.

Chinese forces have intervened several years ago to close down border casinos that then operated in Burma. If this happens again, that, too, raises interesting questions about extraterritoriality. On the other hand, if the casino is shut down, will the holders of the lease (30 years wih the option to extend to 90!) implement some of the more ambitious projects they have advertised, such as golf and real estate? And what about the Golden Flower casino on the Burmese border, near Chiang Saen, which is still under construction and farther removed from China?