High stakes as Laos turns to casinos

PUBLISHED : Sunday, 23 January, 2011, 12:00am
UPDATED : Sunday, 23 January, 2011, 12:00am

Viewed from the Thai border town of Chiang Saen, two golden domes dominate the sparse landscape on the Laotian side of the Mekong River.

After crossing the river, visitors are ushered into a grand hall beneath one dome, Chinese dragons snaking up the stairway, and into the immigration arrival hall. The other golden dome sits atop the casino. Welcome to the Golden Triangle Special Economic Zone.

Built with Chinese money, and catering mainly to Chinese visitors, the SEZ at Tonphueng in Bokeo province bears little resemblance to the sleepy, impoverished Laos that lies beyond its 3,000 hectares.

Alongside the SEZ waterfront, high-powered boats disgorge mainland and Thai businessmen, and gamblers. Most arrive via Thailand, but some travel directly down the Mekong from Jinghong in Yunnan province.

In the SEZ, everything from currency to cuisine is Chinese. Of the more than 4,500 people employed in the zone, only around 500 are Laotian. For visitors, the glimpse of a Laotian immigration officer or policeman at the quayside, and a stamp in your passport, are among the few visible reminders that you are in Laos at all, in this enclave where the borders of Myanmar, Thailand and Laos blur. In the words of the casino manager, E. Abbas: 'We have our own government inside the zone'.

The investors who signed the contract to create the SEZ with the Laotian government back in April 2007 have pledged to change the image of the Golden Triangle, once the epicentre of the global heroin trade, into a tourist haven with glittering nightclubs, ecotourism and a new international airport.

Yet despite the influx of cash and grandiose plans, there are plenty of concerns about the project, with a prominent Thai business leader and a UN agency worried that the centrepiece casino will be used to launder money from the region's infamous drug trade.

And despite the scale of the multibillion-dollar project, the identity of the investors remains largely a mystery.

The man who runs the operation in the name of the King Romans Group (KRG) is 60-year-old Zhao Wei, chairman of the SEZ and KRG president.

Chao is a native of northeastern Heilongjiang province and says he is vice-chairman of the Macau-Asean Business Association, though this group could not be tracked down.

In an interview with the Sunday Morning Post, Zhao said the project was inspired by the blossom of the iconic rainforest tree, the giant kapok. 'We Chinese people have a great respect for this heroic tree,' he said. Don Sao Island, part of the 3,000-hectare Special Economic Zone, is renowned for its annual kapok festival. KRG has adopted the kapok as its symbol and the group's Chinese name translates as 'Golden Kapok'. The chairman said his projects would provide an alternative to opium cultivation and 'we are doing something for the well-being of the Lao people, helping them to improve their standard of living'.

When the first stage is completed, the complex should include a golf course, karaoke bars, massage parlours, a swimming pool, hotels, clinics and shopping centres. But it is no accident that the first building in place is the casino: gambling is illegal in both Thailand and the mainland, and it promises to be the chief money spinner.

The chairman said KRG investors had spent millions of US dollars on infrastructure, including the reinforcement of the river bank and a 30-kilometre road to the nearest town, the regional capital, Ban Houei Xay. KRG also hoped to build an international airport with help from mainland airlines.

The SEZ's first phase has cost 3 billion yuan (HK$3.5 billion) according to Zhao. By comparison, the entire Laotian national budget in 2009 was estimated at US$1.13 billion. KRG's total investment is expected to reach US$2.25 billion US by 2020.

The communist government of Laos, which long ago adopted free market policies, has signed over 10,000 hectares to the King Romans Group on a 99-year lease. A prime ministerial decree in February 2010, set out guidelines for 'the establishment and management of a 3,000 hectare SEZ' within the total area. Generous tax breaks are designed to encourage investment, and the government will share profits with the developer

Yet Zhao confirmed that the Chinese investors were firmly in control. 'We have 100 per cent right to manage the zone,' he said. Security issues are nominally in the hands of a few Laotian police, but KRG employs its own security guards.

The implications of the SEZ are deeply worrying for Laotians, who fear the demographic impact of creating a Chinese enclave in this region, with many farmers already resentful of a huge influx of settlers from neighbouring Yunnan.

Abbas said: 'We hope to accommodate 200,000 people in the new city we are building, Kapok City.' This would make it the second largest town in Laos, after the capital Vientiane.

The always-smiling Zhao prefers to focus on KRG's philanthropy. Large donations have been handed over to improve schools in Myanmar and northern Laos; a Vientiane Times report said that when the casino first opened, Zhao handed over a cheque for US$1 million to former Laotian Prime Minister Bouasone Bouphavanh, to be spent on schooling.

The exact provenance of those funds, and the money that created this Macau on the Mekong, remains unclear. Zhao's original company, Myanmar Macau Lundun, registered in Macau, was renamed Golden Kapok in Chinese and Dokngiewkham in Lao. It operates internationally under the name Kings Romans Group. He said his partners were from Hong Kong, Macau, Taiwan and the mainland, but named only two companies - Golden Dragon and Yuchang Investments in Macau.

Zhao convinced the Laotian government that the project was not just about gambling: he has pledged to turn the SEZ into an agro-industrial and livestock complex, an export hub, and an IT and computer complex. But he admitted that he had no previous experience in any of these fields. Nor was he an expert in urban planning and tourism development.

Instead, his expertise is running casinos. He was in charge of the Nan Dun casino in Myanmar's notorious jungle gambling town of Mong La in conflict-prone Shan state from 2000 to 2007. His assistants now include Wang Chongminh - a former district secretary in northern China, appointed as deputy chairman of the SEZ - and a former Chinese diplomat that worked in the Vientiane embassy for 12years. The SEZ's vice-chairman is Ousavanh Thiengthepvongsa, a member of the Lao National Assembly and the Lao-China Friendship Society.

Zhao said the project had no official backing from the Chinese government, except for tourism co-operation with authorities in Yunnan.

Crucial to the Tonphueng project is the landmark Kunming -Bangkok Expressway, which links the two cities via Laos and was inaugurated in 2008 as China's first international expressway. The China section is already completed; the only major infrastructure work remaining is the construction of a bridge spanning the Mekong and linking Laos and Thailand. The promise of the highway is a development boom for the region.

While many local businessmen welcome this influx of dollars and tourists, not everyone is supportive of King Roman's grand scheme.

Thai businessman Pattana Sittisombat, president of the Committee for the Economic Quadrangle and a key figure in economic co-operation between northern Thailand, Laos and Yunnan, is worried about where all the money is coming from.

'I am absolutely concerned about the possibility that illicit funds could be attracted to this project, and that it could provide opportunities for money laundering,' he said.

Part of the reason for his concerns lie in Zhao's connections to the Mong La casinos, in Shan state's so-called 'special region 4', an area under the supervision of local warlord, Sai Leun. The one-time drugs kingpin, also known as Lin Minxian, is believed to have funded much of Mong La's gambling infrastructure.

Like the new Laos casino, the Mong La casinos catered mainly to cross-border Chinese gamblers. The freewheeling town's casinos attracted Yunnan high-rollers until they attracted the ire of mainland leaders in 2005, who were alarmed at heavy losses by mainland officials and their families. A ban on Chinese crossing the border to gamble effectively put the casinos out of business, though they continue online operations.

From the old casinos of Mong La to the new casino complex in Tonphueng is not a great distance, geographically at least.

A senior official at the UN Office on Drugs and Crime, speaking on condition of anonymity, echoed Pattana's concerns. The official said 'the Golden Triangle SEZ may also attract some of the narcotics trade through Bokeo province and could also be an attractive venue for money laundering'.

However, Zhao rejected these suspicions: 'Our company has nothing to do with the Wa [the armed ethnic group from northern Myanmar] and region 4. We have ideas about these people and I know some of them.'

He added: 'We have done a lot to stop drug-trafficking here. We have our own Special Economic Zone police and an office of the Lao police here. We take a very strong position against drug-trafficking - this is our responsibility.'

Laotian Foreign Ministry spokesman Khenthong Nuanthasing said he could shed no light on the identity of the SEZ's financial backers, although Zhao has entertained a succession of government VIPs and ministers in Tonpheung including the president, the former prime minister, the defence minister and minister for police.

'All the issues were under the control of the Lao government and the investors. But I do not have any information about Zhao Wei,' said Kenthong.

Big player

The Laotian government's annual budget totals only US$1.13 billion...

... but by 2020 King Romans Group is intending to invest this much, in US dollars: $2.25b