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Belt and Road

Myanmar to probe casinos in China-backed developer's 'rogue city'

$15bn planned community accused of flouting government rules

A casino is seen near the Thai border in Myawaddy, Karen State in Myanmar. 

YANGON -- A $15 billion urban development project in Myanmar near the Thai border has been a source of controversy from the very start, underscoring the pitfalls of lax regulatory oversight in Southeast Asia's last frontier market.

Shwe Kokko New City will cover 120 sq. kilometers, replete with resort areas and a financial district, according to the website of Hong Kong-registered developer Yatai International Holding Group. Yet the original permit issued in 2018 authorized a luxury housing development covering 0.1 sq. km.

Multiple casinos started operating in Shwe Kokko last year, local media reported. Setting up the venues are online gambling operators that have been driven out by crackdowns in China and Cambodia, according to the reports.

The government in the deeply conservative Buddhist country announced plans in June to form a tribunal to investigate the project.

Locals have also complained that they receive no benefit from the project, as Chinese workers have been brought in to handle construction.

According to Yatai's website, the project is part of China's Belt and Road initiative, a cross-border infrastructure drive to develop land and sea trade routes in Asia and beyond.

However, Beijing has distanced itself from the project, with Chen Hai, the Chinese ambassador to Myanmar, saying it was not part of the Belt and Road in a meeting last month with Gen. Min Aung Hlaing, the commander of Myanmar's influential military.

In an interview last month with Frontier, a Myanmar publication, a Yatai representative admitted the size of the border town exceeds that of the permit.

"At this moment we have ceased construction, and are waiting for [another] permit from the" Myanmar Investment Commission, said the representative.

Yatai felt unconstrained in flouting the investment rules because Shwe Kokko is located in a territorial gray zone in Karen State, home to ethnic Karen rebels. The militants have entered into a cease-fire with the central government and now serve as a border guard force in the state.

Yatai's local partner is a company affiliated with the militia, which limits how much the central government and the army can get involved.

"The guarantee of economic interests is part of the cease-fire agreement," said Myanmar military source.

But negative public opinion surrounding Shwe Kokko has forced the government to act. Officials have indicated they will no longer tolerate investments that lack transparency.

Myanmar was once home to "anarchic, plundering capitalism of dictatorship," according to historian Thant Myint-U, grandson of former United Nations Secretary-General U Thant. That legacy has lasted to this day in the resource and real estate development rights held by rebels, the national army and politically connected tycoons.

The lax adherence to the law has complicated the search of worthy enterprises and business partners by foreign companies. Tougher enforcement of regulations will be imperative to draw international capital.

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