Geopolitics

At Thailand-Laos Border, A Shadow Economy Thrives

In northwestern Laos, Chinese businesses dominate the Ton Pheung district, a special economic zone that has become a hub for all kinds of trafficking.

The inside of the Kings Roman Casino in Tonpheung, Laos
Francesco Radicioni

TON PHEUNG — A silhouette of the casino's golden domes and gaudy crown appears in the distance, standing out like a sore thumb against the landscape of lush tropical hills in this northwestern corner of Laos. The Ton Pheung district is part of a special economic zone (SEZ) — deep in Southeast Asia's drug-producing Golden Triangle — and the enormous Kings Roman Casino is its beating heart.

Just across the Mekong river from Thailand, Ton Pheung is just a stone's throw from where the borders of Laos, Myanmar, and Thailand meet. To the northeast is the border with China, and Chinese citizens have come to dominate and the surrounding province of Bokeo.

The most powerful is Zhao Wei, who obtained a 99-year concession on 10,000 hectares of land in Bokeo from the Laotian government in 2007. That land was ambitiously transformed into a small village on the banks of the Mekong, replete with luxury hotels, shopping malls, restaurants, golf courses, spas, and casinos — everything that was to become the Ton Pheung SEZ.

While nominally under the control of the government in Vientiane, everyone in Ton Pheung speaks Mandarin. Clocks are set to Beijing time and almost no one accepts the Laotian kip as currency, preferring the Chinese yuan instead. Rice paddies give way to 15-story condominiums and SUVs are increasingly common on the empty streets.

The main attraction is the Kings Roman Casino, which is decorated with Greco-Roman statues and ceilings painted with neoclassical scenes. Chinese citizens fill the gambling halls, bringing piles of banknotes and clouds of cigarette smoke. Gambling is banned in China outside of Macau, so Chinese tourists flock to this corner of Laos for slot machines, online betting, and other casino games.

A set of pool tables in the food court are among the many gaming options at Kings Roman Casino in Ton Pheung Photo: Prince Roy/ZUMA

On paper, Zhao's project promised to raise living standards and spur economic development in this small, impoverished country. But while hundreds of millions of dollars in investment flooded into this remote northwestern province, there's been little benefit for locals.

"We aim to improve living standards and economic conditions for locals," says Ye Jiankun of Golden Kapok Group, a Hong Kong-based company also owned by Zhao.

In reality, most of the new shops in town are still shuttered and almost all of the workers are Chinese. Zhou Ye recently arrived from the southern Chinese province of Guangdong and opened a restaurant near a Confucius statue, located in a part of town modeled after a traditional Chinese city.

"It's true that there are very few visitors, but soon this zone will become a major tourist attraction for Thailand and southern China," says Zhou. "There's a good business climate, and improved services, security and infrastructure for tourists. Plus you can use the evocative brand of the Golden Triangle."

Shady dealings

Not everyone, though, is so enthusiastic about Zhao Wei and his many business ventures. In January, the U.S. Department of the Treasury announced sanctions against the Chinese investor and listed Kings Roman, Golden Kapok, and other Zhao-linked entities as transnational criminal organizations charged with "horrendous illicit activities' including drug trafficking, money laundering, corruption, human trafficking, and trafficking of exotic animals.

While hundreds of millions of dollars in investment flooded into this remote northwestern province, there's been little benefit for locals.

The Kings Roman casino is the alleged nerve center of Zhao's operation, serving as a storage and transit hub for the trade in heroin and methamphetamines.

For his part, Ye Jiankun denies any connection to illegal activities. "There is a program underway to provide farmers with an economic alternative to cultivating opium," he says.

The Kings Roman Casino in Ton Pheung has been accused of being the site of multiple crimes including trafficking in drugs, humans, and animals Photo: Thanate Tan

Little is known about Zhao himself. He was born 65 years ago in Heilongjiang province in northeastern China, going on to invest in Macau and the Burmese border town of Mong La in the 1990s. Like Ton Pheung today, Mong La became a hub for local drug lords seeking to launder their illicit money by financing a flourishing gambling industry. Zhao can count on a solid network of friends and relationships in Vientiane, and a brochure for the Kings Roman proudly displays a visit by the ex-Laotian leader Choummaly Sayasone.

Beyond its position in the Golden Triangle, Ton Pheung has emerged as a regional center for the sex trafficking of minors and the trade in exotic animals, including tigers, moon bears, pangolins and elephants. Also, exotic animal parts are used as ingredients in traditional Chinese medicine, served in restaurants, or sold as souvenirs in the form of rhino horns and ivory trinkets. A 2015 report published by the British NGO Environmental Investigation Agency described the zone as a veritable "open-air market" of endangered species.

Recently, efforts have been made to sweep the worst excesses under the rug. A pile of seized ivory objects was incinerated in front of the cameras. The most egregious items were taken off restaurant menus. And prostitution was confined to massage centers. Either way, if you ask people in front of the Kings Roman casino, they'll tell you that anything is available still upon request.

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Economy

European Debt? The First Question For Merkel's Successor

Across southern Europe, all eyes are on the German elections, as they hope a change of government might bring about reforms to the EU Stability Pact.

Angela Merkel at a campaign event of CDU party, Stralsund, Sep 2021

Tobias Kaiser, Virginia Kirst, Martina Meister


-Analysis-

BERLIN — Finance Minister Olaf Scholz (SPD) is the front-runner, according to recent polls, to become Germany's next chancellor. Little wonder then that he's attracting attention not just within the country, but from neighbors across Europe who are watching and listening to his every word.

That was certainly the case this past weekend in Brdo, Slovenia, where the minister met with his European counterparts. And of particular interest for those in attendance is where Scholz stands on the issue of debt-rule reform for the eurozone, a subject that is expected to be hotly debated among EU members in the coming months.

France, which holds its own elections early next year, has already made its position clear. "When it comes to the Stability and Growth Pact, we need new rules," said Bruno Le Maire, France's minister of the economy and finance, at the meeting in Slovenia. "We need simpler rules that take the economic reality into account. That is what France will be arguing for in the coming weeks."

The economic reality for eurozone countries is an average national debt of 100% of GDP. Only Luxemburg is currently meeting the two central requirements of the Maastricht Treaty: That national debt must be less than 60% of GDP and the deficit should be no more than 3%. For the moment, these rules have been set aside due to the coronavirus crisis, but next year national leaders must decide how to go forward and whether the rules should be reinstated in 2023.

Europe's north-south divide lives on

The debate looks set to be intense. Fiscally conservative countries, above all Austria and the Netherlands, are against relaxing the rules as they recently made very clear in a joint position paper on the subject. In contrast, southern European countries that are dealing with high levels of national debt believe that now is the moment to relax the rules.

Those governments are calling for countries to be given more freedom over their levels of national debt so that the economy, which is recovering remarkably quickly thanks to coronavirus spending and the European Central Bank's relaxation of its fiscal policy, can continue to grow.

Despite its clear stance on the issue, Paris hasn't yet gone on the offensive.

The rules must be "adapted to fit the new reality," said Spanish Finance Minister Nadia Calviño in Brdo. She says the eurozone needs "new rules that work." Her Belgian counterpart agreed. The national debts in both countries currently stand at over 100% of GDP. The same is true of France, Italy, Portugal, Greece and Cyprus.

Officials there will be keeping a close eye on the German elections — and the subsequent coalition negotiations. Along with France, Germany still sets the tone in the EU, and Berlin's stance on the brewing conflict will depend largely on what the coalition government looks like.

A key question is which party Germany's next finance minister comes from. In their election campaign, the Greens have called for the debt rules to be revised so that in the future they support rather than hinder public investment. The FDP, however, wants to reinstate the Maastricht Treaty rules exactly as they were and ensure they are more strictly enforced than before.

This demand is unlikely to gain traction at the EU level because too many countries would still be breaking the rules for years to come. There is already a consensus that they should be reformed; what is still at stake is how far these reforms should go.

Mario Draghi on stage in Bologna

Prime Minister Mario Draghi at an event in Bologna, Italy — Photo: Brancolini/ROPI/ZUMA

Time for Draghi to step up?

Despite its clear stance on the issue, Paris hasn't yet gone on the offensive. That having been said, starting in January, France will take over the presidency of the EU Council for a period that will coincide with its presidential election campaign. And it's likely that Macron's main rival, right-wing populist Marine Le Pen, will put the reforms front and center, especially since she has long argued against Germany and in favor of more freedom.

Rome is putting its faith in the negotiating skills of Prime Minister Mario Draghi, a former head of the European Central Bank. Draghi is a respected EU finance expert at the debating table and can be of great service to Italy precisely at a moment when Merkel's departure may see Germany represented by a politician with less experience at these kinds of drawn-out summits, where discussions go on long into the night.

The Stability and Growth pact may survive unscathed.

Regardless of how heated the debates turn out to be, the Stability and Growth Pact may well survive the conflict unscathed, as its symbolic value may make revising the agreement itself practically impossible. Instead, the aim will be to rewrite the rules that govern how the Pact should be interpreted: regulations, in other words, about how the deficit and national debt should be calculated.

One possible change would be to allow future borrowing for environmental investments to be discounted. France is not alone in calling for that. European Commissioner for Economy Paolo Gentiloni has also added his voice.

The European Commission is assuming that the debate may drag on for some time. The rules — set aside during the pandemic — are supposed to come into force again at the start of 2023.

The Commission is already preparing for the possibility that they could be reactivated without any reforms. They are investigating how the flexibility that has already been built into the debt laws could be used to ensure that a large swathe of eurozone countries don't automatically find themselves contravening them, representatives explained.

The Commission will present its recommendations for reforms, which will serve as a basis for the countries' negotiations, in December. By that point, the results of the German elections will be known, as well as possibly the coalition negotiations. And we might have a clearer idea of how intense the fight over Europe's debt rules could become — and whether the hopes of the southern countries could become reality.

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