Southeast Asia’s Brewing Refugee Crisis

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Southeast Asia’s Brewing Refugee Crisis

The impending closure of giant online scamming factories in eastern Myanmar could leave thousands of trafficking victims stranded.

Southeast Asia’s Brewing Refugee Crisis

Buildings under construction at Yatai New City in Shwe Kokko, Karen State, Myanmar, as seen from the Thai side of the Moei River, November 22, 2023.

Credit: Lindsey Kennedy

Buoyed by the tacit approval of China, the resistance in Myanmar is rapidly gaining ground. The ruling military government gambled on protecting the interests of Chinese crime groups over the Chinese state and appears to have overplayed its hand. Beijing is at the end of its tether. By pledging to help law enforcement shut down the sprawling, absurdly lucrative cyber scam industry at the heart of the rift, armed groups fighting against the junta have cultivated a powerful new ally.

All of which is good news for the pro-democracy forces – and, on the face of it, for those striving to shut down or escape from scam compounds. But China is interested in mass arrests, not victim support. Its own laws fail to recognize human trafficking beyond the sex trade, and it takes no responsibility for foreign nationals exploited by Chinese criminals on foreign soil. For the roughly 120,000 cyber slavery victims the United Nations estimates are trapped in Myanmar’s scam compounds, repatriation will be neither swift nor assured. As compounds empty out, an unusual refugee crisis is beginning to emerge on the China-Myanmar border. Escapees aren’t trying to flee their country, but rather, desperately trying to get home. Many are being criminalized in the process.

“We’re heading for a refugee crisis,” says Eugenio M. Gonzales, chief of party at the Partnership for Development Assistance in the Philippines, which works with government and law enforcement agencies to support Filipino survivors of trafficking into scam compounds when they return home. Gonzales explains that a major barrier is a lack of training, as even senior police and immigration officials in host and transit countries often don’t have the tools – or willingness – to distinguish victims from criminals.

“In northern Myanmar, the parties to the conflict have already disrupted the operation of scam compounds, some of which have reportedly ceased operating, leading to many thousands of migrants and potential victims of trafficking being apprehended or left stranded,” says Nima Tamaddon, communications officer at the Asia and Pacific Office of the U.N.’s International Organization for Migration (IOM), based in Bangkok. The IOM, he added, has been assisting victims of forced criminality in Myanmar and will continue to do so, but reports of scam compounds in areas experiencing active conflict “could pose a risk to the people being held captive within the sites.”

Nearly three years ago, Myanmar’s military coup kicked off the brutal civil war that plunged much of the country into lawless chaos. Seizing the opportunity, Chinese organized crime syndicates, colluding with forces loyal to the Myanmar armed forces, swooped into the emptied-out borderland casino towns or made their own cities from scratch, building or converting compound after compound into dormitory-and-office blocks for trafficked foreign nationals forced to work for illegal gambling sites and online scams. This illicit industry, thought to have stolen hundreds of billions of dollars from victims worldwide, seemed impossible to topple. Worse – from Beijing’s perspective – as warnings and reports from the U.N., the FBI, and other international police and government agencies piled up, it sent an embarrassing message that China was unable to keep its gangsters in check, or to keep its citizens safe.

“This made China look just horrendous, right?” says Jason Tower, Burma country director at the United States Institute of Peace, which has been closely monitoring developments in the conflict and borderland scam hubs. Tower believes reputational damage isn’t the only problem – the scale of Chinese citizens being lured into cyber slavery in Myanmar, and the state’s failure to rescue them, was turning into a domestic security threat. “You started seeing family members organize incidents of collective action to push the Chinese government to provide help for finding or assisting their relatives inside the Chinese scam centers. I think that’s another factor that triggered China to pay more attention,” he says.

In October, the Three Brotherhood Alliance – a coalition of the Arakan Army, Myanmar National Democratic Alliance Army (MNDAA), and Ta’ang National Liberation Army – launched Operation 1027, a military offensive in Myanmar’s northeast, catching the Myanmar military off-guard. In the six weeks since, the junta has lost over 180 military outposts. Resistance forces have also captured major crossing points on the Chinese border and several towns on key trading corridors linking Myanmar to China and India. They are also on the brink of capturing one state capital, Loikaw in Karenni State (also known as Kayah State), which Tower says is now around 70 percent under the control of Karenni forces.

“You really are seeing the military losing control, not only of a very large number of posts in significant territories, but also over logistics channels in all directions,” says Tower. This was the culmination of “months and months” of careful planning and coordination between allied armed groups, he says, but it also relied on another smart move by ethnic armed groups (EAOs) operating along the Chinese border. These groups “were able to leverage China’s rising concerns about transnational crime and these scam centers in order to get China’s blessing in launching this operation,” Tower says.

While China hasn’t committed troops to any side of the war, the various armed groups involved are generally cautious about courting the ire of their powerful neighbor. China is one of the few countries willing to invest at scale in troubled areas like Shan State, and few can afford to alienate it, even in the pursuit of military objectives. Back in July, the Three Brotherhood Alliance issued a statement promising to protect Chinese mega-investments in any areas it seizes.

Upheaval in Myanmar’s border states means headaches for Beijing, disrupting trade and threatening to push waves of unwelcome refugees into its territory. China has consistently demanded that both the Tatmadaw and EAOs drop offensives near the Myanmar-China frontier, and pushed back against courses of action likely to upset the status quo. Groups willing to cooperate on keeping the border secure, like the United Wa State Army (UWSA), which controls the autonomous Wa territories in Shan State, have been rewarded handsomely in the past, even extending to Chinese sales of armed transport helicopters to the UWSA to help them cement their position. Until now, Beijing even reluctantly tolerated many of the casino hubs that pepper the Myanmar-China border, which prior to COVID-19, catered mostly to Chinese tourists.

There is a limit, though. China’s patience was pushed to the brink in 2005, when a corruption scandal involving stolen state funds frittered away in Mong La prompted the government to send in troops to forcibly close the town’s casinos. This time, its patience has been pushed even further.

In early October, Chinese law enforcement arrested Bao Junfeng – second-in-command of the UWSA, and the nephew of its leader – for his involvement in the cyber scam industry. The Wa have evidently been brought to heel; in October, the UWSA dismissed two other senior leaders from their posts after China issued warrants for their arrest, and in September collaborated with Chinese law enforcement to empty out scam compounds in its territory, capturing and repatriating over 1,200 Chinese citizens allegedly involved in running the scams. Within weeks, Tower says, around 4,000 people had either fled or been removed from 40 compounds and returned to China.

But this is just the tip of the iceberg. Wa State shares just 420 kilometers of Myanmar’s 2,129-kilometer border with China, and the U.N. estimates that around 120,000 trafficking victims are being held against their will in the country’s cyber scam compounds. Embarrassingly for China, neither the military nor the Border Guard Forces that administer parts of Myanmar’s periphery on its behalf have been as accommodating as the UWSA.

On October 20, the MNDAA entered Laukkai, the capital of the Kokang Self-Administered Zone and a notorious cyber scam hub, to storm a compound controlled by former Kokang leader Ming Xuechang. Ming is a close ally of the junta and the father of a colonel in the Myanmar armed forces; the MNDAA is a Kokang EAO and part of the Three Brotherhood Alliance. The siege turned into a massacre, with around 100 Chinese nationals appearing to have been killed by the Kokang Border Guard Force as they tried to escape. Four, it later emerged, were undercover Chinese investigators.

“In my view, that was the last straw for China,” says Tower. The government, he says, “withdrew the pressure” it had been exerting on the alliance to rein in military operations close to the border. Within a week, Operation 1027 had been unleashed.

The Myanmar military now appears to be panicking. Last month, pro-junta nationalist groups including the hardline “Patriotic Monks Union” staged a protest outside the Chinese embassy in Yangon, accusing China of supporting terrorists and threatening to “crush” Beijing. On the flip side, the regime has finally begun issuing arrest warrants for some figures accused of involvement in the scam industry, according to The Irrawaddy. But it appears to be too little, and too late, to win back China’s favor. Meanwhile, as Tower points out, the Brotherhood Alliance has publicly declared that it is strongly against the scam compounds, and the National Unity Government, which is coordinating the nationwide resistance to the military junta, has also pledged to tackle the crisis should it return to power. Whether or not the NUG follows through, this is an improvement from other hotspots of the cyber slavery crisis, like Cambodia, Laos, and the United Arab Emirates, where governments routinely refuse to acknowledge scam compounds exist at all or downplay trafficking and slavery as worker disputes.

“All allegations and evidence of human trafficking or labor abuses arising from the scam centers anywhere in Burma [Myanmar] should be investigated and any perpetrators should be prosecuted and brought to justice. Victims of human trafficking or labor abuses should be identified and receive full care and protection under international standards from qualified organizations, without fear of retribution from criminals or law enforcement,” a spokesperson from the U.S. State Department said in an email. This will be an uphill battle. The State Department currently designates Myanmar as Tier 3 – the lowest possible rating – for its efforts to counter human trafficking and modern slavery.

The largest of Myanmar’s cyber scam compounds are yet to fall. Among these is Shwe Kokko, a recently constructed casino city on the Thai border, nestled in a bend of the Moei River opposite Mae Sot. This was masterminded by Chinese fugitive She Zhijiang, who had already been on the run for five years, evading illegal gambling charges, when he acquired Cambodian citizenship in 2019, changed his name to Tang Kriang Kai, and reinvented himself as a respectable investor developing Chinese state interests. Having successfully infiltrated a Belt and Road Initiative (BRI) tourism mega-project called Dara Sakor in Cambodia (later found to be, in part, a cyber slavery compound), She tried to pass off his $15 billion Shwe Kokko project as another BRI development until the Chinese Embassy in Myanmar issued a statement explicitly refuting this.

Since then, countless accounts have emerged of human trafficking, forced labor, and physical and even sexual abuse inside Shwe Kokko’s heavily guarded scam compounds, which are now under the control of the military-aligned Border Guard Force in Karen State.  She was arrested in Thailand in August 2022, but is fighting extradition to China on the basis that, as a Cambodian citizen, he is no longer Chinese and cannot be sued through their courts for crimes committed abroad.

In April, a coalition of NUG-linked People’s Defense Forces attempted to liberate these compounds by force, but were, as Tower puts it, “wiped out” by the Karen soldiers. Since Operation 1027, there have been rumblings of another attempt, but this has yet to materialize. In November, when The Diplomat visited the Thai side of the narrow river, opposite Shwe Kokko, activity in the enclave, including construction to expand the site, appeared to be continuing as normal, with guards in military uniform patrolling outside. It’s likely Shwe Kokko is a low priority for the Chinese government: it’s far from the Chinese border, with a high proportion of potential trafficking victims from countries other than China. It’s likely that the overstretched Thai authorities in Mae Sot, a small city with a big refugee population from Myanmar, don’t want another 20,000 cases on their hands, either.

All across Southeast Asia, trafficking victims rescued from scam compounds are frequently placed in immigration detention for months on end, where they may face criminal charges for working or crossing borders illegally, or worse, resale to other criminal syndicates. Adding to the complexity in Myanmar is the absence or collapse of many state institutions and processes, and the lack of consular support for foreign nationals trying to return home from semi-autonomous parts of the country’s periphery. Thailand, which also shares a border with Myanmar, is a frequent crossing point for victims who have escaped from scams, or paid hefty ransoms to secure their release, but the Thai authorities have little capacity or inclination to support non-Thai survivors effectively. Even less so, if an official caseload of a few hundred trafficking victims processed each year turns into tens of thousands overnight.

Meanwhile, with so much money at stake, the powerful organized criminal groups behind the scam industry are hardly going to give up without a fight, and the industry is famously transnational and mobile. Some high-level Chinese crime figures in Myanmar’s cyber scam landscape have business empires stretching across countries like Cambodia and the Philippines, where operations are increasingly spread across multiple sites, disguised as legal enterprises, or protected by powerful patrons, making them harder to root out.

Without efforts to repatriate victims and protect them from further exploitation, other scam syndicates could simply move operations and victims to nearby Laos, particularly the Golden Triangle Special Economic Zone (GTSEZ), a self-contained, self-governing casino-and-compound city across the Mekong River from Myanmar and Thailand. The GTSEZ is run by the U.S.-sanctioned crime boss Zhao Wei, and is already a major hub for human trafficking and cyber scams.

“The concern here is that the criminal syndicates behind all of this are sitting on tens, hundreds of billions of U.S. dollars in stolen assets, and they are very willing, as we’ve seen across the region, to dump those assets into co-opting whoever they need to co-opt or to build out a space where they can continue to perpetrate the criminal activity with impunity,” says Tower. “If left to themselves, groups in Myanmar are going to really struggle with this. There is a need for lots of [international] effort and attention to address these incredibly influential criminal networks that have undermined governance, undermined law enforcement, in many parts of the region and beyond.”