View Original Source: http://www.forbes.com/global/2011/0808/companies-laos-china-economy-gambling-gangsters-bungle-jungle.html
Ron Gluckman, 07.27.11, 06:00 PM EDT
Forbes Asia Magazine dated August 08, 2011
The idea was a Chinese economic colony in the Lao wilderness, and that was okay with Laos. Then the gamblers, hookers and gangsters took over, and that was not okay with China.
The pink buildings were meant to serve as hotels and office space in Boten. Shops and housing in front were razed to make way for a new marketplace.
Across Asia, once-backward regions have surged in the boom that’s lifted millions out of poverty–monuments to the Asian economic miracle. But there have been grand schemes that went spectacularly wrong. Few compare with Golden Boten City, a project that promised a beehive of economic activity in northern Laos by the Chinese border, but today sits lonely and desolate.
Route 3 in the Lao highlands cuts through rubber plantations and forests, a vast carpet of greenery interrupted only by tiny villages–groups of shacks on stilts and tribal people in bright blue, red and black garments. Then suddenly there’s a clearing–and the surreal sight of a dozen enormous buildings erupting from the plateau in blistering shades of pink, orange and yellow.
This is Golden Boten City, a “Paradise for Freedom and Development,” as the investment brochures called it. In 2003 a developer leased the 21-squarekilometer site from Laos for 99 years, and buildings started going up the next year. The plan called for a trade zone in what was expected to be a key growth corridor, with road and rail links from southern China to ports as far away as Bangkok and Singapore. Drawings depict a golf course, a resort and apartment blocks along picturesque lakes and lagoons. Instead, Boten quickly became a Gold Rush-style boomtown and, like many such towns, renowned for gambling, crime and bustling brothels.
At Boten’s peak thousands of people each day poured across the border from China’s Yunnan Province, thanks to unprecedented visa-free access. As gaming halls proliferated, rows of shops sprouted–a ramshackle market serving Sin City. A dozen lingerie shops catered to battalions of Chinese prostitutes, with the finest choice of stiletto heels in Laos. Pharmacies stocked sex potions alongside racks of X-rated DVDs and containers of bile from black bears fresh from a hilltop factory and used in traditional Chinese medicine. Next door to the factory was a massive pink entertainment hall that boasted transvestite shows. The ladyboys hailed from Thailand but everything else came from China: the beer, the police and practically all the dealers, even the currency that made it all possible. Hotel signs were in Chinese, and Boten’s clocks didn’t run at Laos’ sleepy pace, but were set an hour ahead to China time. Boten was completely a Chinese colony.
Then, just as fast as gamblers from China turned this remote site into the Macau of the jungle, Golden Boten City melted down. Stories in the Chinese media talked about hostages held over gambling debts. Residents told FORBES ASIA of bodies dumped in the river. China cut off electricity and telecom service to the enclave and started requiring visas. “We heard reports of killings, of people disappearing,” an official of Golden Boten City Ltd., the developer, told FORBES ASIA during a visit in May. (The developer said it didn’t run the casinos; that was done by several little-known operators from abroad.) “We don’t disagree that there have been problems here, but we are working to correct them.”
Days later the last casinos shut down. The shops closed for a lack of customers, leaving behind a huge supply of stiletto heels along with a giant picture of American actor George Clooney gazing forlornly from an unopened luxury goods emporium, one of a half-dozen grandiose structures that had been completed but now stand unused. The bears were still packed in cages, milked of bile, but the ladyboys returned to Thailand, and Boten was left a ghost town.
The man behind Golden Boten City is Huang Minxuan, 56, who had been involved in a casino in Myanmar before it was shut down in a crackdown by Beijing on just-over-the-border gambling. (Gambling is banned in China outside of Macau.) Originally from Fujian Province, he operated a business in Yunnan for some years before registering a slew of companies in Hong Kong in 1997 and 1998–all long dissolved–and gaining Hong Kong citizenship; he’s still the honorary chairman of the Fujian Chamber of Commerce in Yunnan.
Huang says between $200 million and $300 million was spent on Boten, but he doesn’t say where it came from or how much of it was his money. Chinese media reports indicate that he served as the executive director of a Hong Kong company that pumped $36 million into the project when it began, but no record of the company can be found. The second-in-command, George Huang, 55, a Taiwanese national who worked with Huang Minxuan at the Myanmar casino, has said small investments came from Thailand, Singapore, the U.K., Russia and Ukraine. George could not be contacted; he is believed to have left for a job in Thailand after Boten collapsed.
Casinos began sprouting in Myanmar along the Chinese border in the 1990s, and eventually up to a hundred were operating. Most were modest in scale, sometimes featuring a hotel, but all followed the same formula: deploy fleets of boats to ferry gamblers along the Mekong River, mainly from China but also Thailand. But in Boten, the Huangs had grander designs. Laos had been eyeing the Myanmar tourist traffic and started touting its special economic zones to investors. “I was talked into the idea,” says Huang Minxuan.
That won’t mollify critics. “Nobody knows why this was allowed, or what they paid,” says Sounh Manivong, director general of the Lao Planning and Operation Department. The best estimate of what the Huangs pay in concession fees was $700,000 a year until 2010, then $2 million a year for 2011–13 and $2.4 million a year in 2014–15, according to Pingkaew Luangaransri, a professor at Chiang Mai University. Officials with Laos’ office for economic zones decline to comment.
Today new casinos, hotels and multistory gem warehouses with exterior detailing of Greek goddesses all stand completed, but most are vacant. Some 10,000 people a day used to mob Boten. “It was so crowded, you could barely move,” says a Golden City official. Now a few dozen visit each day. “We are shut down until we find new financing,” the official says on a tour of sites for a potential golf course and luxury housing. “We’re waiting for investment to come.” Says Huang Minxuan to FORBES ASIA: “Please be patient. When we finalize our modifications and come up with a new development plan around September or October, we will invite you to come over for an interview.”
The new plan may be close to the original, which didn’t emphasize gambling and instead promised a huge economic center to nurture a new growth corridor. Laos cleared villages to provide land not only for the concession but also for the nearby rubber plantations and tobacco-processing plants that have lured Chinese investment. The original town of Boten was relocated, its farmers moved to new roadside settlements 20 kilometers south. “They took the land, we had to go–we had no choice,” says one vendor at a grocery shop in ramshackle New Boten. Like many villagers, she concedes they received compensation that seemed fair, but adds: “If we could go back, we’d do it in a minute.” Now, she says, they have no rice, no fields. “No life.” She adds: “When they told us about the project, they said they were going to make things better. They needed the land to make gardens and pig farms. They said they wanted to do something to help people, to provide jobs.”
Jobs in the casinos were well paid by Laotian standards but few went to locals because they couldn’t speak Chinese. Instead, several thousand Chinese workers went across the border to staff Boten’s discos, brothels, casinos and hotels.
A dozen gaming operators from China, but also Ukraine, Slovenia and the Philippines, arrived in Boten to set up shop. (All were small, low-profile companies that quickly disappeared in May and could not be contacted.) Touts in vans roamed China’s border towns, offering free, “sure-fire” get-rich trips. But when their holiday ended, some punters in hock were detained and ransom demands issued to relatives, according to widespread Chinese accounts.
Golden City officials concede that China issued numerous complaints and warnings. In March it shut off Boten’s electricity and telecom service. This was meant to restrict gambling by proxy, in which minions could play cards for godfathers back in China who barked out instructions over the phone. If they racked up big debts, the Chinese bosses could abandon the hapless gambling mule and simply compensate his relatives. In May, days before the casinos closed, gamblers could be observed operating by mobile phone and over the Internet, using the more expensive Lao telecoms.
The final blow for Boten came when most Chinese again started needing visas. When the economic zone was marked out, Laos moved its customs posts south, creating a lawless land in between China and Laos where Golden Boten City ruled and policed itself, rather ineffectively. But China severely tightened access in April as part of a campaign against border casinos, according to Qi Yongjiang of the Yunnan Provincial Tourism Administration.
Golden Boten City recently hired a Singapore firm, FBI365, to help with rebranding and bring in new investors. The goal, according to Kan Goh, the firm’s chief operating officer, is to remodel Boten as more of a trading hub. “Development now is paused,” he says. “At this stage they are trying to clean up and advance the project. We want to bring in duty-free shops and more hotel operators. This is all the original plan.”
A $7 billion China-financed rail line from Kunming to Bangkok that would pass near Boten is on the drawing board. “This is the entrance to Asean,” says one official still in Boten, looking over the overbuilt but deserted jungle site. “In the original plan, casinos were just a small part of our goal.”
But the casinos could certainly be back. Huang Minxuan says the casinos are now merely “shut down temporarily for modifications and new planning.” Asked whether his company will recruit new casino operators, he says, “Can’t tell for now.”
But some observers think Boten–the buildings and the concession–will likely be sold. Offers have come from Chinese investors, but on the low side, say Boten officials. Still, Boten may have little choice but to sell if it can’t find new investors, or it may simply slide back into the jungle. “Now we want to move on,” says one official. “It’s like we are closing one door and opening a new window.”
Joyce Huang also contributed to this story.
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