In early August, the authorities in Laos delivered an ultimatum to scammers operating in the notorious Golden Triangle Special Economic Zone: Clear out or face the consequences.
On Aug. 12, the Lao police, supported by their Chinese counterparts, swooped in. Some 711 people were arrested during the first week. Another 60 Lao and Chinese nationals were arrested by the end of the month, and more arrests have been made since.
The way Vientiane frames it, Laos is now getting tough on the vast cyber-scamming industry that has infested much of mainland Southeast Asia.
In Laos, the sector could be worth as much as the equivalent of 40 percent of the formal economy, according to a United States Institute of Peace report earlier this year.
The think tank estimated that criminal gangs could be holding as many as 85,000 workers in slave-like conditions in compounds in Laos.
People in Laos tell me there is some truth to Vientiane’s assertions. This might have been why Laos was downgraded to Tier 2 on the U.S. State Department’s annual human trafficking ranking in July, while Myanmar and Cambodia were downgraded to the lower Tier 3.
According to one expert, “Laos is taking this issue more seriously than Cambodia and has more capacity to respond than Myanmar.”
Admitting a problem is the first step, but Vientiane has been somewhat fortunate in how the scam industry has structured itself differently in Laos.
In Cambodia and Myanmar, for instance, scamming tends to be geographically dispersed with compounds across the country and controlled by different syndicates.
Zhao Wei’s empire
In Laos, however, the industry was, until very recently, almost entirely centered in the Golden Triangle Special Economic Zone, an autonomous area long notorious for organized crime and run by the Chinese crime boss Zhao Wei and his Kings Roman Group, which has close ties to organized crime in China and Hong Kong.
The United Wa State Army and the Myanmar National Democratic Alliance Army, Myanmar-based militias with large stakes in Southeast Asia’s drug trade, are also active in criminal activity, including scam centers, within the SEZ.
Initially, this centralization of criminality was a problem.
After the Golden Triangle SEZ was founded in 2007, on a 99-year concession awarded to Zhao, it essentially operated as a mini-fiefdom. The Lao authorities were not even allowed entrance to the economic zone, giving the criminals carte blanche.
This was a concern of a few nationalists within Laos’s communist party but tolerated by the majority, who regarded crime as a lesser evil, since Zhao and his associates were bringing in considerable foreign investment — and, of course, some cash to the political elites.
However, as the cyberscam problem has metastasized since 2022, this situation has made it somewhat easier for Laos to respond.
Because Zhao and his associates had established laundering trails to China and Myanmar years earlier, it meant that, unlike in Cambodia, most of the revenue from the scam industry immediately left Laos.
This limited the amount of money needing to be recycled or laundered through local conglomerates, thus reducing the sums needed to corrupt Laotian officials, politicians, and tycoons.
This meant that officials, especially those outside Bokeo province where the SEZ is located, weren’t contaminated by scam money, so they were not invested in protecting the racket.
Sovereignty over SEZ
By comparison, the scam industry is more geographically dispersed and controlled by more numerous players in Cambodia. This means much of the revenue stays within Cambodia where it is laundered through businesses run by some of the most prominent Cambodian oligarchs and politicians.
So well-connected has the industry become that even if a faction within Cambodia’s government favored a full-frontal assault on the scammers, they know they would have to take on most of the country’s political aristocracy and oligarchy, risking strife within the ruling party.
Scamming isn’t such an existential threat for the ruling Lao People’s Revolutionary Party, or LPRP.
Indeed, the normally sedate National Assembly has noisily pressed Vientiane to tackle the scam problem, even last year rejecting a proposed government bill to toughen up regulations on SEZs for being too weak.
In May, the Lao government reshuffled the leadership of Bokeo province, where the Golden Triangle Special Economic Zone is located, ostensibly to clean out officials who had been bought off.
Vientiane has somewhat reasserted its sovereignty over the zone this year.
Through discussion and threats, it got Zhao and his Kings Roman Group to accept greater access for Laotian police and troops to the economic zone. That said, Zhao and associates can still limit what Lao authorities can do in the zone
RELATED STORIES
Lao teen says she’s been released from Chinese scam center in Myanmar
Thai police: Lao scam centers used illegally installed internet cables
Lao and Chinese security forces raid call centers in the Golden Triangle
Another advantage is that Zhao serves more at the whim of the Chinese Communist Party, which wants to crack down on parts of the scam industry in Southeast Asia, than some of the more independent operators in Cambodia and Myanmar.
And the Lao government is also more dependent on Beijing than Cambodia’s authoritarian government.
Pressure from China
That means Vientiane, which relies almost entirely on Chinese investment for economic growth and on Chinese debt relief so the state doesn’t go bust, cannot say no when Beijing orders it to move on the scammers.
The raids on the Golden Triangle SEZ in August came after a meeting earlier that month between the Lao Ministry of Public Security and Zhao – and just weeks after Chinese Foreign Minister Wang Yi visited Vientiane.
However, we must also ask whether Laos’s cure is actually creating a worse disease.
According to a USIP report last month, the Aug. 6 meeting between government officials and Zhao Wei, weeks before the raid on his GTSEZ, “gave criminal kingpins and their senior [scam] compound managers ample time to relocate. Many of them shifted operations to Cambodia or the Myanmar border with Thailand.”
Simply scaring off some scammers to Cambodia might not be the best regional response, although Vientiane probably won’t give a fig about this.
However, Vientiane would care if scammers are now merely set up shop elsewhere in Laos. One source tells me that they are already embedding themselves in the capital and near the Laos-China border.
Depending on how things play out, Laos might end up with a diffuse scam industry that’s structured a lot more like Cambodia’s — and which is far harder to dismantle.
Dispersing the scam compounds means increasing contacts between the criminals and officials from other provinces. Less sophisticated syndicates mean more of the scamming profits stay in-country, laundered through the local economy, infecting everything.
Narco-states like Mexico and Colombia have learned the brutal lesson that it’s simpler to deal with an illegal industry run by one dominant cartel, even one you have to tolerate, rather than a scorched-earth free-for-all between many warring factions.
Possibly, a similar impulse may be why Vientiane seemingly wants to push Zhao and his associates enough for some smaller operators to flee the country, but not enough that the Golden Triangle SEZ collapses.
David Hutt is a research fellow at the Central European Institute of Asian Studies (CEIAS) and the Southeast Asia Columnist at the Diplomat. He writes the Watching Europe In Southeast Asia newsletter. The views expressed here are his own and do not reflect the position of RFA.