Chinese tech firm claims digital plans for Mong La SEZ

A Shanghai blockchain company claimed it intended to set up a special economic zone in a rebel-held border area of eastern Shan State where it would issue digital currencies and IDs to the local population.

Executives from Shellpay Internet Technology Co, in a Channel News Asia (CNA) broadcasting programme aired last December, said that the firm was granted a piece of land by the general office of “Peaceful Liberation Alliance of 7 States” in April 2018 as a Special Economic Zone (SEZ) to issue digital coins and e-citizenship.

Jane Zhang Hong, CEO of Shellpay and who identified herself as the director of the SEZ’s digital economy bureau, said the objective is to “improve” the “dirt-poor” locals and develop the region.

She told CNA that she wanted to create “the world’s first digital economy experiment with 40 million people [in Myanmar] who are dirt-poor” through a “Yongbang SEZ”.

The disputed area, covering 220 square kilometres, is located within the Mong La Special Administrative Region 4 in eastern Shan. Run by the rebel group known as the National Democratic Alliance Army (NDAA), the enclave bordering China’s Yunnan province is known for being a infamous hub for prostitution, gambling and crime. The rebels signed a Union-level ceasefire agreement in December 2011.

Despite legally under Nay Pyi Taw’s sovereignty, Mong La functions more as an integral part of China than of Myanmar, with Chinese business people, linked to business activities in Yunnan, running hotels, restaurants, shops, brothels and casinos, catering for the thousand of Chinese customers visiting Mong La every day. Chinese language and Chinese yuan are used.

NDAA as well as the state government rejected suggestions that the project was authorised. U Kyi Myint, the general secretary of NDAA, denied knowledge of the project. “If they launched such a project, we would definitely know. We don’t know anything about it. It doesn’t make sense,” he said. Similarly, Shan State minister U Soe Nyunt Lwin also said the regional government “has no knowledge of this project” and did not agree to the enterprise.

Shockingly, the blockchain company admitted that the Myanmar authorities were not aware of the plan.

“I don’t think the Burmese [Myanmar] government is aware that Shan State has given a small piece of a place to us to do the digital economy. No. I am very interested to have the conversation with them,” Ms Zhang commented in the interview.

Joern Kristensen, executive director of the Yangon-based Myanmar Institute for Integrated Development (MIID), wasn’t convinced.

“Given the close relationship the Mong La rebel group have to China, it’s hard to believe that they don’t know about the Chinese company [Shellpay] and their plans of an experiment of a blockchain governance system within the area they control,” he told The Myanmar Times.

The leader of the Mong La group, Lin Mingxing aka U Sai Lin, is himself a Chinese who came over from Yunnan in 1968, joined the now-dissolved Communist Party of Burma and married the daughter of Peng Jiasheng, then leader of the Kokang region.

“I remember my first visit to Mong La in 1991, as UNODC’s representative. We were received by Sai Lin at his house, located right on the China-Myanmar border. He jokingly told us ‘When I leave my house from the front door I am in Burma [Myanmar] and when I go out of the back door I am in China,” Mr Kristensen said.

An article published on Shellpay’s Skynews English-language website in May 2018 called Yongbang SEZ “an inalienable part of Shan State” which “exercises a high degree of autonomy”, with “executive, legislative and independent judicial power, including that of final adjudication”.

“Myanmar’s Yongbang SEZ is established on the basis that Sino-Myanmar mutual political trust and bilateral relations are strengthening and that Belt and Road continues to push forward development,” the Chinese-language edition of the website explained.

It is unclear when and how Yongbang SEZ was created. According to the 2014 SEZ Law, there are only three zones in operation or in the pipeline – Dawei, Kyaukpyu and Thilawa SEZs.

Liu Zhanbin, another self-identified SEZ official, argued that the enterprise could reduce poverty, lamenting that “you can’t imagine how poor they [Myanmar people] are.”

“Let me try to explain. Their living standard is like it was in China in the 1950s and 60s. We are hoping to use blockchain to build and improve this area which might be the most under-developed place in the world,” he said.

But such optimism is in short supply on this side of the border.

“People in Myanmar should be aware that many cryptocurrency schemes are little more than fantasies, frauds and fads, like the South Sea Bubble and the tulip craze of the 17th century,” a long-time Myanmar observer told The Myanmar Times. “There is less to this than meets the eye – but it does give an insight into how some in China view Myanmar.”

It appears that the SEZ enterprise is pitched as a vehicle for upper Myanmar’s development, covering tangible natural resources.

“The best quality jade in the world comes from northern Myanmar – specifically from one place, Kachin State. This is one area we plan to include in our [SEZ] in the next phase. The biggest tin reserves in the world are also located in northern Myanmar. They are not yet exploited,” Mr Liu continued.

On top of digital coins and natural resources, e-citizenship is on offer as well for anyone who uses “Yongbang Coin”.

“They [the Myanmar people in the area] are so poor because the Burmese [Myanmar] government don’t give them the ID card. They are landlocked. They cannot go anywhere because they don’t have a passport. So we can issue everybody a digital ID using blockchain,” said Ms Zhang.

The Chinese Embassy in Yangon did not respond to request for comment from The Myanmar Times.

“Whatever the truth is in this bizarre story, the way Myanmar’s agreement and participation is taken for granted calls for an official explanation from China. It should come from the Chinese Ambassador,” Mr Kristensen observed.

The Myanmar Times has written to Shellpay to clarify how the project was authorised.


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