How Cambodia’s backpacker haven became a Chinese casino mecca

By transforming Sihanoukville into a casino mecca, Cambodia hopes to rival other Asian gaming hubs like Macao, Singapore and Manila. Gambling is illegal for locals since 1996. So the city hopes to attract Chinese tourists, who are not allowed to gamble in their home country. Despite a recent crackdown on online gambling, they are coming in droves.

“It is extremely easy to obtain a casino license in Cambodia,” says Ben Lee, the founder of IGamiX, a Macao-based consultancy firm focused on the gaming industry in Asia. “To get one, all you need is to prove you have a parcel of land and to pay an application fee to the Cambodian ministry of finance, which is in charge of overseeing casinos.”

Casino operators here aren’t required to check their customer’s identity or verify the origins of their funds, according to several industry experts. Earnings from gaming are not taxed, although the government collects a monthly fee from bigger casinos and a fixed levy on each table and slot machine from smaller ones, Lee adds.

A new gaming law, which Cambodia plans to publish next year, would introduce a 4% to 5% levy on casino revenue. In Macao, it is 38% to 39%.

The Financial Action Task Force, a crime-fighting organization founded by the G7, recently placed Cambodia on its gray list of countries vulnerable to money laundering, citing the lack of regulation of its casinos, which the United Nations Office on Drugs and Crime has warned could be used to launder the proceeds from organized crime, including methamphetamine trafficking.

A few mega-casinos have, however, started to sprout up. The imaginatively named Wisney World will feature three themed casinos, an amusement park, a safari and an artificial lake. Meanwhile, to the east of the city, Suncity, one of Macao’s largest junket operators, and Jincheng Group, a company linked to Chinese plane maker AVIC, have started construction on a huge gaming complex nicknamed “Chinatown” by locals.

Sihanoukville has also become a hotbed for online casinos.

In one establishment, tucked away in a side street, a row of women wearing black lace leotards shuffle cards. They stare into cameras with fixed smiles. There are no players. “The game is live-streamed to bettors — usually based in China — who play remotely,” explains Jonny Ferrari, a Canadian online gaming consultant who lives in Sihanoukville.

The online casino industry is sparsely regulated. “I have seen Chinese businessmen buy a building, get a casino license and rent out sections to various online casino operators,” Ferrari says. “As long as they pay the rent, no questions are asked. They don’t even have to show identification.”

These virtual operations are legal in Cambodia but not in China, where gambling is forbidden.

To get around this prohibition — and Beijing’s strict foreign exchange controls — Ferrari says “agents collect the money in China, using WeChat Pay or in Bitcoin, and a local representative in Cambodia provides a cash advance.” He will use any future gains to repay himself.

Thanks to this underground banking system, no money actually crosses the border.

A close friendship

Chinese companies started taking root in Cambodia in the late 1990s. But their interest really spiked after President Xi Jinping launched China’s Belt and Road Initiative (BRI) — his grand plan to push the country’s influence globally — in 2013.

Beijing invested $5.3 billion in Cambodia between 2013 and 2017, Nut Unvoanra, deputy secretary general of the Cambodia Investment Board, told the Phnom Penh Post.

“Just this year, new projects valued at $4.8 billion have been announced,” says Andrew Davenport from RWR Advisory Group, an agency tracking Chinese investments.

The investments make sense commercially. Chinese manufacturers profit from the lower wages in Cambodia and use it as a base to avoid American tariffs on Chinese goods. In Sihanoukville, the Chinese company Jiangsu Taihu Cambodia International Economic Cooperation Investment and a local partner have set up a special economic zone on the outskirts of town.

More than 160 Chinese companies — mostly garment, leather goods and furniture makers — already operate in the area. In June, the United States fined several companies based there for dodging US tariffs by labeling their goods as Cambodian even though they had been produced in China, US Embassy spokesman Arend Zwartjes told Reuters in an emailed statement.

“Beijing also wants to create new markets for its infrastructure firms abroad,” says Agatha Kratz, an associate director at Rhodium Group who studies BRI investments. Chinese overcapacity means it needs to export some of its iron and cement by building roads, airports and railway lines, she adds. State-owned company China Communications Construction, for example, is building a $2 billion four-lane highway linking Sihanoukville and Phnom Penh, cutting the journey from six to two hours.

Many of these projects are financed with Chinese loans — as of the end of 2018, Cambodia had borrowed $4.6 billion from China, according to an official report on the country’s public debt.

There are also geo-strategic considerations for China to be invested in Cambodia. Davenport adds: “Cambodia has become Beijing’s main ally in Southeast Asia. It systematically backs China’s claims to the South China Sea within the Association of Southeast Asian Nations (ASEAN).”

Zero-dollar tourists

With its new casinos and hotels, Sihanoukville aims to attract mostly Chinese tourists, especially members of the new middle class. The city’s airport has dozens of flights to second- and third-tier cities in China. In 2018, 2 million of the 6.2 million tourists to visit Cambodia were Chinese.

Many of these holidaymakers were traveling abroad for the first time, according to local business people working in the tourism sector. Generally, they prefer to stay in hotels and eat in restaurants staffed by fellow Chinese. Some are bused straight from the airport to a casino and spend a week gambling before heading back to China.

Locals call these travelers “zero-dollar tourists,” because they spend virtually no money in Cambodia — coming in on package tours, their whole stay is paid for before they leave China.

For that reason, many Sihanoukville residents who depend on tourism say their revenues have vanished almost overnight. A row of shuttered restaurants and abandoned bungalows on Otres Beach, traditionally one of the more popular spots, highlights the extent of the problem.

“I still get a few local customers, but Chinese tourists don’t come here and the Western ones have fled,” says Keo Puth Vireak, a 50-year-old who operates a stall on the beach. “I liked them better. They were here to have fun, not just gamble. And they understood that us locals need to make a living.”

Behind the beach, a street that used to be full of bars and travel agents is now covered in “for sale” signs. “The workers came one day, emptied out the lake and cut down all the trees,” says Sina, the son-in-law of Sok Sabay Resort’s owner, standing on a veranda that used to look out onto a picturesque pond and now sits next to a construction site.

Life-threatening jobs

Many of the limited jobs left for locals are tough and dangerous, says Athit Kong, a trade unionist. “On the construction sites, Chinese workers take on all the qualified jobs,” he says. “Cambodians are only hired to do menial work.”

In Sihanoukville, many local laborers wear sneakers and work without helmets. They tie T-shirts around their mouths to protect themselves against dust. “We have quite stringent laws regarding worker safety in Cambodia, but they are rarely enforced,” Kong says. CNN contacted the Cambodian Ministry of Land Management, Urban Planning and Construction about allegations workers lack proper safety equipment, but did not receive a reply.

The workers usually live within the compound they are constructing. “This is a major safety hazard,” Kong adds. “A half-finished structure can come crashing down at any time.”

In June, Kreal Oeun and her husband were asleep in the middle of the night when the Sihanoukville building they lived in came crashing down, killing 28 people.

The couple spent 12 hours trapped under the rubble. “It was terribly hot and we didn’t have anything to drink,” says her husband, 30-year-old Nhov Channeth. “To survive, we had to lick the condensation on the walls.”

Channeth says his 18-year-old brother, who was supposed to get married this year, died in the accident.

They had been living with their coworkers in makeshift accommodation on the second floor of the half-constructed building, which was set to house high-end condos. The contractors hadn’t secured a construction permit, a spokesman for Cambodia’s Ministry of Land Management, Urban Planning and Construction told Chinese state-run media Xinhua.

Today, a heavy plaster cast covers Oeun’s leg. Underneath, the 28-year-old’s foot has started to blacken from gangrene. “We didn’t have enough money to pay the hospital doctors so they only gave us a few pills,” says Channeth, whose arms are covered in scars from the accident.

Oeun and Channeth left the Cambodian capital Phnom Penh to work in Sihanoukville two months before the accident, leaving their children, ages 5 and 10, behind. “We had debts and we needed money for their education,” says Channeth. They say their Chinese employer paid them $15 a day — 50% more than they would have earned back home.

Even the casino jobs are not as good as they might seem, says Maggie Eno, who has lived in Sihanoukville since 2003 and founded an NGO to help children. “I’ve seen 13-year-old girls stop school to work as a croupier,” she says. “They work 12-hour shifts and are regularly harassed by the customers.”

CNN sent a series of questions to the Cambodian Ministry of Land Management, Urban Planning and Construction, as well as to the Cambodian Ministry of Economy and Finance, on the safety issues faced by the construction industry, the deteriorating job prospects for locals in Sihanoukville and the lack of regulation of the casino industry, but did not receive a reply.

Shortly after the building collapse that injured Oeun and her husband, seven businessmen — including five from China — were charged with manslaughter, according to Reuters. Four of them were arrested and the others fled. The provincial governor Yun Min also resigned over the tragedy. As of October, the case was still under investigation and the four men were still in detention, Lim Bun Heng, a spokesman for Preah Sihanouk province’s court of first instance told CNN.

The Chinese Ministry of Foreign Affairs admitted at least one Chinese national had been implicated. “He is currently under the control of the Cambodian police and China believes that the dedicated Cambodian organ will deal with the case justly and handle the violators in accordance with the law,” a spokesperson said in responses faxed to CNN.

‘Life is hard’

As the Chinese money pours in, Sihanoukville’s infrastructure is struggling to cope with the level of development. “There are regular water outages and power cuts,” says Eno, who says her NGO is seeing more cases of dengue and typhoid because of poor drainage.

Plastic also litters the beach. Smelly brown streams flow straight into the sea. Local NGO Mother Nature Cambodia tested some samples in October 2018 and discovered they contained E. coli and Trichomonas intestinalis, bacteria normally found in raw sewage.

But the biggest hardship for many locals is no longer being able to afford to live in their city. A two-bedroom flat that used to cost $300 a month now costs up to $3,000 after demand for rentals ballooned to accommodate Chinese residents.

In one area, about 100 families live in shacks with corrugated metal roofs and dirt floors on a 10-meter (32 feet) wide strip of land between a busy road and a fence. “We have been here for 13 years,” says 66-year-old resident Boeun Korng. “Life is hard. We have to rely on a single well for the whole community and we don’t have electricity.”

Evicted from their rice paddies in 2007, they say they will soon have to move again to make way for the new Chinese-built highway between Sihanoukville and Phnom Penh. “We have been offered 5-by-20-meter lots in an isolated area with no infrastructure,” Korng adds. “We will never leave. We would rather die here.”

Their story is not unusual in Sihanoukville, explains Sreng Vanly, who works for Cambodian human rights NGO LICADHO: “There is a recurring pattern where poor residents are forcibly evicted by a local businessman who is then awarded the right to rent or sell their land to Chinese investors for a profit.”

The Cambodian Ministry of Land Management, Urban Planning and Construction did not respond to CNN’s requests for comment on the environmental and housing issues faced by local residents. China’s foreign ministry said it was “willing to cooperate with Cambodia” to improve the local sewage system, adding: “China has been actively participating in Cambodia’s construction, supporting Chinese enterprises to invest in the country and encouraging Chinese tourists to visit, sincerely hoping to bring more tangible benefits to the Cambodian people via cooperation.”

But discontent is brewing. In January, Sihanoukville police opened fire on local farmers who had set tires alight and built barricades to protest evictions, according to Vanly.

In an attempt to quell the anger, the Cambodian government has started to crack down on some of the excesses. This year, 91 Chinese online casino operators were extradited from Cambodia to China after being accused of setting up online gambling sites that illegally involved wagers from within China. By the end of August, 335 suspects had also been apprehended had also been apprehended in a joint crackdown between Phnom Penh and Beijing on online gambling involving fraud, according to Xinhua.

In August, Cambodia announced that it would immediately stop issuing licenses for these virtual operations while current permits will not be renewed when they expire at the end of the year, according to Xinhua. This has sparked some anxiety in gaming circles but will not imperil Sihanoukville’s larger physical casinos, according to several industry insiders.

In its responses to CNN, The Chinese Ministry of Foreign Affairs said that “online gambling is like a malignant tumor,” adding that it “is willing to work with Cambodia to adopt practical measures, deepen law enforcement and eradicate it.”

But it might be too late, says Eno: “People are angry. … Anti-Chinese sentiment is on the rise.”