Abstract

In this episode, Ms Niva Yau, an expert on China’s Western peripheral diplomacy, shares about the role of Chinese private security companies across central Asia.

This podcast series is presented by Dr Alessandro Arduino, Principal Research Fellow and Dr Ameem Lutfi, Research Fellow, at the Middle East Institute, National University of Singapore.

Listen to the full podcast here:

Full Transcript:

[Ameem Lutfi]: Welcome to the 11th episode of the National University of Singapore Middle East Institute’s podcast series Boots Off the Ground: Security in Transition from the Middle East and Beyond.

In this series, we look at the future of warfare which will see uniformed soldiers, or boots on the ground, being replaced by private military companies, autonomous weapons systems and cyber weapons.

My name is Ameem Lutfi and I will be the co-host for the series along with my colleague, Alessandro Arduino. We’re glad to have with us today Ms Niva Yau, a researcher at the OSCE Academy in Bishkek, Kyrgyzstan. Ms Yau is an expert on China’s western peripheral diplomacy, including Central Asia and Afghanistan. Recently, one of her papers won the Washington Post’s prestigious award for best paper in political economy. Today, we are going to talk to her about another research project of hers that she did with Dirk Van Der Kley, on the role of Chinese Private Security Companies (PSCs) in Central Asia.

[Alessandro Arduino]: Thank you very much for being with us today, Niva and congratulations again to you and Dirk on the paper. To start off, I would love if you could give our listeners a quick overview of China’s private security firms in Central Asia. What countries do they have an established presence in, for example, and since when have they been there — I do recall it’s not recent — and what kind of different services do they provide compared to other private security firms, both locally or internationally? Thank you.

[Niva Yau]: Thank you Alex and thank you to the National University of Singapore and your podcast for having me here today. In our research, we found six Chinese private security companies with evidence of operations in Central Asia – but only in Kazakhstan, Kyrgyzstan and Uzbekistan. The level of presence is different in each of the three countries because of legal local restrictions.

The first Chinese PSC that went into Central Asia was the Xinjiang Shamo Tewei . They provided bodyguards for the Chinese engineers who were working in Kazakhstan from 2013 — quite a basic service.  In Kyrgyzstan, we have a more sophisticated Chinese private security company named Zhongjun Junhong. They have about 20 Chinese clients — different Chinese companies — and they offer even political risk assessments. This company has a local weapon license granted by the Kyrgyz government as well.

The local private security sector is quite large in both Kazakhstan and Kyrgyzstan for different reasons. For Kazakhstan, because there’s a lot of money; for Kyrgyzstan because there’s a weak state and a lot of political instability. Chinese PSCs here set up joint ventures with Kyrgyz local private security, whereas in Kazakhstan the local Kazakh private security companies, they have a large labour union group. They lobby in the Kazakh parliament to resist Chinese entry into the Kazakh market because they already have good relationships with the Russian private security companies.

So in Kyrgyzstan, Chinese clients also hire local private security companies because they have insights and sometimes, connections with local criminal groups. This is something that the Chinese PSCs have to rely on the local partners for and at the moment, there are no Western PSCs in Central Asia to my knowledge.  I assume we are talking about Central Asia, excluding Afghanistan, here.

[Ameem Lutfi]: Thank you for giving us that overview. It’s interesting — I mean I’m talking about the paper that you co-wrote; one of the arguments that you make, that the spread of Chinese private security companies is happening hand in hand with Chinese commercial expansion through the BRI. Now, a few months back, we had on our podcast, a representative from HXZA — which I’m sure you know — and one of the questions that we asked him was about this popular perception that Chinese PSCs are basically a front for the PLA. Of course he refuted that claim and said anyone in the industry would know that is not true.

One of the arguments that he made which was interesting, was that a lot of the conflictual contracts that the Belt and Road Initiative (BRI) projects are awarding are actually not to Chinese companies themselves — and they’re being awarded in the open market. If a Chinese company and Chinese PSC ends up getting the contract, it’s only purely because it’s wanted on the basis of the services it offers.

Would you say that’s true even in Central Asia? Are Chinese private security companies gaining these BRI contracts simply because they offer better services or a better price point?

[Niva Yau]: In Central Asia this is a very difficult kind of environment, because winning these contracts or having an open tender would mean that there is competition but here, there’s simply no competition. I mean, each of the Chinese PSCs here kind of dominates one country. In Kyrgyztan for example, there’s only one really active Chinese PSC, Zhongjun Junhong, and they are getting contracts from all the Chinese companies here, even for Huawei’s office in the capital as well as the Chinese Embassy here in Bishkek.

For years now, Chinese companies here only work with local private security companies or the local police but it’s not working because they are quite corrupt and very unreliable. In a sense, the Chinese PSCs are providing better service but it’s mostly because it’s Chinese-owned. It’s in this sense that the company is getting contracts; because it is a Chinese PSC and they have very close relationships with the Chinese Embassy and they signed security arrangements to even protect projects that are still at the negotiation stage.

[Alessandro Arduino]: On a related note, as you just mentioned that this relationship between Chinese PSC and Chinese Embassy — in your paper and in your article, the Chinese government has taken several important steps in doing some coordination between the various stakeholders abroad, such as creating a coordination group in the embassy, establishing security management guidelines and so on. Can you elaborate a little bit more on these and especially focusing on the various efforts — giving us an idea if, at the end of the day, this kind of coordination has been a success or not?

[Niva Yau]: This is from an official Chinese document published in 2018 called ‘A Security Management Guideline for Overseas Chinese-funded Companies, Institutions and Personnel’. This is a 170-page precise measures of what Chinese companies abroad should do to be safe and this is published by the Ministry of Commerce, I think, in some sort of a collaboration with other Chinese ministries. It says in this document that Chinese PSCs, amongst other Chinese agencies, are part of this newly established mechanism called the ‘Belt and Road National Security Intelligence System’.

This is the first time that this mechanism was actually mentioned in a Chinese document this close to the public and it says there that this mechanism aims to make intelligence gathering more transparent across different ministries concerning foreign affairs. Chinese PSCs are expected to join Chinese embassies in reporting and engaging intelligence gathering under the system.

Are they successful? Well, in this region, there’s already a lot of joint intelligence gathering efforts to fight terrorism under the Shanghai Cooperation organization so the point of having Chinese PSCs to engage in intelligence gathering and being connected to the embassy to me, seems like it’s about gathering local intelligence and not a collaborative kind of work-with-the-Kazakh-and-the-Uzbeks. It’s more about what China wants to know – so it’s about local criminal groups, political risks in this country and so on. China, of course, has shown itself very knowledgeable about this region and these countries here; it’s extremely clear.

I’ll give you a recent example — so in Kyrgyzstan at the moment, we’re undergoing a political transition since October. We have a new leader. His name is Sadyr Japarov and in November, his supporters were pressuring him to manage debt issues with China. I mean, Kyrgyzstan is one of the countries in the world most indebted to China. Japarov, this new leader, proposed to give this mine ore called ‘Jetim-too’ —  an iron ore mining site — to the Chinese in order to pay the debt.

China didn’t accept it because this site is a very sensitive one — it’s the world’s second largest iron ore deposit; it will be very profitable but it’s situated between the two river mouths in Kyrgyzstan, on top of the mountains. If this water is contaminated, it will kill the entire agricultural sector not only in Kyrgyzstan, but also in Kazakhstan and Uzbekistan because the water flows from here to the entire region. This is why even the Russians didn’t dare to touch it during the Soviet Union. Japarov’s deal was a trap deal and China immediately avoided it and came out to say that it is not taking the mine and if a debt extension is required, it will offer 35 million for a four-year period of extension to Kyrgyzstan.

It was very clear that Beijing had access to information about this mine and these plans.

[Ameem Lutfi]: This insight that you gave — what was very refreshing about your paper was that beyond-the-official-story of how this collaboration happened and it gave us a feel of some of the informal practices, that workaround that the PSC companies are developing to overcome legal restrictions such as the Chinese citizens’ ban on using arms abroad or Kazakhstan’s restriction on the presence of foreign PSCs. I’m wondering if you could also give us and our listeners some insight, some examples, or something that you’ve experienced about some of these informal workarounds of these laws.

[Niva Yau]: So yes, there are local legal restrictions that regulate activities or foreign PSCs in Central Asia. In Kazakhstan, they outrightly do not allow operations of foreign PSCs so the Chinese PSCs there are called ‘logistics services’ — escort logistics, transport security; whatever you call it — and the bodyguards employed by Chinese engineers, like I said, are personal bodyguards. They came together with the engineers from China so the contracts were not technically in Kazakhstan, so there’s a way around it. But of course, there is no way around having your compound guarded by Chinese PSC security guards so this doesn’t happen in Kazakhstan.

In Kyrgyzstan, on the other hand, the Chinese PSC Zhongjun Junhong work as a joint venture with a local private security company led by a former police chief. So, to get around the Chinese ban on Chinese citizens using arms abroad, this company here insists that only their local staff carry guns.

[Alessandro Arduino]: This issue of guns is not only related to Chinese in Central Asia but is all along the highly complex environment in the BRI but please Niva, allow me to push a little bit further the angle on hiring locals. Your article hints at their role and the fact that their role is not limited to carrying arms but instead, always involved more high-level and complex roles such as, as we mentioned before, intelligence gathering, liaisons with local government officials and so on.

In the region in which countries we are seeing this local Chinese partnership? If you can, give us some examples of what they look on the ground? And especially on another note, considering that the main medium of communication in Central Asia is the Russian language, do you see any role played by a Russian private security firm in the region or in future? Thank you.

[Niva Yau]: Yes, Russian PSCs are, in fact, present in Kazakhstan but they work together with the Kazakh private security companies. The Kazakhs are okay with it; they’re okay with working with the Russians in Kazakhstan because the Russians actually also let the Kazakh private security companies work in Russia so there’s a good collaboration there. This is not the same for China – we don’t see Kazakh PSCs in China for example; this will be quite unthinkable.

The higher-level and more complex roles are seen in Kyrgyzstan the most because criminal groups here put a lot of Chinese companies at risk; mining companies and the assets and so on because there’s high political instability and little protection. Whereas, elsewhere in Central Asia, the regimes are quite authoritarian and stable so Kyrgyzstan is the country where Chinese companies are most at risk.

Intelligence gathering and liaisons with local government are perfect just for preventative measures; revolutions erupt in Kyrgyzstan very quickly — like last year in October, no one expected to have another mini-revolution; no one expected to have an early presidential election and have a new president so soon. On the ground, especially Chinese mining companies, they hire Chinese PSCs and local PSCs at the same time because the local private security companies here have knowledge into criminal groups and sometimes even business relations with these criminal groups so they can pay and make it all go away.

It’s the same logic when it comes to working with local government officials – to have someone on your side who’s gaining powerful positions and be friends with the right people to make sure your assets are safe. This is mainly the interests of why Chinese companies hire PSCs because there’s a demand for intelligence gathering so the Chinese PSCs have to meet them.

[Ameem Lutfi]: On a related note, I’m wondering if there are examples also of Chinese companies partnering with foreign private security companies? One of the examples that you mentioned was of a frontier services group led by Mr Erik Prince, but are there other examples of Chinese and Western partnerships or is there something different about frontier service groups? If it is different, if frontier service groups are operating differently, how do they do it? How do they hire people, operate and get contracts? What sets them apart?

[Niva Yau]: Frontier service, of course, is one type of this Chinese-Western partnership but really a standalone case. In my research, I found 32 Chinese private security companies that work abroad and a few of them do hire Western security personnel as consultants. Sometimes, I think I saw — either it was Qatar or in the Gulf region — local experts who were actually hired as consultants. So it varies in countries; in Central Asia no locals are hired as consultants because Chinese private security companies here work with local private security companies that already have this knowledge. So when it comes to a Chinese private security company, hiring westerners or locals, it’s to fill a gap of knowledge that they don’t have.

[Alessandro Arduino]: Yes, since we’re already discussing Mr Prince — and it’s for several months that we’ve been trying to have him in this podcast so we have the chance to ask him this kind of question directly — but looking at FSG’s recent activities, they’re are no longer limited to the security industry itself. Instead of just gaining subcontracts for logistics or gaining mining sites, FSG and Erik Prince by himself is not trying to be directly on the mine so we do see similar cases.

Did you experience these, for example, Chinese private security firms expanding in other lines of business in Central Asia? Especially the mining sector as you mentioned before —and I recall that in Central Asia, especially coal mines are quite attractive to Chinese investors.

[Niva Yau]: Yes, not particularly in mining, but Zhongjun Junhong, the Chinese PSC working in Kyrgyzstan, has shares in a Chinese-owned cement factory here so they also, at the same time, protect this project as well. I definitely see the interest of Chinese PSC in wanting to expand into other spheres of work.

[Ameem Lutfi]: To extend this discussion of comparison between the Chinese private security company and the Western one — one of the trends that we’re seeing with some of the Western companies is that they’re moving away from this idea of private security being sort of an instrument of blunt force, or being an actual physical force. Now they’re focusing more on developing technological edges like developing specific niches in either drone use, cyber security, surveillance and so on.

Do you see a similar trend with Chinese private security companies as well, who are now developing very high-tech arms and developing a niche in that sector?

[Niva Yau]: I have to first, again mention that, because Central Asia is a region of the Shanghai Cooperation Organization and high-tech security measures, use of drones and military exercises cyber security sharing of information — all these things are already going on within the SCO and China has access to these. It’s not really the role for Chinese PSCs to do that and apart from that, there’s also other Chinese actors in this region. For example, Chinese software engineers — they are already working as consultants in this region, the very sensitive networks for the surveillance traffic camera system — they are mainly Huawei’s deal with the local governments so there’s very little the Chinese PSCs can do. Actually, I see more Chinese PSCs trying to change the mindset of the Chinese companies here.

For example, Chinese mining companies here used to allocate a cost for security to pay local criminal groups or officials for protection but now, the Chinese PSCs are actually suggesting to stop this practice and actually work towards strengthening rule of law in this country for the long term safety; it’s quite interesting. I don’t see Chinese PSCs here as high tech at all but this is also because Central Asia is still extremely backward – rural areas are mostly where these mining companies are located but Internet there is very slow and expensive.

[Alessandro Arduino]: Now that’s quite interesting – what you just mentioned and especially if we look at the development of the so-called Digital Silk Road was, for example, in the part of the world that we are at right now – Singapore. Singapore is  a global leader in technological innovation — you will see on paper that there is a lot that a country like Singapore can provide, not only in cyber security but in this technological cooperation in Central Asia and also with China.

But then, this is on paper. If we look at reality, then we can see that there are a lot of limitations and one of these limitations, for example, is the fact that the foreign entities cannot own Chinese private security that operates overseas or cannot even own shares into them.

Do you foresee any change in the future, in a more open market, for not only collaboration but ownership or partial ownership? And more broadly, do you see any space for Singaporean companies on the BRI project in Central Asia?

[Niva Yau]: I don’t know if Singaporeans would find it appealing; it’s a lot of work in these countries and it makes very little money. I’ll say, thinking from the perspective of profits, it makes the most sense for Singapore to work in Kazakhstan but I actually also doubt that the Kazakhs will be willing to open up to Singapore as well in the realm of private security or anything related to security.

With that said, the Kazakhs are very keen on having their own technology they can monitor so maybe this is something that Singapore can target in terms of technology transfer. Well, for example, in Kazakhstan the surveillance camera system — yes, they use Chinese hardware but they also insisted to use Kazakh software engineers to build a Kazakh software and they did that and they monitored their own system. I think Singapore should target working with the Kazakhs directly and then perhaps the chances will be higher.

The limitation on overseas Chinese ownership of PSCs is mainly because Chinese PSCs – domestic or working abroad, are regulated by Chinese law and this means that at least 51 percent have to be state-owned, so this squeezes out any foreigners’ stake in the Chinese company abroad. For example, here in Kyrgyzstan, Chinese PSCs set up a joint venture with local PSCs where the Chinese act in bringing clients and the local side acts in offering services.

So, for example, to work with Chinese PSCs abroad, I think it will make sense only in a country with a lot of Singaporean investments so there is an incentive to bring in a Singaporean PSC to attract Singaporean clients. Maybe in Myanmar this could be possible.

[Ameem Lutfi]: To change the topic a little bit away from the conversation about high technology, I’ll ask what is the nature of the opposition that some of the Chinese projects faced in Central Asia? What are the main security threats — is it just disgruntled workers and displaced natives who are opposing these foreign investments and developmental projects? If so, are there any attempts or any conversation going on about even expanding the idea of what security means to include? Something like social welfare services?

You talked about how sometimes they pay off local gangs and local criminal groups but another option is also investing in development; you build schools you build hospitals and so on, to take away some of those causes of grievances. Are those some of the conversations going on as well?

[Niva Yau]: The opposition against China in this region is a lot more complex. It dates back to Soviet teaching. So last year, there was a Chinese logistics project proposal in south of Kyrgyzstan that was cancelled because of a lot of local opposition. My partner, in fact, was there very recently and he spoke to one of the protests leaders and the protest leader said that he’s against the project because he’s, himself, anti-China.

He was reciting a Soviet poem from 600 years ago about how bad the Chinese is, culturally and how the Chinese is set to swallow the entire Soviet Union, step by step. What we are dealing with is the older generation who were educated by the Soviet Union.

Well, there’s also another factor — locals here are generally anti-foreigner. Many foreign businesses like Turkish factories or Kazakh mining companies here are also frequently attacked by locals. The main problem for foreign companies in this region is because foreign companies pay tax to the government in the capital. Due to corruption across this region, this money is never channelled back to the local communities so the locals who live around these foreign companies and projects, they never see benefits and this is very common.

Last year, I got in touch with a Chinese mining company here that annually allocates a portion of its profits to this local village development fund to build roads and schools. Even then sometimes, they still get into disagreements with the villagers and that went violent very quickly so there’s definitely a strong will for Chinese companies to expand social welfare services and building long-term soft power but this takes time; the older generation has a very strong Soviet thinking.

The younger generation are beginning to see benefits to work with China and they are quite pro-China. Especially during Covid-19, there was a public opinion survey done in Kyrgyzstan by a company — Central Asia Barometer —the statistics show that young people actually find China the best country in fighting Covid-19 and also the best country in helping Kyrgyzstan with Covid-related aid. In terms of soft power in the future, this will definitely change; the situation of anti-China sentiment will not be as severe.

[Alessandro Arduino]: Before thanking you for joining us today, please allow me to ask you the last question – one that we ask all our guests — what, in your opinion, would be the future of security management in a complex environment? How will it look like in 30 years from the perspective of China’s private security companies in Central Asia?

[Niva Yau]: BRI is not dying, it’s written into the constitution so Central Asia is a very strategic region for China’s Western “expansion”. There will be more Chinese investments in Central Asia in the coming 30 years; more Chinese PSC presence will definitely follow as well. Globally, there’s a gap in regulating private security companies and I think this will change, especially in Central Asia. The Organization for Security and Cooperation in Europe (OSCE) is a comprehensive international security organisation that also covers Central Asia.

It is within the scope of the OSCE to support local governments to strengthen private security regulation and code of conduct. This is an area that some colleagues of mine in Vienna have been interested to do more in. With the support of OSCE and other international organisations, a stronger rule of law concerning foreign PSCs in Central Asia is going to offer more preventative security measures, reducing points of conflict that are posed by foreign PSCs. The way I see it, the work of foreign private security abroad will be more regulated in the coming 30 years.

[Alessandro Arduino]: And with this, I would like to thank you again for joining us today. Special thanks to all our listeners!