Prepare chicken marinade. Whisk together water with sugar until sugar dissolves. Add remaining ingredients (vinegar, fish sauce, garlic, chili). Add chicken and stir to coat. Marinate for 1 hour.
Meanwhile, prepare sauce. Combine chili sauce, fish sauce, vinegar, sugar, garlic, with Thai chili in a medium sauce pot. Bring to a simmer over medium heat and cook until slightly thickened, about 3 minutes. Let cool.
Heat frying oil to 350 degrees F.
Remove chicken from the marinade, discarding marinade. Toss chicken in potato starch, making sure to evenly coat all sides. Shake off excess potato starch.
Fry chicken until golden brown on all sides. Remove with a slotted spoon and drain on a paper-towel-lined plate. Repeat with remaining chicken.
Pour half of the sauce on top of the chicken and toss to coat. Top with fresh cilantro and serve with remaining sauce on the side.