Philippines halts new online casinos as China urges crackdown

Move follows similar action by Cambodia on Sunday
Offshore gaming is one of the Philippines' fastest growing sectors, employing around 350,000 people. (Photo by Cliff Venzon)
Offshore gaming is one of the Philippines' fastest growing sectors, employing around 350,000 people. (Photo by Cliff Venzon)

The Philippines will stop issuing new licenses to offshore gaming operators amid fears that the online gaming boom enables large-scale money laundering and is exacerbating social problems in mainland China.

The move comes as fears mount in Manila over the security risks posed by the huge influx of Chinese workers to service the industry, and follows a similar crackdown on online gaming announced by Cambodian authorities on Sunday.

Philippine Amusement and Gaming Corporation Chairwoman Andrea Domingo said the regulator will temporarily cap at 61 the number of online gaming operators, known as POGOs, after processing three existing applications.

"Then we will no longer accept any more applications until we have reviewed and addressed the concerns of everybody," Domingo told reporters.

Aimed at the Chinese market, where gambling remains illegal, offshore gaming has been embraced by the administration of President Rodrigo Duterte and is now one of the Philippines' fastest-growing sectors, employing over 350,000 people, including around 100,000 mainly Chinese foreign workers.

Since he became president in 2016, Duterte has sought closer ties with Beijing, leading to a surge in Chinese investment in the Philippines. In return, Beijing has been in a better position to exert influence on Philippine foreign policy.

Domingo said PAGCOR would weigh the costs and benefits of keeping POGOs,  and added that the freeze order will be reviewed toward the end of this year. PAGCOR expects to collect 8 billion pesos ($152 million) from license fees this year, representing 2% of total gross gaming revenue.

"It's about time that after two and half years of implementing this program, we stop first, take stock, and look at all the other concerns that we haven't met comfortably and effectively," Domingo said.

Still, the decision to halt the issuing of new licenses is a significant reversal for Domingo, who only last month said that Pagcor was working hard to attract "as many legitimate operations as possible."

Reports focusing on the growing POGO industry appear to have forced Beijing's hand, with the Chinese embassy in Manila earlier this month urging the Duterte administration to crackdown on the industry, saying that a huge amount of "Chinese funds has illegally flown out of China and illegally into the Philippines."

The Chinese embassy statement added that "a large number of Chinese citizens are lured into illegal gambling has resulted in an increase in crimes and social problems in China," and also stated that illegally recruited Chinese workers were the victims of abuse.

"Some Chinese citizens were physically tortured, injured or even murdered," the statement said.

Philippines Defense Secretary Delfin Lorenzana has also voiced concerns over the influx of Chinese workers into the country.

"Knowing that these Chinese companies are mandated by the Chinese government to assist intel collection for their government, it is not far-fetched that individuals, likewise, could be compelled to do so," Lorenzana said on Sunday.

Despite closer ties between Manila and Beijing under Duterte, the two countries remain locked in a territorial dispute over the South China Sea.

The shared concerns over online gaming made the Philippines defense establishment an unlikely bedfellow with Beijing in their opposition to the further growth of the POGO industry, said  Alvin Camba, a doctoral candidate at Johns Hopkins University who studies Chinese investments in the Philippines and has done research on the online gaming industry.

"Beijing has always been against online gambling," said Camba. "China is behind the moves to curb online gambling because it's a sector held by powerful billionaires who exercise power above and beyond the Chinese Communist Party."

China's increasingly vocal attitude against online gambling also appears to have pressured Cambodia, which announced Sunday that it will stop issuing new online gambing licenses.

The directive issued on August 18 and signed by Prime Minister Hun Sen said action was needed to tackle “security and social order.” The directive also mentioned that "foreign criminals” had been conducting “online fraud.”

Finance Ministry spokesman Ros Phearun told Nikkei there were currently 99 online gambling licences issued by the government which expire on December 31. The boom in online gambling operators has coincided with an explosion in Chinese investment in hotels and casinos, particularly in the coastal city of Sihanoukville where authorities have granted more than 160 casino licenses, with at least 91 in Preah Sihanouk province.

"I think we’ll see more coordinated efforts between the Cambodian government and the Chinese government to try and rein in these people and try to get everything back onto an even keel, because at the moment, to say it’s the Wild West, is mild," said Shaun McCamley, managing partner at Euro Pacific Asia Consulting.

David Leechiu, CEO of POGO office broker Leechiu Property Consultants, said halting POGO applications at a time of Cambodia's move is a "missed opportunity."

"I think legitimate operators in Cambodia would have been forced to go to the Philippines," he said.

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