Reprieve for now

Stakeholders in the booming but controversial offshore gaming sector can now heave a sigh of relief. It has been reported that Chinese President Xi Jinping made no specific request that the Philippines ban offshore gaming, which employs nearly 200,000 workers mostly from China, but targeting clients mainly from the mainland where gambling is illegal.

Finance Secretary Carlos Dominguez III, who was present during the bilateral meeting between President Duterte and the Chinese leader in Beijing last week, explained that China respected the Philippines’ sovereignty over the government’s policy on gambling.

The anxiety was fueled last Aug. 8 when the Chinese Embassy in Manila announced the Chinese government’s crackdown on cross-border gambling. The statement said China’s Ministry of Public Security “will focus on investigating and cracking some major cases, including those of organizing gambling overseas and opening online gaming, and will destroy networks of criminal organizations involved in recruiting gamblers from China by overseas casinos and using the internet to open casinos in China.”

The Chinese Embassy claimed that many Chinese citizens working in online gambling hubs in the Philippines were recruited illegally and were being subjected to “modern slavery.” While China bans any form of gambling by Chinese citizens,
including online gambling, the Chinese fuel casinos worldwide and, of late, online gambling such as those operated by Philippine offshore gaming operators (Pogos).

Then, on Aug. 20, the Chinese foreign ministry again called on the Philippines to ban all online gaming involving Chinese citizens, arguing that “online gambling is a most dangerous tumor in modern society.” While appreciating the Philippine government’s move to suspend the issuance of new licenses to Pogos, the foreign ministry urged the Duterte administration to do more and ban all online gambling altogether.

Thus, all eyes were on Mr. Duterte’s meeting with Xi last week. And the reassuring news for now was the report of the head of the administration’s economic team that President Xi only raised Beijing’s concern about Pogos, although Dominguez also quoted Xi as saying they would appreciate more if additional actions were taken by the Philippine government against online casinos catering to Chinese players. Still, Dominguez said he believed this statement was nothing more than “a comment,” and that Mr. Duterte just took note of it.

An outright ban on Pogos would have caused a dent on the Philippine economy. Online gambling has become a big source of revenue for both the government and the property sector. Pagcor has earned P11.9 billion from the Pogo industry during the past two years, and expects to generate P8 billion in revenues from Pogos this year.

The Bureau of Internal Revenue also expects to collect P2 billion in income tax from Pogos a month and P1.25 billion in value-added tax from Pogo workers’ spending. The government has estimated the earnings of real estate developers at no less than P20 billion a year on rentals—P8 billion this year and P12 billion in the past two years.

However, gambling always has social consequences that cannot be ignored. Sen. Joel Villanueva is among those who contend that Pogos have contributed not only to the spike in foreigners illegally entering the country, but also to crimes committed by foreigners, including money laundering, the increasing specter of Chinese criminals coming over to prey on their countrymen on Philippine soil, and the “threats of espionage that may affect national security,” given the Philippines’ rival territorial stand against China’s sweeping claims over much of the South China Sea. Other Philippine officials have also raised concerns about the labor and social implications arising from Pogos.

The “societal impact” of Pogo operations would have to be more assiduously assessed, as suggested by Pagcor chair Andrea Domingo. While the value or importance of Pogos to many sectors at the moment cannot be denied, long-term economic and national security requires that the government and private sector look at other business opportunities that could generate jobs, boost taxes and uplift economic conditions without the accompanying heavy social cost that gambling, whether of the local or foreign kind, entails.