The Philippine Amusement and Gaming Corporation (PAGCOR) previously said it would not issue licenses to new casinos. This statement has been welcomed by the Chinese authorities, noting that it would be better for the Philippines to completely ban gambling in their country.
In fact, originally Rodrigo Duterte was the initiator of the legalisation of gambling in the country. In 2016, the Philippine Amusement and Gaming Corporation was created, and issued licenses to 56 Philippine offshore gambling operators (POGOs). Since the demand for gambling, especially online casinos, came mainly from Chinese citizens, it is the Chinese who are employed in this industry in the Philippines.
Philippine Justice Minister Menardo Guevarra said that in 2018, 95,000 work permits were issued to Chinese citizens employed in the gambling industry. In 2019, this figure grew to 138,000, according to the country’s Ministry of Finance. The data has also been confirmed by the Philippine Amusement and Gaming Corporation, indicating that more than 100,000 Chinese citizens are legally working in the nation’s gambling industry.
Chinese Public Security Minister Zhao Kezhi earlier stated that the problem of cross-border online gambling should be addressed as soon as possible. The Chinese Embassy in Manila, in turn, noted that a sharp increase in the demand for online gambling among Chinese has resulted in an increase in crime and social instability inside China.
The problem is also that the use of electronic, including cryptocurrency wallets, in online casinos allows players to hide their identities. And this creates an opportunity for money laundering and the illegal withdrawal of money from the country. There have already been precedents.
The most notorious case is the theft of $81 million from the Bangladesh Bank’s foreign reserves, which were withdrawn through an online casino in the Philippines. China is also worried, according to the statement from the Chinese Embassy in Manila that several hundred million yuan may be withdrawn annually from online casinos in the country.
Moreover, this outflow of capital is illegal. Firstly, because it bypasses the rules of currency control and secondly, by law, Chinese citizens who are physically on Chinese territory can only gamble in Macau.
That is why Beijing welcomed PAGCOR's initial decision not to issue new online casino licenses. The Philippine regulator's decision was motivated by lawmakers and some ministries in the country receiving numerous complaints from China about illegal workers in the gaming industry.
It was noted that it is necessary to streamline the industry and tighten control over labour migrants because illegal immigrants pose security threats.
Duterte, however, has set the record straight himself. His position is clear: gambling brings large tax revenues to the budget and contributes to the development of related industries, says Chen Bingxiang, director of the Centre for Philippine Studies at the Guangxi University of Nationalities.
"I think there are three sets of reasons. First, tax revenues are what the economy is based on. As far as I know, a significant amount of investment by Chinese non-state companies in the Philippines is precisely in the gambling business. It doesn’t matter, online or offline. Chinese companies and citizens invest a lot there. Moreover, these companies are also managed by the Chinese, and their target audience is Chinese citizens", the scholar said, adding that these big investments are a significant source of revenue for local authorities.
The nation needs the money because they are currently implementing a large-scale infrastructure construction programme across the country financed by the Philippine government, in addition to private investors: "If you curtail the gambling business, including online casinos, then government revenue will also fall. I believe that if the Philippine authorities had plans to curtail this industry, they would do it in a certain way and gradually. And, of course, it all depends on the interaction between China and the Philippines. For example, if the country's authorities do not issue new licenses, this could be considered a signal that the industry is gradually being phased out".
Chen Bingxiang also pointed out that the industry creates jobs for Filipino citizens, despite it being low paid work that does not require high qualifications.
"Finally, gambling-related industries and the economy as a whole is developing, as a result, of the casino business", Bingxiang said.
"According to statistics, almost 200,000 Chinese are working in the industry. They create effective demand. This is easy money, and therefore, they willingly spend it. Consumption is wide. The market directs its resources to other areas. They pay in restaurants, buy real estate, and consumer goods. For example, landlords were able to raise the cost of housing due to demand from the Chinese. Sometimes whole apartment buildings were provided to the Chinese. If there is no gambling business, there will be no Chinese, and landlords will no longer be able to make such a profit", the Chinese scholar stated.
However, for Filipinos themselves, a large effective demand from Chinese citizens sometimes results in aggravating social problems. According to a report by real estate company Santos Knight Frank, real estate prices in gambling areas for 2018 increased by 62%. Thus, for local residents, housing is becoming less affordable.
Not to mention the fact that even at such prices, free housing was simply insufficient. In areas close to gambling zones, residential sectors have a 94% occupancy rate.
And the effect of the development in related industries for Filipinos is very relative. So, for example, in terms of gambling industry workers, Chinese restaurants now prevail (with Chinese workers).
And business of ordinary Filipinos has been pushed out to other areas less attractive to Chinese demand. Given that according to the Philippines Department of Labor and Employment (DOLE), there are almost 4 million unemployed in the country, additional pressure on business activity may be out of place.
On the other hand, tax revenues from gambling may offset the negative socio-economic consequences. According to PAGCOR, in the first half of 2019, the gambling industry generated 20 billion pesos ($385 million) in taxes. However, collecting taxes from foreign citizens can be difficult. As the Philippines Ministry of Finance noted, each year the country misses out on nearly $600 million in tax payments due to the fact that foreign workers do not provide reliable data on their income.
Views and opinions, expressed in the article are those of Chen Bingxiang and do not necessarily reflect those of Sputnik.