By: Our Correspondent

The Philippines has belatedly begun a crackdown on the tens of thousands of Chinese workers who have swarmed into Manila illegally to work in the teeming offshore gaming industry, with Labor Undersecretary Ana C. Dione reporting on April 22 that as many as 130,000 workers in so-called POGO firms are unregistered with the Bureau of Internal Revenue and aren’t paying taxes to the Philippine government.

A review of 88 companies in the Philippine Offshore Gaming Operators (POGO) sector found that only 16,550 workers have been issued work permits, with another 7,411 issued alien employment permits, according to the bureau. The unregistered workers are estimated by the Bureau of Internal Revenue to be costing Philippine coffers as much as PHP22 billion (US$421 million annually, with foreign workers being paid the equivalent of RMB10,000 (US$1,488) per month.

Earlier, President Rodrigo Duterte claimed there could be as many as 300,000 Chinese workers in the offshore gaming industry which has become a huge draw for mainland Chinese who want to gamble online.  And while that figure may be a substantial overestimate, having 130,000 in the country, not paying taxes, has raised red flags.

Nonetheless, the industry is kind of the modern equivalent of the swarms of Chinese who moved to the west coast of the United States in the 1850s for what they called “Gold mountain” to work in California gold mines. These are jobs that, while there is almost certain to be exploitation, are far better than the Foxconn assembly factories in Dongguan. They are likely also to keep increasing unless the Chinese government becomes increasingly alarmed at the losses pouring out of Chinese consumers’ credit cards and into the coffers of the POGO companies.

According to the online research firm Research and Markets, China’s online gaming market is expected to surpass US$75 billion by the end of the year 2024, making it one of the biggest such markets in the world, with as many as 700 million of China’s 1.4 billion people gambling online over the next five years.  With convenient, well-developed payment systems, they are finding it easy to spend vast amounts of money and time online.

At the same time, the rapid rise in offshore casinos that appear on Putonghua-speaking computers in China is undoubtedly creating tens of thousands of gaming addicts who are losing their shirts. The machines guarantee that the companies will make a healthy profit, and that profit comes out of their pockets.

According to statistics, online gaming revenues shot up to nearly PHP7.5 billion in 2018. Overseas business office processing, one of the mainstays of the Philippine economy, took up a combined 25 percent of new office space in 2018, outpointed by 35 percent for online gaming, more than reversing the trend in 2017, when business processing took up 25 percent of new space compared with 19 percent for offshore gaming.

Today, according to a source familiar with the gaming industry, Manila has become known as the Macau of Southeast Asia, a gaming district offering respite from the sharp eyes of China’s law enforcement personnel on the lookout for crooked mainland officials eager to gamble away government funds.  As with Macau, the Philippines has become a route away from state control.

Duterte earlier kicked off a minor spat with the Chinese with his remark about 300,000 Chinese illegally in the country, causing Chinese Ambassador to the Philippines Zhao Jianhua to warn that China “China adheres to the principle of non-interference in other countries’ internal affairs” and adding that “China respects the laws and regulations of the Philippines regarding employment of foreign nationals in the country, and holds that Chinese nationals should not stay or work illegally in foreign countries including the Philippines.”

Thus it appears that the Bureau of Internal Revenue’s crackdown is as much at the behest of the Chinese government, which is calling for enforcement of the law against illegal entrants to the country. The enormous increase in the industry has led to charges that the Philippine Amusement and Gaming Corporation (PAGCOR) has been lax in regulating offshore gaming operators, Senator Joel Villanueva told local media.

But PAGCOR clearly has its work cut out for it, attempting to regulate an unruly industry peopled almost exclusively by foreigners whose allegiance to paying Filipino taxes is limited at best. It is an industry that is almost synonymous with money-laundering, as exemplified by the spectacular heist by security hackers via the SWIFT network of US$101 million from the Bangladesh central bank in 2016 through a Philippine casino.

The influx of overseas workers began in 2016, when Duterte proffered 54 permits, called Philippine Offshore Gaming Operator licenses, or POGOs, allowing the development internet-based casinos for online gamblers. The result was a stampede by Chinese operators who brought dozens of ancillary companies providing IT support and call service centers. Because of the need to speak Putonghua, all the workers are mainland Chinese.

The result has been an explosion in commercial real estate and condo take-up, with the area surrounding the gigantic Mall of Asia, the region’s biggest, on the Manila Bay blossoming into scores of high-rises that seemingly is moving the sprawling city’s center from the Makati business district to Pasay.  Companies coming under the POGO statute are now starting to spread from Manila Bay to the posh Fort Bonifacio district and farther south to the new community of Alabang. The bureau of internal revenue noted that as many as 2,000 unregistered workers including consultants, engineers, designers, IT workers, and others in the economic zones around Subic Bay and Clark air base.

As Asia Sentinel reported on March 19, the influx of Chinese may well have saved Manila from a real estate glut. Condominium prices have risen by an average of 30 percent, according to Collier’s, with rents rising as well. In many cases, Chinese are said to be paying cash for the condos and in some cases pricing middle-class Filipinos out of the condo market and causing local resentment.

In 2017 the gaming centers drove the office sector, saving the saturated Manila commercial property market from a crash. Demand from offshore gaming has continued to sustain office space.