Chinese Offshore Gaming Drives Filipino Economy, Causes Tensions

On Feb.9, a 23-year-old student named Zhiang Jaile, exasperated because she wasn’t allowed onto a Manila light rail car carrying food, threw her tofu drink at a Philippine police officer, William Cristobal, igniting a national debate over growing irritation with Chinese citizens flooding into the country, most of them connected with the offshore gaming industry.

Zhiang tearfully apologized amid the ensuing uproar. But the picture of the shocked, tofu-spattered officer went viral, stirring outrage at what many Filipinos regard as arrogance toward their country and presenting the country’s fractured opposition an issue for upcoming general elections scheduled for May 13.

“Throw these mainland Chinese national scum out and make sure to double-check their baggage properly as they might be stealing and sneaking out some stuff that shouldn't be brought out of the country,” wrote one irate reader to a news website.

That was set off by a report of a Chinese national throwing a cup of hot water at the chest of an Air Asia flight attendant. Another image went viral of a woman allowing her child to empty his bowels among plants in the upscale Bonifacio Global City area. As in Hong Kong, mainlanders have been accused of being rude and not observing local customs, cutting into queues and pushing in front of the locals.

But at the same time, the gaming industry – and the gigantic casinos sprouting on the Manila Bay floodplain – are providing a jolt to the Philippine economy that recalls the dynamic US$18 billion business process offshore industry and inward remittances from overseas workers, which contributed US$32.2 billion to the Philippine economy in 2018.

There are a couple of reasons for caution. First, the Chinese government has always blown lukewarm on gaming. The rapid rise in offshore gaming – casinos that appear on Putonghua-speaking computers in China – is undoubtedly creating thousands of gaming addicts who are losing their shirts. The casinos themselves in the Philippines that are drawing Chinese tourists may be drawing the petty government officials gambling their offices’ funds who are now under close watch in Macau.

Nonetheless, according to one count, as many as 340,000 to 400,000 – the latter figure from Sen. Francis N. Pangilinan – overseas Chinese have poured into the country to work since President Rodrigo S. Duterte revised the country’s gaming laws to allow licenses for companies establishing internet-based casinos for overseas gamblers. However, nobody, including the administration, knows for sure how many. The Department of Labor and Employment says it issued has 51,980 Chinese Alien Employment Permits since 2016. But that figure is wildly off the mark, critics say. Duterte himself has used a figure of 300,000 Chinese in the country illegally.

If his figure is correct, that is four times the next-biggest emigre group, South Koreans, about 90,000 of whom are said to regard the country as their Miami Beach. The ramshackle Bureau of Immigration offices in the historic Intramuros district, always a disorderly scrum, have been inundated daily with hundreds, perhaps thousands of permit-seekers, with legions of fixers at the front seeking to pave the way through.

Nearly 3 million tourists have entered from China over the past two years at a rate growing by 30 percent per year although it is questionable how far they get outside of Manila. For most, their destination is the spate of casinos in the Pasay district, frequented by thousands of Chinese gamblers.

As Asia Sentinel reported on Feb. 4, that has spawned a new industry – loan sharking and gambling-related kidnappings of Chinese, almost all by their own countrymen with the occasional aid of the odd Filipino criminal or cop.

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.

“One dynamic of this is that this is sort of all about escaping state control in China,” said a source with a country risk management firm. “When you first see this, one is inclined to think this is an aspect of China’s state policy. Gaming is all about escaping state controls.”

Duterte 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 Chinese government is calling for enforcement of the law against illegal entrants to the country, an indication that Beijing isn’t particularly supportive their citizens’ involvement in the Philippine gaming industry.

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.

“We are puzzled by the apparent lack of regulatory supervision that the PAGCOR should be exercising. It cannot even produce basic data, such as the number of employees of their Philippine Offshore Gaming Operations licensees.”

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.

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 influx of Chinese may well have saved Manila from a real estate glut, according to Joey Bondoc, the Manila-based research manager for Colliers International, the Canadian real estate management and investment firm. Condominium prices have risen by an average of 30 percent, according to Collier’s, with rents rising as well. In many cases, Bondoc said, Chinese are paying cash for the condos and in some cases pricing middle-class Filipinos out of the condo market.

“In 2017 it was really the gaming centers that drove the office sector,” Bondoc said. “If not for that, the Manila property market would have crashed. Demand from offshore gaming sustained office space. In 2017 there was a slowdown, we had President Trump’s anti-outsourcing rhetoric, there were other issues, and some delays in accrual of office space contributed to the decline.”

Since 2016, office vacancy across the city has fallen to between 3.5 percent and 5 percent and is projected to stay that way through 2021.

While that may overjoy developers and landlords, there is considerable evidence that Filipinos across the city and perhaps beyond are increasingly angry at the Chinese invasion. According to one source, developers of some of the high-rises maintain separate lifts so that the Chinese employees can discreetly rise to their offices without coming eye-to-eye with Filipino workers in the same buildings. In both condos and office buildings, sources say, developers attempt to maintain a 60-40 split in tenants, with Filipinos comprising the majority, to minimize tensions.

“Realistically, some developers are wary, some locals aren’t too accommodating having these employees as their neighbors,” said an observer who asked not to be named. “Local developers perhaps are doing a wait-and-see because of the tensions.”