MANILA -- The Philippines is gearing up to expand its online gambling industry by opening up betting to local residents and domestic operators, targeting more overseas markets and offering new services including online cockfighting and horse racing.
The move is aimed at reviving slumping gaming revenues, which could help President Rodrigo Duterte's administration bankroll the country's recovery from the coronavirus pandemic. Critics, however, say more safeguards are needed to ensure the industry -- which has been linked to money laundering and other financial crimes -- will be adequately policed as more betting moves online.
The Philippines has seen a boom in foreigner-only online casinos in recent years, the bulk of them run by foreign operators targeting primarily Chinese gamblers. But the closure of national borders due to the coronavirus, along with Beijing's staunch opposition to gambling, has begun to take its toll on these companies. Threats of higher taxation by Manila and a recent bribery scandal have also hobbled the controversial industry.
To counter the industry slowdown, Manila's gaming regulators are paving the way for the country's conventional casinos and integrated resorts to start taking online bets, including from locals.
Bloomberry Resorts' $1.2 billion Solaire and another smaller casino have already been given permission to offer online betting, according to Andrea Domingo, chair and CEO of the Philippine Amusement and Gaming Corp., or Pagcor, the industry regulator.
City of Dreams Manila and Okada Manila, two other multibillion-dollar casinos in the Entertainment City near Manila Bay, have sought approval to do the same, Domingo said during a recent webinar by Asia Gaming Brief, an industry information provider.
In November, Pagcor also granted a unit of Philippine listed-DFNN a license to "offer [a] remote gaming platform" that allows "a certain part of gaming [to] take place in the privacy of the client's own home."
Domingo said the move was aimed at recouping gaming revenues lost due to community quarantines.
"With the pandemic, older people cannot play [because they] are not allowed to go out of their houses until recently," Domingo said, referring to the stay-home order for people aged 60 and older. "If they are able to do that, we will be able to get that market back and [it's] safer. Due to the pandemic... people are now going online," she added.
As in Asia's gaming hubs of Macao and Singapore, casino revenues in the Philippines have tanked due to travel restrictions. Gross gaming revenues from land-based casinos as of September fell to 73 billion pesos ($1.52 billion), according to Pagcor. In 2019, GGR stood at a record 251 billion pesos.
In addition to allowing more online betting, Pagcor is also looking at new offerings for overseas players.
The regulator plans to roll out an online version of cockfighting -- a popular pastime in the Philippines -- primarily for players in South America. Online horse racing and dog racing are on the cards for the U.S. and U.K., respectively.
"We are focusing on other countries beyond Asia. We might be able to penetrate the cockfighting arena in South America in one to two years from now," Domingo said in the AGB webinar.
On top of boosting gaming revenues, shifting to a more domestic-focused online betting regime could help address other issues related to the current, Chinese-dominated model.
Manila in 2016 began issuing licenses for Philippine offshore gaming operators, or POGOs. The majority of these operators target Chinese bettors and employ primarily Chinese nationals.
Like their brick-and-mortar counterparts, POGOs have taken a beating from the coronavirus.
According to Domingo, only 35 out of around 60 licensed operators and 138 out of more than 300 "service providers" -- companies that run camera-equipped casino studios to call center-like customer services -- have been allowed to resume operations after months of lockdown.
Immigration data also point to a possible manpower shortage. Bureau of Immigration chief Jaime Morente said 292,669 Chinese nationals left the country from January to September this year, with only 188,517 arriving during the same period. According to data from the bureau, some 500,000 Chinese nationals were still in the Philippines as of end-September.
Manila's threat to levy higher taxes on POGOs, moreover, has driven many to move out of the Philippines to "other Southeast Asian countries," according to real estate brokers who handle the industry's office and worker lodging requirements.
David Leechiu, CEO at Leechiu Property Consultants, said the 277,000 sq. meters of vacated Pogo office spaces this year suggest around 127,000 job losses, "easily half of them Chinese." Leechiu's company last year estimated the sector employed around 470,000 people.
Alvin Camba, a doctoral candidate at Johns Hopkins University who has studied POGOs, said these exits are partly due to hedging. Duterte's term as president ends in 2022, and Camba said there was uncertainty over whether the next president "will safeguard these investments in the future."
Duterte -- who previously expressed disdain for gambling and shut down plans for new casinos -- has embraced the POGOs, citing their economic benefits, despite opposition from Beijing, which blames the industry for causing social problems in China as well as cross-border crimes such as money laundering.
Camba said allowing land-based casinos to take bets online could generate more local employment, while diversifying markets beyond China could ease political pressure on Duterte.
"This is a recognition on Pagcor's part that they have to pursue different avenues to make online gambling viable without relying on the potential politically untenable types, such as the previous system, where it gave way to illegal labor imports and an ungovernable betting system," Camba said. "There has also been unrelenting pressure on the Duterte government to punish the firms."
Online gambling has proved unpopular with the Philippine public, as authorities blamed online betting for the massive influx of Chinese workers -- including thousands of illegal aliens -- and a proliferation of Chinese-staffed brothels. Early this year, a whistleblower from the Bureau of Immigration said Chinese nationals believed to be coming to the Philippines to work in POGOs were paying bribes of 10,000 pesos ($200) for special entry treatment, triggering a senate investigation.
Senators who have investigated the POGO industry have questioned whether Pagcor will be able to regulate the industry's new offerings.
"Time and time again, they have failed to monitor the operations of POGOs to ensure if they are complying with their obligations to the government such as taxes, permits and licenses. Regulation of financial flows in the sector has always remained a challenge," Senator Joel Villanueva told Nikkei Asia, pointing to billions of unpaid taxes.
"Gambling has also been linked to criminal activity such as money laundering, prostitution, illegal drugs, and other excesses that threaten public safety," Villanueva added.
In 2016, a portion of the $81 million in Bangladesh Bank funds stolen from the Federal Reserve Bank of New York was laundered through Philippine casinos. Manila has since amended its anti-money laundering laws to cover casinos.
Meanwhile, the majority of POGOs licensed by the Philippines are domiciled in secretive tax havens such as the British Virgin Islands and the Seychelles.
Domingo, the Pagcor chief, said strict safeguards are in place for casinos' online betting, which can be done via mobile phones.
Only VIPs and registered casino patrons are allowed to bet and they will be screened via facial recognition technology, while Pagcor agents will be stationed in casinos to monitor bets, she said.
"No minors or banned personalities will be allowed to play. And this is just in the Philippines at this point in time," Domingo said. "We don't want just anybody to bet, we want those who can afford to do so."
The casinos themselves are keeping quiet on the issue despite Domingo's disclosure.
Bloomberry Chief Finance Officer Estella Tuason-Occena told Nikkei: "We need to establish the infrastructure to be able to go into online gaming. It can take months or even years before it can be fully operational." She declined to discuss the extent of the company's online betting service.
City of Dreams Manila Vice-President for Public Relations Charisse Chuidian told Nikkei it was "not doing online gaming" and did not respond when asked if they had plans to do so. Okada Manila did not respond to a request for comment.
Senator Risa Hontiveros, who led the probe on the immigration bribery scheme, echoed Villanueva's comments, saying Pagcor's track record in regulating POGOs "does not inspire confidence in its capacity to undertake other online gambling activities."
"Similar to what our Senate investigations have revealed regarding POGOs, I worry that the social costs will be greater than the vaunted benefits," Hontiveros said.