Duterte's risky bet on online casinos as an essential service

The Covid-19 outbreak has raised many questions about Philippine President Rodrigo Duterte's handling of the crisis. His government's decision to designate online Chinese casinos as an essential service and allow them to reopen, while most other local businesses are under a two-month-long lockdown, has ignited an outcry in the Philippines.

The move has also refocused attention on the controversies swirling around the so-called Pogos (Philippine offshore gaming operators). Despite expressing hatred for gambling, Mr Duterte has overseen the entry of hundreds of thousands of Chinese workers, many illegal and mostly employed in the sprawling yet opaque online casino industry. Much to the chagrin of the public, the government recently allowed Pogos to reopen from May 1 at 30 per cent capacity and subject to certain conditions.

Opposition has sprung from priests to politicians. Church officials asked why online gaming was allowed to resume operations while Sunday masses remain banned. Ozamis Archbishop Martin Jumoad lamented on Radio Veritas: "Why allow the reopening of Pogos? From the Philippines being the only Christian nation in the Far East, to being the gambling capital in the Far East."

Trade union group Kilusang Mayo Uno (KMU) questioned the government's rationale of designating the industry as an essential one. "Pogos are not essential both in terms of people's needs and its contribution to the economy," said KMU chairman Elmer Labog. "It insists on allowing Pogo operations because it favours dealing with Chinese business over the nation's economy and people's welfare. Where is the Filipino people's interest in this?"

Crucially, even Duterte-leaning legislators have joined in. Up to 31 lawmakers, led by House Minority Leader Bienvenido Abante Jr, have crossed party lines to push for a Bill to effectively ban these online casinos. Dubbed the "Anti-Pogo Act of 2020", House Bill No. 6701 characterises the Chinese-dominated Pogos as a "source of unimaginable corruption" and "social menace", which has made a "mockery of our anti-money laundering, immigration and tax laws. It has been a source of untold criminal offences and heinous crimes related to the conduct of such operations". Top senators, including Senate president Vicente Sotto and Senate Minority Leader Franklin Drillon, also do not find the government's justifications persuasive.

Presidential spokesman Harry Roque had argued earlier that Pogos are akin to the multibillion-dollar business process outsourcing sector - an essential industry - and an important revenue source. There are about 60 such licensed firms in the country. The Philippines' gambling industry has experienced a fourfold expansion under Mr Duterte, with total revenues reaching US$4 billion (S$5.7 billion) last year. Licensing fees topped US$150 million that year.

Philippine Amusement and Gaming Corporation chairman Andrea Domingo has defended the influx of Chinese workers, saying Mandarin-speaking employees are essential as most offshore gaming clients are Chinese.

But critics say the revenue is outweighed by the social costs of illegal immigration, prostitution, human trafficking, kidnapping and other crimes. If the Pogos cannot be trusted with abiding by immigration laws, how can they be trusted to follow Covid-19 regulations such as testing of workers? And if health officials have a real clue of the number of illegals working for the Pogos, how are they to contain the spread of the disease?

The latest concern over Pogos comes on top of the Duterte administration's slow pandemic response. It did not impose curbs on travellers from China until weeks into the outbreak in Wuhan, likely for fear of upsetting Beijing and disrupting the online casinos. And when the administration finally imposed a month-long lockdown of the Philippines administrative and industrial heartland, the Pogos were still allowed to operate across Metro-Manila days after the announcement. Many simply shifted to residential areas after regulations were tightened.

A second major concern with Pogos is their highly opaque nature and alleged underworld links. In recent years, there has been a surge in criminal activities, including kidnappings and homicides, involving elements directly or indirectly involved in the online casino industry.

Between 2017 and last year, the Philippine National Police recorded at least 67 gambling-related kidnappings. Government agencies have also warned of suspicious transactions, with a portion reportedly funding drug trafficking, as well as large-scale tax evasion by the casino operators.

The law and order concern is so dire that Manila is considering a special Mandarin-speaking law enforcement unit. More broadly, critics warn of the corrosive effects of corruption on government agencies. A recent legislative investigation revealed a thick web of corruption, conspiracy and large-scale illegal entry of Chinese citizens into the Philippines.

The third source of concern is national security. Earlier this year, Philippine Senator Panfilo Lacson, a former police chief and current head of the Senate Committee on National Defence and Security, publicly warned that there could be as many as 3,000 members of the Chinese People's Liberation Army (PLA) embedded among the foreigners working for the Pogos.

The senator said the information came from sources in the Philippines' security establishment when the Chinese Embassy in Manila questioned the claim. Mr Lacson's explosive statements came shortly after two Chinese citizens suspected of involvement in a casino-related murder were reportedly in possession of military IDs. Another senator, Mr Richard Gordon, said in a recent interview that the Pogos may have been infiltrated by the PLA.

Both the Armed Forces of the Philippines and the Department of the Interior and Local Government have yet to verify the senators' claims, but top security officials voiced similar concerns last year, citing the tendency of most Pogos to cluster around strategic facilities such as the national police headquarters at Camp Crame, the air force and navy headquarters, and Camp Aguinaldo, the headquarters of the Philippine Army. Defence Secretary Delfin Lorenzana has noted that given their location, "it's very easy for all these people to perhaps shift their activities to spying".

Mr Duterte has insisted the Pogos are "clean" even in the face of concerns from China about their involvement in scams. But the continued operation of the Pogos will only sow the seeds of resentment, risking a major blowback against not only the casinos but also Chinese nationals and relations with Beijing. In the minds of many Filipinos, the Pogos, which hire few locals, epitomise the growing shadow of China and the deep menace of the gambling industry. For critics, the gaming firms underscore the emptiness of Beijing's (and Mr Duterte's) promise of high-quality Chinese investments, which would supposedly create many well-paying jobs for Filipinos. Their legacy of scepticism about Chinese goodwill will outlast the Duterte presidency.

• Richard Javad Heydarian is a Manila-based academic and columnist at the Philippine Daily Inquirer.

Join ST's Telegram channel and get the latest breaking news delivered to you.

A version of this article appeared in the print edition of The Straits Times on May 19, 2020, with the headline Duterte's risky bet on online casinos as an essential service. Subscribe