Chinese government cracks down Philippine-based online gaming

This article was originally published in Momentum Works’s Chinese blog, and was translated by the team in Singapore. 

Last August, Cambodia cleaned up the Chinese online gambling operations in the country. It is the Philippines’ turn now. 

To date, the country has issued 60 Philippine Offshore Gaming Operator (POGO) licences. Each licence is allowed to carry 5 sub-operators. As you all know, Chinese operators like to rent their licence out, so nobody knows for sure how many Chinese players are operating in the country.  

A real estate broker estimated that more than 470k individuals are engaged in the online gaming industry in the country – far exceeding the government estimate of 100k. 

Many of these individuals are Chinese, as many of the operators target exclusively the market of China. 

The congress has had multiple hearings where legislators have debated bitterly on the future of online gaming. 

A key concern is that many operators underpay tax. Some legislators believe the only reason to allow these operators is tax, and if they do not even want to abide by that rule, they should be kicked out of the country. 

Last year, the Philippine government collected Php 6.4 billion (US$125 million) online gaming tax. Although this is a 170% from the previous year, many believe that much of the gambling activities are settled in China and thus not taxed in the Philippines. 

Abuse of staff, bribery of immigration officers, sex trade and other crimes associated with the industry have given quite a bit of pressure to the authorities. Many public opinion leaders believe that the social costs are far greater than the tax income. 

In a raid last December, Philippine police arrested more than 300 Chinese citizens who did not have residence permits. Similar actions took place multiple times last year. 

The local Chinese community also hates the gambling industry. All the bad news is destroying the trust that the Philippine public has in the Chinese community. 

“You must do something about this people, they are too presumptuous,” says an old friend of Momentum Works who has been in business in the Philippines for more than 3 decades.

However, President Duterte seems to favour the continued existence of the industry. 

Enter Government of China

However, the real blow is not from the Philippine government, but that of China. 

Late February, Chinese Embassy in the Philippines issued a statement that they would work closely with the Philippine government in tackling online gaming-related crime. 

Passports of those who participate in such activities would be cancelled – meaning if they are in China they can’t leave, if they are outside they risk deportation. 

The government also gave a deadline for those involved to turn themselves in and signed a “No participation of online fraud crime” pledge. Otherwise, they will face more severe punishments including: 

1. Freezing of all personal bank accounts; 
2. Reregistration of their kids/offsprings from schools;
3. Cancellation of all subsidies to the family;
4. Banning of taking any flight/train in China; 
5. Blocking of any phone connections. 

And the information they must report to the police include: 

Phone number, passport number, Wechat account, all bank account information, proof of work, content of work, income sources, origin of recruitment notice, who bought the air ticket, travel companions, info of flight, contact person outside China, who the boss is, the contact details of the boss, visa information, place of work, working hours, salary amount and payment method, colleague names, Wechat group screenshots, internal company rules, place of residence outside China, housemate info, how to settle the rent, transport to work everyday, and places to hang out after work. 

There were also rumours that amongst the hundreds of thousands of online gaming workers were hundreds of undercover agents from the Chinese police. It is generally not difficult for the Chinese authorities to figure out who is doing what. 

In fact, many provinces in China started the operations before Chinese New Year. Things were disrupted by the coronavirus outbreak, but resumed largely from end Feb onwards. 

Casualties

Online gaming is not the only industry impacted by such operations. A lot of other sectors, which flourished with online gaming, were also hit hard. 

A number of office buildings in Metro Manila are now empty – owners are struggling to pay their mortgage as they have lost the rental income. 

The associated shops, bubble tea joints, supermarkets and restaurants are being advertised for ownership transfer, most at zero cost. 

If this continues, the property prices of Manila will probably be impacted.

As for the Chinese operators, many might move to another country, just like how ICOs went to Malta. 

However, there aren’t many countries left in this world that can sustain such big immoral operations but not subject to the pressure of the Chinese government.