Thursday, August 11, 2022

Philippines, Cambodia in likely firing line for China online crackdown


There’s growing concern that China may launch a crackdown on the streaming of casino games into the country next year, potentially dealing a major blow to the booming industry in the Philippines and Cambodia.

The issue was highlighted by Spectrum Gaming Group, an independent research and professional services company, as the second most important trend that the global gaming industry needs to monitor in the coming year in the 15th edition of its annual rankings.

Specifically, Spectrum predicts that the “online gaming industry… will begin to face scrutiny from China and international regulators.”

A lack of transparency and regulation makes it “impossible to assess the financial consequences of such a crackdown, according to Spectrum’s managing director, Fredric Gushin.

“The law in China is clear relating to casinos and streaming and proxy betting from casinos in Macau, but what is happening elsewhere would seem to fly in the face of existing law and policies in China,” he said.

China has been increasingly active in tackling unregulated gambling, with some startling results.

In July, police in Guangdong province broke up an alleged illegal gambling ring hosting more than $1.5 billion in cryptocurrency bets. Numerous other raids over recent months have led to hundreds of arrests.

Streaming, proxy betting and other forms of gaming will eventually be the subject of a crackdown, Gushin said.

“As the crackdown on corruption continues, it is likely that efforts to target Chinese citizens who participate in these forms of gaming will also be accelerated,” he added.

That’s worrying news for both the Philippines and Cambodia, where online gaming is booming thanks mainly to an influx of Chinese firms. The property market in Manila for example has been fuelled this year by demand from Chinese nationals.

JADE Entertainment and Gaming Technologies CEO Joe Pisano expects China to impose further enforcements through website-blocking and threatening citizens who are found to be involved with a reduction in their Social Credits System score.

Under the system, Beijing plans to give all citizens a ranking by 2020 to standardize their social reputation, or “credit.”

A lowly score can be used to punish citizens in a number of ways, from restricting travel movements through to blocking their children from joining prestigious educational institutions.

China’s efforts have already extended beyond its borders though.

“China has already conducted several actions over the past two years to rein in the more egregious segments of the online gaming industry in the Philippines and Cambodia through identifying their nationals involved, cancelling their passports and requesting their deportation from those countries,” said Ben Lee, the managing partner of IGamiX Management and Consulting.

“With regards to the video-streaming component of a land-based casino, that is a little bit more complicated and to date, we have not seen any direct action there. However, we would imagine that pressure would be brought to bear on those jurisdictions to rein them in as well.”

In order to make a significant difference in controlling online gambling, China requires the support and cooperation of its neighbours.

“It must start in the countries where the servers are located,” Gushin said.

Some observers believe that the headwinds facing providers in the Philippines – coupled with a political regime in the country that has, at times, been antagonistic towards gambling – has the potential to create a perfect storm.

President Rodrigo Duterte said in October that online gambling should be “suppressed” in the Philippines. It was the latest in a series of outbursts by the head of state on the issue over the past couple of years.

As has previously been the case, advisers swiftly attempted to tone down the President’s rhetoric by briefing the media that it is only illegal online gambling that sits in his notorious line of fire. However, many believe that Duterte – who usually allows little room for such ambiguities in his statements – has a broader antipathy towards gambling as a whole.

Such opposition could matter “a great deal, and in line with his strategic shift towards Beijing, that risk will increase [for providers] as Beijing increase its presence and influence over Manila,” according to Lee.

“I would not be surprised if China is already leaning on the Philippines government to tighten regulations and supervision of that industry as I believe they are in Cambodia,” he added.

In April 2017, authorities in the Philippines and China collaborated on cracking a cyber-gambling operation, shutting down four illegal websites operating out of the Philippines, freezing more than 1,000 bank accounts and arresting 99 people.

“I expect that there will be closer coordination between Philippines and Chinese governments and it is highly likely that the operators that are operating illegally will move to other jurisdictions,” Pisano added.

Despite the bleak outlook for providers, Gushin highlighted the example of how casinos in Macau have adjusted to declines in VIP junket play and how the junkets themselves have consolidated and relocated their activities to new jurisdictions.

A similar shift could occur with online streaming, with Lee expecting providers to “migrate to other jurisdictions outside the influence of Beijing.”

However, Lee does not hold out much hope for a proactive response from the authorities in the Philippines.

“I expect the various Philippine government departments to do what they usually do in such situations; prevaricate and delay until the Philippine president instructs them in clear plain terms what they should do,” he said.

According to Gushin, “the long-term trend is towards compliance and regulation.”

He added: “Countries such as the Philippines and Cambodia, host to multiple service providers, should be planning for the long-term consequences of these changes.”

 

Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.

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