Southeast Asia pulls back on online gambling as China rages

Southeast Asian countries are moving against their lucrative online gambling industries amid pressure from China to clamp down on a practice that’s ballooned due to demand from its own citizens.

Weeks after China lashed out at the Philippines for encouraging offshore gambling, which it said targets Chinese customers and causes the illegal outflow of hundreds of millions of yuan, the Philippine gaming regulator said yesterday that it would stop accepting applications for new online gaming operations at least until the end of the year to review concerns about the burgeoning sector.

Separately, Chinese state news agency Xinhua reported on Sunday that Cambodia’s Prime Minister Hun Sen has ordered a stop to new licenses for online gambling operations in the country. Existing licenses also will not be renewed upon expiry, said the report.

The about-turn in gambling policy in these Southeast Asian nations comes as China steps up efforts against what its minister for public security, Zhao Kezhi, called “the cross-border online gambling problem.”

Online and phone betting in Southeast Asian countries by Chinese punters many miles away has exploded in the last few years, and there are signs that the offshore services are penetrating more deeply into China’s population than expected.

Offshore gaming is divided into two main categories. In online gambling, small-time bettors gather at cyber tables that can accommodate 500 gamblers at a time. Then there is proxy betting, its richer, better-dressed cousin, where high rollers communicate with staffers wearing headsets at baccarat tables in offshore casinos. Proxy betting now accounts for 40% of the $1 billion VIP gaming market in the Philippines, according to brokerage CICC.

Some online gaming websites offer punters wagers as low as 10 yuan and have round-the-clock live streams. That makes them easily accessible by lower-income Chinese in rural areas, who do not have the means to go to Macau, the only place in China where casinos are legal, to scratch the gambling itch.

The burgeoning industry has also transformed Southeast Asian countries and the abrupt pullback is likely to hurt their economies. In the Philippines alone, more than 50 offshore gambling companies had received permits to operate, over a hundred thousand Chinese workers had surged into Manila to staff the industry, and property prices near gaming sites were booming. Revenue from online gaming operations is projected to reach up to 10 billion pesos ($191 million) next year, according to the Philippines gaming regulator.

The Xinhua report said that Cambodia ordered authorities to stamp out illegal online gambling businesses in order to uphold social security and public order.

The Philippines gaming agency chair Andrea Domingo, while announcing the pause in new licenses, emphasized that the practice is legal in the country, but that gaming revenue growth may be flat to slow this year due to China’s campaign. Jinshan Hong, Bloomberg