Last week we saw some interesting developments in the gambling industries of two Southeast Asian nations that have become increasingly allied with China. While I am personally opposed to gambling and casinos, I respect the right of a country to allow them if it feels they will help the economy. But it's an industry that must be managed well in order to avoid negative effects.
In the Philippines, the government-run corporation that owns all the casinos has suspended all applications for new online casino licences at least until the end of the year. The Philippine Amusement Gaming Corp (Pagcor) -- the third largest revenue contributor to the state after taxes and customs -- was responding to concerns raised by defence officials about the potential security threat posed by the influx into the industry of Chinese nationals, some of them undocumented or using fake papers.
The Philippines has one of the fastest-growing casino industries in Asia, with gaming revenue last year of US$3.6 billion, up 23% from 2017.
Online gambling is a major concern, though. An interagency task force estimates there are 138,000 Chinese workers in the internet-based Philippine Offshore Gaming Operations (Pogo) business. Others believe the number could be closer to 400,000, with many Chinese working as marketing agents, tech support specialists and engineers -- all to serve the Chinese-speaking clientele. The country has 58 licensed online casino operations.
Since coming to power in 2016, President Rodrigo Duterte has pursued warmer ties with China, such as by relaxing visa restrictions for Chinese nationals, who largely avoided the Philippines during the era of frosty relations under his predecessor. The introduction of a visa on arrival is expected to result in Chinese tourist numbers nearly doubling to 1.2 million over the next two years.
In Cambodia, meanwhile, strongman Hun Sen has issued a directive to stop issuing online gambling licences, "both within and outside Cambodia", effective immediately. Existing licences will remain valid but won't be renewed once they expire.
The government justified the move by claiming that "foreign criminals have taken refuge in the form of this gambling to cheat and extort money from victims, domestic and abroad, which affect the security, public order and social order".
A week earlier, police in Sihanoukville, assisted by Chinese authorities, arrested 127 Chinese nationals accused of running an illegal online gambling and extortion ring. The move came just days after the Cambodian Interior Ministry issued a warning that local gamblers who access internationally licensed online gambling sites -- in violation of local law, which allows only foreigners to gamble -- could fall victim to phishing schemes and data theft.
With the exception of the local operator NagaCorp, Cambodia's gaming industry is largely driven by Chinese interests, particularly in Sihanoukville where dozens of Chinese casinos have sprung up.
Amid the ongoing influx of Chinese tourists, investment and development, the world at large increasingly suspects that China is also planning a military buildup in Cambodia to further extend its influence in Southeast Asia.
In both cases, it is clear that authorities in the Philippines and Cambodia have not done enough to manage the "Chinese invasion" and that has caused a backlash at home. In the Philippines, images portraying Chinese nationals as threats abound in social media, with a toxic combination of xenophobia and hysteria greeting any mention of Chinese tourists and workers.
The leaders of China and the Philippines are scheduled to meet in Beijing later this month, and Philippine government representatives have indicated that online gambling will be among the topics up for discussion.
China, meanwhile, has become increasingly vocal about gambling enterprises, which are illegal at home, based in other countries catering to punters from the mainland. Earlier this month, the Beijing government called on the Philippines to take "concrete and effective measures to prevent and punish Philippine casinos, Pogos and other forms of gambling entities for their illegal employment of Chinese citizens and crack down on related crimes that hurt Chinese citizens".
Beijing is also worried about large outflows of money from the mainland going into online gambling operations based in the Philippines and Cambodia.
But China also has to fix its own laws and regulations that allow the industry to thrive rather than stepping on other countries' sovereignty to solve the problem. The Philippines and Cambodia, meanwhile, now have to strike a delicate balance between securing national interests and keeping a good relationship with China, which is now their close ally.