Philippine spy scare turns on Chinese-run casinos

When Philippine authorities announced a moratorium on the issuance of new gaming licenses, the move had more in mind than curbing a recent proliferation of Chinese-run online gambling operations.

Known officially as Philippine Offshore Gaming Operations (POGOs), Chinese online gaming sites have boomed under President Rodrigo Duterte, facilitated in part by his administration’s easing of visa regulations for Chinese nationals.

But growing security concerns, including defense establishment suspicions that POGOs could be involved in spying on key military installations, have now put a break on the industry’s rapid expansion.

It’s the latest twist in Manila’s topsy-turvy relations with China, which often pit Duterte’s pursuit of Chinese aid and investment against the defense department’s institutional mistrust of Beijing’s intentions.

While Beijing has recently called for tougher Philippine action on the gaming sites, which are banned on the mainland, defense officials wonder if Beijing’s statements aim to mask the POGOs possible role in Chinese surveillance.

Defense Secretary Delfin Lorenzana and others have openly questioned whether POGOs are serving not only as platforms for Chinese organized crime but also as hubs for espionage activities against the Philippines.

The suspicions were sparked by a series of aerial photos posted online, including in known defense forums, that showed POGOs are concentrated near critical army, navy and air force facilities in Manila.

POGOs in the Araneta Center and Eastwood business districts in Metro Manila, for instance, are within eavesdropping distance of major military establishments.

Moreover, as many 130,000 Chinese workers and online casino operators have clustered around Philippine Air Force and Navy headquarters, Philippine National Police headquarters at Camp Crame, and even Camp Aguinaldo, which hosts the Philippine Army and the National Defense Department offices.

“When you already see many people [at the POGOs], who are always there…it’s very easy for all these [Chinese] people to perhaps shift their activities to spying,” Lorenzana said in a mixture of English and Tagalog. “They are near [military facilities].”

The surveillance scare comes as other security agencies warn about a recent unregulated influx of Chinese nationals, whereby tens of thousands are believed to have overstayed their initial tourist visas to work in the online gaming industry.

Philippine National Security Adviser Hermogenes Esperon portrayed large month the recent influx of Chinese nationals, especially those that are “undocumented” or on “false documentation”, as a security “threat.” That assessment is based on Philippine surveillance of the alleged spying migrants.

“You’d also start getting worried when a whole building, condominium, tower is occupied by only one nationality where you would not be able to guard all their activities,” Esperon said. “Some unwelcome activities could transpire there so we need to prevent those,” he said.

“You will see something like a rotation of every eight hours of people going in and out [of buildings in POGO areas] then you would begin to wonder what they are doing,” he added.

Top brass have said a suspension of new POGO licenses isn’t enough and are calling for harder measures, including a collective relocation of POGOs to areas more distant from military and other strategic facilities.

“I support the idea to put them in a hub which is away from the military camps,” said Lorenzana. He has called for them to be moved into isolated, “self-contained hubs” where their immigration, finance and logistical needs can all be processed in one place.

Philippine security officials were already on high alert about China’s moves in the country. Earlier this year, defense officials vetoed a Chinese company’s proposal to purchase a strategic shipping yard close to naval facilities based at Subic.

But the moratorium on new licenses and potential new regulations on their operations has raised questions about the future of POGOS, which currently employ close to 350,000 people, including more than 100,000 Chinese nationals.

Indeed, the Philippines’ gambling industry has enjoyed a golden age under Duterte, with overall revenues quadrupling to US$4.1 billion during the first three years of his presidency.

This year, PAGCOR expects to collect $152 million in licensing fees alone, an almost 11-fold increase since the beginning of Duterte’s administration. Gaming authorities are thus trying to play down the POGO-related spying controversy.

“We will no longer accept any more [POGO license] applications until we have reviewed and addressed the concerns of everybody,” said Philippine Amusement and Gaming Corporation Chairwoman (PAGCOR) Andrea Domingo.

“It’s about time that after two and half years of implementing this program, we stop first, take stock and look at all the other concerns that we haven’t met comfortably and effectively,” Domingo said.

Domingo has endorsed the proposal for “self-contained hubs” for POGOs, which she has suggested would meet “all the basic needs of the foreign employees” who will be “free to go anywhere they want to without any limitation on their personal rights or liberties.”

Some reports have suggested that the moratorium was made at China’s behest. Days before the ban’s announcement, the Chinese Embassy in Manila urged Philippine authorities to curb POGOs.

“The Ministry of Public Security of China has taken many actions and will carry out more special operations aimed at preventing and combating cross-border gambling,” a statement released by the Chinese Embassy in Manila said.

“China will focus on investigating and cracking some major cases, including those of organizing gambling overseas and opening online gaming, and will destroy networks of criminal organizations involved in recruiting gamblers from China by overseas casinos and using the Internet to open casinos in China,” it added.

Another recent Chinese Foreign Ministry statement referred to offshore gaming as “the most dangerous tumor in modern society.”

Analysts and observers suggest that China’s sharply-worded announcement marks a calculated turn, as Beijing was previously largely silent over POGOs recent high-profile and fast expansion in the Philippines.

Some believe Beijing likely earlier viewed the growth-spurring industry as a potential springboard for warmer ties with Duterte’s government, which has courted Chinese investment to kickstart the local economy.

But now that Philippine defense officials have expressed spying concerns, they say Beijing may now view the POGOs more as a diplomatic liability than strategic asset.