One year on: Gambling in the time of Rodrigo Duterte

One year on: Gambling in the time of Rodrigo Duterte

The sound of phones ringing incessantly inside the Philippine Stock Exchange drown out the gasps of traders as they watch the share price of gaming technology provider PhilWeb Corp. take a nose dive on August 3.

One year on: Gambling in the time of Rodrigo DutertePhilWeb, which has been managing the eGames network of Philippine Amusement and Gaming Corporation (PAGCOR) for the past 14 years, operates a network of 268 eGames cafes with a total of 8,839 gaming terminals nationwide.

It remits PHP14billion ($298 million) to the agency for its share of the revenue from the operations, according to the company.
But things came to an end on that day for PhilWeb chairman Roberto Ongpin after Philippine President Rodrigo Duterte singled him as an oligarch embedded in government that must be destroyed.

Ongpin, who later stepped down as PhilWeb’s chair to save his flailing company, would soon be remembered as the first casualty of Duterte’s war against online gambling.

A year after Duterte launched a war against “online gambling,” PAGCOR had shuttered hundreds of eGames parlor across the Southeast Asian island nation.

PhilWeb was the biggest loser in Duterte’s hardened stance against gambling. Last April, the Philippine-based firm reported that its net income plunged 134.2 percent in 2016 due to the expiration and non-renewal of its Intellectual Property License and Management Agreement (IPLMA).

On the other hand, Philippine-listed gambling firm Leisure & Resorts World Corp. (LRWC) survived the tumultuous year, eking out a two percent rise in its profit in 2016.

The firm, however, reported that it had been badly hit by Duterte’s war after its wholly-owned subsidiaries AB Leisure Exponent Inc. (ABLE) and Total Gamezone Xtreme Inc. (TGXI) received separate notices from PAGCOR to cease and desist their respective operations.

LRWC also reeled from PAGCOR’s decision to issue Philippine Offshore Gaming Operator (POGO) licenses. LRWC owns the majority of First Cagayan Leisure and Resorts Corp., which issued licenses to online gambling operators during the previous administration.

Philippine casinos hit jackpot under Duterte

Casinos in the country, however, tell a different story on Duterte’s gambling policy.

The lights of integrated resorts in Manila’s Entertainment City have shone brightly as tourists from mainland China starts to flock the island nation.

Manila has aspired to become the next big Asian casino hub as high-stakes Chinese gamblers increasingly abandon Macau amid their government’s crackdown on corruption. Escalating territorial disputes between Manila and Beijing during the term of former Philippine President Benigno Aquino, Jr., however, drove mainland Chinese tourists away from the island nation.

Duterte’s rise to power gave casino operators renewed hope due to his pivot toward China. The Philippines saw an increase in visitors from China as the president sought to improve relations between the two countries.

Philippine casino mogul Enrique Razon, who founded Bloomberry Resorts Corp., has made a huge bet that Duterte would deliver on his promises by pushing ahead with plans to build a $418 million integrated resort outside the Entertainment City. Razon also threw his support behind Duterte’s campaign against loosely regulated electronic gaming.

Razon’s bets are starting to pay off. In March, Bloomberry reported that it has swung into profitability in 2016. It posted net income of P2.32 billion ($46.07 million) – the highest annual sum since opening in 2013.

Melco Philippines, operator of City of Dreams Manila, is basking on a bull run, making it the best-performing casino stock in the world.

Like Bloomberry, analysts say that Melco Philippines is benefitting from Duterte’s move to draw closer to China and from the continued anti-corruption drive that drove the rich Chinese VIPs from Macau to Manila.

“The prospects for the gaming industry are improving,” Richard Laneda, an analyst at COL Financial Group Inc. in Manila said in an interview with Bloomberg. “The improvement in Chinese traffic is driving sentiment, for it accounts for 30 percent to 40 percent of the VIP market.”

Duterte’s war brings Philippine online gambling clarity

If there’s one good outcome from Duterte’s gambling war, it brought clarity to the country’s online gambling market.

In February, Duterte signed an executive order which not only beefed up the government’s fight against illegal gambling but also clarified the extent of authority for the regulation and licensing of online gambling operations.

Section 3 of the executive order provides that “No duly licensed online gambling operator, or provider of activities and services related to or in support of online gambling activities, shall directly or indirectly allow persons who are physically located outside the territorial jurisdiction of the licensing authority to place bets, or in any way participate, in the games conducted by such operator, whether through an online portal or similar means. Nothing herein, however, shall prohibit the duly licensed online gambling operator from allowing the participation of persons physically located outside Philippine territory.”

The section reinforces an existing rule in the Philippines, which prohibits locally licensed online gambling operators from serving local punters.

But as the old saying goes, nothing is constant except change.

That’s why gambling operators should be cautiously optimistic as the Philippine online gambling industry continues to evolve under the heat of Duterte’s war.

After all, once the dust has finally settled, there’s no place for the industry to go but to rebuild.