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Foreign Policy

Duterte’s Gamble: The Real Threat to Philippine-China Rapprochement

Jun 07 , 2020

While the COVID-19 pandemic has sparked renewed tensions between China and the West, most especially the US, the Philippines’ President Rodrigo Duterte has largely stood by Beijing. If anything, the ongoing crisis has brought the two Asian nations closer, with both President Xi Jinping and his Filipino counterpart regularly exchanging words of support and appreciation. 

Crucially, the pandemic has come on the heels of the Philippines’ historic, and even shocking decision, to nix a crucial defense agreement with the US, its only treaty ally. The upshot of Duterte’s unilateral cancellation of the US-Philippine Visiting Forces Agreement (VFA) could be a rapid reduction in bilateral military exercises, particularly in the South China Sea. 

Duterte personally thanked the Chinese leadership on multiple occasions for their crucial assistance amid an outbreak across the Philippines. The tough-talking Filipino leader has repeatedly warned against ‘Sinophobia’ and, up until early February, opposed strict travel restrictions against Chinese citizens. On paper, this has been nothing short of a ‘golden age’ in bilateral relations, following years of rising tensions and decades of lukewarm ties. 

Yet, the Filipino recent president’s decision to adamantly nurture and re-open controversial Chinese online casinos amid a strict lockdown in major cities risks undermining burgeoning ties with Beijing. Not only does China oppose the proliferation of the shadowy industry in the Philippines, but the Chinese-dominated gambling centers are also sparking a massive backlash at home. If left unchecked, Duterte, who is set to step down from office in 2022, may inadvertently sow the seeds of generalized anger towards China as a whole and, overtime, undermine recent gains in the bilateral relationship. 

A Special Bond 

It’s hard to understate how Duterte has almost singlehandedly revolutionized historically-tense bilateral relations with China. In a major departure from his West-leaning predecessors, the Filipino populist has effectively adopted China as his personal strategic patron, especially amid a deepening diplomatic crisis with the West over human rights issues. At one point, he even claimed that China will ‘protect’ him from any coup or domestic conspiracy, since Chinese leaders supposedly told him, “We will not allow you to be taken out from your office.” His affections for Beijing have been far from unrequited, at least rhetorically. 

China’s Foreign Minister Wang Yi once described Duterte as 'the most respected and the most important friend' of China. During his late-2018 visit to Duterte’s hometown of Davao, the Chinese diplomat – wearing Barong, a traditional Philippine shirt – rapturously exclaimed: "That is why I have worn this barong, to show you that tonight, I am a member of your family."  

They say that the true mettle of one’s friendship is proven in times of crisis. Just over a year after Wang’s emotional speech in Davao, the Filipino president proved why he is so treasured by his Chinese counterparts. 

Until the first confirmed fatality in the Philippines – which was also the first outside China – Duterte repeatedly opposed travel restrictions on Chinese citizens, instead warning against “Sinophobia”. Even after Wuhan’s lockdown, the Philippines welcomed more than 100 Chinese nationals from city while clearing massive arrivals of Chinese citizens via cruise ships. Duterte’s Health Secretary, Francisco Duque, warned of “diplomatic and political ramifications” if travel restrictions were imposed against China. 

In response, a grateful Chinese Consul General praised how their Filipino hosts have “proven to be a true friend of China”, even as a whole host of nations, from Singapore and Malaysia to Mongolia and Russia, began to shutter their borders well ahead of the Philippines.   

Although the government later imposed stricter travel restrictions, including a total ban on flights coming from or transiting to China, the Philippines welcomed direct flights from Mainland until March. Nevertheless, declining number of Chinese tourists amid the ongoing crisis has, so far, cost the Philippines close to $200 million

By standing solidly by his strategic partner, however, Duterte risked feeding into deepening anti-China sentiment and popular backlash, including against Chinese-Filipinos. Deepening disputes in the South China Sea have already contributed to China’s profound unpopularity among Filipinos. Last November, Chinese trust rating among Filipinos was at a historic low of negative 33 points. And yet, Duterte has solidly stood by his China-friendly foreign policy. 

To better understand what’s at stake, one must look at the recent renaissance in Philippine-China relations, cutting across the fields of diplomacy, commerce, and potentially even infrastructure development. The most dramatic expression of warming bilateral ties, however, is the massive influx of Chinese citizens into the Philippines under Duterte’s watch. 

Shortly after coming to power, the former mayor of Davao relaxed travel restrictions for Chinese nationals. The introduction of the visa-upon-arrival regime facilitated the entry of a historic number of Chinese workers, businessmen, and tourists into the country. Less than three years into Duterte’s presidency, more than 3 million Chinese citizens visited the Philippines. And for the first time in modern history, China is now also the Philippines’ biggest trading partner, dislodging Japan, which had been the country’s dominant economic partner since the end of World War II. 

The Deluge 

In the first 8 months of 2019 alone, as many as 1.2 million Chinese citizens visited the Southeast Asian country, which has been largely overshadowed by tourist hotspots of Thailand, Singapore, and Malaysia in the past. More crucial, however, were the hundreds of thousands of Chinese workers, most of them working in the Philippines’ booming online casino industry, officially known as Philippine Offshore Gaming Operators (POGOS). 

The upshot is a stratospheric uptick in the Philippine casino industry, already among the world’s biggest next to Macau, Las Vegas, and Singapore. Within three years of Duterte securing his presidency, gambling revenues more than quadrupled to $4.1 billion from only $1 billion in 2016. Even more astonishing was the increase in licensing fees, which experienced a whopping 11-fold expansion, reaching $140 million, in the same three-year period. 

But China, which has banned gambling at home, has publicly criticized the POGOS, largely over concerns of money-laundering and other illicit activities associated with the shadowy industry.  Yet, the Chinese-dominated online casino industry has become so essential that Duterte uncharacteristically opposed the Chinese government on the issue. When President Xi Jinping pressed him to restrict the entry of online casino operations into the Philippines, the Filipino leader retorted:  “I decided we need it to benefit the interest of my country. Many will lose livelihood (sic).” 

The deluge of such investments, however, has gone in hand with festering corruption, tax evasion, prostitution, illicit activities such as money-laundering, and outright violence, including multiple cases of torture, kidnapping, and murders. The situation has deteriorated to a point that the Philippine police have been forced to create a Mandarin-speaking special unit for crimes by Chinese nationals. 

Some senior lawmakers and defense officials have even gone so far as warning that the online casinos could act as den of spies, with thousands of Chinese intelligence officers allegedly in their midst. Noting the proximity of Chinese online casinos to major military camps across Metro-Manila, Philippine Defense Secretary Delfin Lorenzana has warned, “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... They are near [military facilities].” 

Duterte, however, has largely ignored criticisms, both from within and from Beijing. And his recent decision to re-open Chinese online casinos – despite the lockdown in the national capital region – prompted dozens of lawmakers, including some of the president’s allies, to file a new bill, which, if approved, will effectively ban the POGOs. 

Known as the “Anti-POGO Act of 2020” bill, the proposed law characterizes the Chinese-dominated gambling centers as “source[s] of unimaginable corruption” and “social menace” that have made “a mockery of our anti-money laundering, immigration, and tax laws. It has been a source of untold criminal offences and heinous crimes related to the conduct of such operations.” Senior senators have questioned Duterte’s decision, noting that only essential sectors should remain open under current circumstances. 

The Filipino leader, however, has repeatedly come to the POGOS’ rescue, maintaining that they are “clean” despite open criticisms from his own officials and government agencies. However, by shielding the Chinese online casinos from critics at home as well as Beijing, Duterte is only fueling widespread anti-China sentiments. His full embrace of the POGOS, supposedly to facilitate economic recovery, risks undermining long-term sustainability of his hard-earned rapprochement with Beijing – strengthening the hands of China hawks calling for pivoting back to the West. Thus, the unchecked proliferation of online Chinese casinos in the Philippines could significantly re-shape the contours of bilateral relations as the Philippines prepares to elect Duterte’s successor in coming years. 

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