Did Cambodia Just Make a U-Turn on Gambling?

On August 18, Prime Minister Hun Sen issued a directive banning online and arcade gambling in Cambodia. More specifically, the government will stop issuing new licenses and won’t update current licenses when they expire. It will mean that all online or arcade gambling should cease in Cambodia by August 2020. More surprising, according to a statement he said that “Cambodia needed to develop the country based on natural and cultural heritage tourism but not based on an income from online gambling.”

In short, what the government has just committed to is a major U-turn. Previously, it was the greatest supporter of turning Cambodia’s tourism sector over to Chinese visitors arriving for gambling – at the expense of the traditional tourist market of Western backpackers. And it was the government that applauded the transformation Sihanoukville, a coastal city previously popular with backpackers, into a Southeast Asian Macau, and repeatedly played down tensions between the Chinese community and the local population, even when concerns were raised by the provincial governor.

Bradley Murg reported in the South China Morning Post on September 5 that an estimated 10,000 Chinese citizens had left Sihanoukville following the government’s announcement on online gambling, which Murg dubbed the “Great Chinese Exodus of 2019.”

“Tickets for one-way flights to China are sold out and the airport has been packed. In Bavet, on the Vietnamese border, numbers are harder to come by, but interviews with local officials and what remains of the Chinese business community indicates that nearly two-thirds of the Chinese population have made a beeline for Phnom Penh, seeking to get their affairs in order before leaving the country,” he wrote. “Sources in Cambodia’s third online gambling hub, Poipet, report similar findings.”

What led Hun Sen to this volte face? The fingers will quickly to point to China, with the suggestion being that Hun Sen’s move came amid concerns from Beijing, his benefactor and now Cambodia’s most loyal ally. In August, China’s foreign ministry described online gambling as “the most dangerous tumor in modern society.” Its Minister of Public Security has called for a solution to “the cross-border online gambling problem.” But this is about Hun Sen’s position in Cambodia as well. This move means he will be able to claim his decision constitutes a “win-win.” He will be seen as getting tough on Chinese crime, when he wasn’t in the past, and getting serious on Cambodia’s chronic corruption.

But it begs the question: Why just online gambling? Don’t the government’s criticisms of online gambling also hold true for conventional gambling? The government says that online gambling can be rigged by operators, and those who lose their money are threatened, and sometimes assaulted, to repay their debts. “Some 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,” the government’s directive stated. A spokesman of the General Department of Immigration even claimed that banning online gambling “will help to reduce the number of crimes because some Chinese nationals get involved in crimes such as kidnapping and extorting money.”

But isn’t all this true for conventional gambling, too? The social and public disorder now seen in Sihanoukville is not exclusively the result of cheap online gambling but high-stakes conventional gambling, too. So why doesn’t the Cambodian government move to ban all casinos in Cambodia? When, earlier this year, the UN Office on Drugs and Crime released a major report on transnational crime in Southeast Asia, it noted that “the region’s rapidly expanding network of casinos, many of which are lightly or not at all regulated, has emerged as a perfect partner or offshoot industry for organized crime groups that need to launder large volumes of illicit money.” Yet it didn’t specify this as being a problem exclusive to online gambling.

The government’s ban on online gambling has far-reaching implications. There are reports that, because so many Chinese nationals have left Sihanoukville, rental and hotel rates have already come down in price, which will be welcomed by Cambodian consumers, who have long complained that the Chinese caused a considerable inflation in the cost of living, outpricing many locals. It won’t be welcomed, however, for hoteliers and restaurateurs, or anyone who has expensively adapted their business to suit a Chinese clientele.

The rather immediate way in which the government made this decision (yet again without going through the National Assembly) is likely to have caught many business owners by surprise. Moreover, Cambodia has one of the most corrupt governments in Asia, and many government officials must have made a tidy sum from the online gambling sector. They aren’t going to be best pleased.

Just as interesting, since the government has defended its actions by saying it will now herald a better quality of Chinese investment in this sector, is it now going to sort out quality and inferior Chinese investment more generally? Are we to see a similar substantial changes to which Chinese investments in Cambodia’s property or industry sectors are accepted?

The problem for the government is that it now has to spin a new policy that is so opposed to what it has been saying for years. The speed and suddenness of the decision, moreover, means the government has had to be more critical of the online gambling industry than it might have been if it was a gradual and well-thought out shift in policy. Hun Sen has now publicly said he thinks online gambling is a security threat, disrupts social order, and he wants a tourism sector that isn’t dependent on Chinese gamblers.

That would make it all the more difficult for his government to do yet another U-turn, as some suggest it might. On September 13, a Nikkei Asian Review article threw a spanner in the works when it reported that, while a senior Cambodian official reiterated the online gambling ban would be permanent, market experts and investors predicted it would only be temporary. Indeed, there is the suggestion that as the Cambodian government watches gambling investments vacate the country (and bribes and grease money along with it) it will start to have second thoughts. And it might regret the fact that by banning online gambling, the source of money simply heads elsewhere in Southeast Asia.

Indeed, China expected all Southeast Asian governments to play ball, but the Philippines didn’t go as far as Beijing had hoped. In August, the Philippine gaming regulator announced it would stop issuing licenses to new online gambling operators at least until the end of the year, but rejected an outright ban.