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[email protected] EDITORIAL Mostly Illegal and Very Big Given the phenomenal growth of Asia’s legal gambling markets it’s understandable to find the unregulated ones rather overshadowed, massive as they are, too. How massive no one really knows since most of them exist in cyberspace. Which is interesting in itself because in Internet gambling as in the terrestrial variety the growth in Asia has been epic. In terms of the revenues we know about, the continent has overtaken North America as the world’s second-largest online market after Europe, accounting for 25% of the regulated take, or about US$10 billion, according to H2 Gambling Capital, one of the leading consultants in the field. Of course, this has to be qualified in light of the determination of governments in the US over the last several years to suppress their home markets. Still, if we consider just the impact of China, which, as in most things, is impossible to exaggerate, it’s worth pondering how much of a difference the US ban has really made. If we accept a conservative estimate of $400 billion for the total online market worldwide, this implies an Asian market, regulated and unregulated, worth $100 billion, conservatively. Howmuch of thismight be China’s share?Ten percent?Would 20%be unrealistic? Let’s start with the combined sales of the country’s two legal forms of gambling, theWelfare and Sports lotteries, which attained a number last year that was larger by about $2 billion than the gaming revenues of all of Macau’s casinos. Then factor in more than 500 million broadband users and 400 million mobile Internet users and more than 1 billion mobile phone users and another 14 million computers logged on an average of 11 hours a day across about 140,000 Internet cafes. So when we read as we did in one news story last summer about authorities in Shanghai busting an online gambling ring that had handled more than 70 billion yuan in bets over a six-month period, which is around US$11 billion, it’s entirely believable. “Asia, in general, is booming,” says Dennis Valdes, president of Philweb. Philweb is the company licensed by PAGCOR, the Philippine government’s regulator/operator, to run online games in the island nation. Philweb’s varied businesses include scratch cards in Cambodia, Timor Leste and Indonesia and sweepstakes in Guam. The Philippines business includes mobile gambling—there are an estimated 70 million mobile phone users in the country—and more than 200 PAGCOR-branded Internet cafes offering all kinds of casino games. The cafes are sold as franchises for PHP1.2 million-1.5 million (around US$300,000) and a cut of the winnings, and one can opt to have one’s in a shipping container complete with computer terminals and cash- handling so it can be moved around if the traffic in any one location is too slow. “We are the 7-11 of gaming,” says Mr Valdes. Such permissiveness, while refreshing, is not shared by the rest of the region. It was to the Philippines, in fact, that police in Vietnam traced an online gambling ring they busted in January that was moving so much money out of the country one of the bank accounts they seized contained the equivalent in Vietnamese dong of US$470 million. The Ministry of Public Security describes the country’s cyber-underground as a multilayered conspiracy between foreign bookmakers and local operatives and agents. Similarly, the operation busted in Shanghai was routed through servers outside of China and was funneling bets to more than 20 affiliated sites operated by Chinese based mainly in Southeast Asia. Conversely, a gang reputedly based in Singapore that law enforcement in Europe considers the most lethal match-fixing syndicate in the world has run most of its online bets through China, according to a former insider. Internet gambling is illegal in Japan, yet H2 estimates that revenues in 2012 exceeded the equivalent of US$4.5 billion. South Korean police estimate the size of their black market at more than KRW3.5 trillion (US$3 billion) a year. The government of Thailand, which outlaws all forms of gambling except horseracing and a state lottery, says there are so many Web sites taking bets in the country they can’t keep up. They’ve identified more than 200 of them, several of them mobile sites, offering games in Thai and English and happy to work with either baht or US dollars. Philweb considers Thailand an expansion opportunity. “The risks will likely be magnified as the technology supporting online gambling further evolves,” Singapore’s Second Minister for Home Affairs S Iswaran warned recently. The city-state, characteristically, is having none of this misbehavior and is studying ways to prevent its citizens from participating in it.“In Singapore there are concerns within the community over the social risks associated with this highly accessible form of gambling,” said Mr Iswaran. “The government shares these concerns.” It expects to have solutions by the end of this year. Currently, only 9% of Philweb’s revenues are generated outside the Philippines, and Mr Valdes wants to change that. Along with Thailand he sees Myanmar, Sri Lanka, Mongolia, Nepal and Palau as ripe for the picking. He says he can see the day when the majority of the company’s business is in greater Asia.