Marcos’ POGO dilemma: Economic managers never backed Chinese online gambling

The adverse economic impact of kicking out Philippine offshore gaming operators (POGOs) has been repeatedly used by proponents to defend the contentious industry.

From job losses to a real estate bubble burst, revenue losses have been repeatedly raised in congressional hearings.

But the country’s economic architects – the Cabinet officials in charge of improving the Philippines’ fiscal position – were never really on board. In fact, they recommended an outright ban amid criminal activities surrounding POGOs.

With all the controversies hounding POGOs, why is President Ferdinand Marcos Jr. still keeping them around?

Recovering revenues

The Duterte administration saw the biggest gains in the POGO industry. From contributing over P660 million to the Philippine Amusement Gaming Corporation’s (Pagcor) total gaming income in 2016, the amount peaked to P6 billion in 2018, representing an 809% increase in just three years.

After 2018, income derived from POGOs declined, hitting a low of P2.2 billion in 2022. 

The Department of Finance has also cited lower economic returns from POGOs. Tax collections hit an all-time low of P1.7 billion in 2022 from a high of P8 billion in 2019, representing a 78.8% decline from the peak.

But in 2023, Pagcor’s income from POGOs jumped by 43.2% to P3.15 billion year-on-year.

Pagcor’s gaming income has helped shore up government revenues. In 2023, Pagcor dividend remittances reached P4.6 billion. Excluding financial institutions like Land Bank of the Philippines, the Philippine Deposit Insurance Corporation, and the Bangko Sentral ng Pilipinas, Pagcor ranks second in dividend remittances, just behind the Philippine Ports Authority.

Latest data from Pagcor showed that there are 45 registered POGOs, seven of which operate with provisional licenses.

Is the cash worth it?

Here’s what the Philippines’ economic managers previously said about POGOs:

Ralph Recto, Finance Secretary: “Frankly, I’m not a fan of gambling and two, I’m not a fan of POGOs, really. But if they were not doing any hanky panky and they’re paying taxes, fine with me. But I think there are many issues already surrounding the POGO industry.”

In a chance interview, Recto said the economic team has transmitted a letter to Marcos, urging him to go for a total ban.

Arsenio Balisacan, National Economic and Development Authority Secretary: “We don’t think that the benefits in terms of the revenues generated and the additional…and the impact [on] the economy are worth the cost.” He added, “What we want to encourage are very…legitimate investments, good investments, quality investments.”

Benjamin Diokno, former finance secretary: “China has discontinued POGO. Even Cambodia. It also has reputational risk. People will ask, ‘Why are they going to the Philippines, it is discontinued in China. Why are they going to the Philippines?’ Maybe because we are loose, we are not strict on our rules.” 

Pagcor remains firm

Pagcor is firm that it will come out with better regulations, nearly a decade since they were tasked to regulate POGOs.

In a DZBB interview, Pagcor chief Alejandro Tengco said they are set to release new guidelines, where they will ban POGOs in establishing hubs.

“Doon po nagaganap ang mga criminal activities. Napakahirap po kasing i-monitor sila sapagkat una, they are confined in a specific area, malalaking mga hektaryang lupa and they are walled. Ang perimeter fence sila, security fence ang dating. They are gated and it is confined na sila lang halos ang nakakalabas at makakapato,” Tengco said.

(Criminal activities are happening there. It’s very difficult to monitor them because, first, they are confined to a specific area – large hectares of land that are walled. Their perimeter fence is like a security fence. They are gated and it is confined, almost only they can go in and out.)

Recall, however, that it was former Pagcor chief Andrea Domingo who wanted these hubs.

Domingo said self-contained hubs for Chinese online gambling workers would serve only to provide their basic needs and not segregate them from the population.

“When we refer to POGO hubs as self-contained communities, what we mean is that these hubs will have all the basic needs of the foreign employees of POGO,” Domingo said in a text message to reporters last August 8, 2019.

She said these hubs would have office and residential spaces, food establishments, wellness and recreational facilities, and service shops.

“They are free to go anywhere they want to, without any limitation on their personal rights or liberties,” Domingo added.

The Chinese embassy has repeatedly expressed concern over POGO hubs, as they could infringe on the basic legal rights of its citizens.

Pagcor has only accredited only one POGO hub, namely the one owned by First Orient International Ventures Corp. in Cavite.

Prior to recent developments in the Senate, Pagcor was already grilled by lawmakers for their lack of detailed roadmap for the online gaming industry.

In a November 2022 Senate hearing, Pagcor said it intends to grow POGO revenues to P10 billion by 2027, higher than the P8 billion earned in 2019, or during the peak of POGO activities. It added that they aim to have a 100% market share of the online gambling industry in Southeast Asia.

Pagcor’s roadmap for POGO growth was only four pages long. They have yet to make public any updated plans, two years since that hearing.

Will a ban help?

Pagcor, so far, has canceled some 69 POGO licenses and 272 service provider licenses. Most have left the Philippines during the pandemic, while some licenses were canceled due to alleged illegal activities.

The gaming regulator, as well as the police and local government units, are struggling with law enforcement.

“Isang hamon sa law authorities natin na tugisin at hanapin ang mga iligal na ‘yan sapagka’t wala na pong mga lisensya ‘yan, 2023 pa. Kaya naniniwala po ako, ‘yung kinansela namin na himigit-kumulang 250, ‘eh nandito lang po kung saan-saan na lugar sa ating bansa. Dahil…mahirapan na pong bumalik ‘yan sa country of origin nila,” Tengco said.

(It is a challenge for our law authorities to pursue and find those illegal entities because they have not had licenses since 2023. Therefore, I believe that the approximately 250 licenses we canceled are still scattered in various places in our country. It will be difficult for them to return to their country of origin.)

Since 2018, or since the Duterte administration, nearly 3,000 Chinese citizens implicated in cases have been repatriated through the efforts of both the Philippines and China.In the past year alone, China has assisted the Philippines in shutting down five POGO hubs and repatriated nearly 1,000 Chinese citizens.

“POGO is detrimental to both Philippine and Chinese interests and images as well as China-Philippines relations,” the Chinese embassy said in a statement last June. – Rappler.com