Special Report: POGOs: The good and the bad

(Conclusion)

MANILA, Philippines — The Duterte administration is moving in the right direction by scrutinizing the fast growing online gaming industry.

As with any sector, government must ensure that Philippine Offshore Gaming Operations (POGOs) are fully compliant with existing laws.

However, authorities must also tread with caution: if the Philippine regulatory environment becomes too tight or unreasonable, gaming operators may just pack up and move to friendlier destinations like neighboring Cambodia. After all, the advent of internet and communications technology gives these gaming firms much flexibility. They can operate anywhere in the globe, especially in countries that welcome or embrace online gaming companies.

Thus, it is imperative to strike a delicate balance between regulating and taxing POGOs, on the one hand, and preserving the Philippines’ image as one of the leading investor-friendly havens for these companies.

Cambodia’s regulation

It’s no secret that Cambodia is attracting much attention from the international gaming community. Located in the lower part of Southeast Asia’s Indochina peninsula, “the Land of the Khmer” has lax online gaming regulations.

Sihanoukville, in particular, is enticing Chinese investors who want to convert properties into online live-dealer casino operations.

A province in southwest Cambodia, Sihanoukville is known for its beaches, tropical islands and the mangrove jungles of Ream National Park. Set around a deep-water port on a peninsula jutting into the Gulf of Thailand, the provincial capital of Sihanoukville is positioning itself as a destination for Asian gamblers looking to circumvent gambling restrictions in their home countries.

Thus, according to local reports, most new operators setting up shop in the kingdom are eyeing online gambling. In the absence of regulations, gaming firms are tolerated provided they operate out of licensed brick-and-mortar casinos. As a policy, online gaming is not open to Cambodians, like their counterparts in the Philippines.

As a result, construction of integrated casino resorts is booming. The race is on to accommodate the influx of online gaming firms, Chinese tourists and gamblers, government statistics show.

In 2018, Cambodia issued 52 casino licenses, bringing the total number of licenses granted to 150, according to the Phnom Penh Post. This figure represents a 50 percent jump from the number of gaming licenses awarded in 2017.

Most casinos in Sihanoukville offer online gambling options to Chinese customers looking to skirt the mainland’s ban on e-gaming, according to an article on TotallyGaming.

With the flourishing gaming and hospitality industries, Cambodian lawmakers have noted increased employment opportunities and rising land prices in the region.

But, as the old cliche goes, “not everything that glitters is gold.”

Social risks

Live onscreen dealer.

San Chey, executive director of the Affiliated Network for Social Accountability, said the growing number of casinos shouldn’t be received as entirely good news due to multiple social risk factors.

These include money laundering, human trafficking, and other illicit activities that could become a source of multiple social problems. Even though Cambodians are officially banned from playing at local casinos, he said there are still many who lose millions from gambling.

Philippine property sector

At the same time, like Cambodia, land values in the Philippines are soaring and property players couldn’t be happier.

The Metro Manila office space market is expected to remain vibrant this year, driven by a resurging interest from information technology-business process management (IT-BPM) companies and offshore gaming firms, a property consultant said.

In a recent briefing, Leechiu Property Consultants (LPC) chief executive officer David Leechiu said office space takeup in the first quarter of 2019 is currently at 187,000 square meters (sqm), fueled by demand from the IT-BPM and offshore gaming markets.

A total of 36,000 sqm of office space was taken up by offshore gaming companies in the first quarter of 2019, Leechiu said.

LPC said the POGO industry generates about $170 million in annual rental income.

The firm added that POGOs are also notable drivers for the residential property segment as they generate $501 million in annual housing income. Thus, from the property sector alone, POGOs pay roughly $671 million or P35-billion annually, a non-existent figure some four or five years ago, industry observers noted.

Social concerns

But like Cambodia, there are also social concerns being raised on the phenomenal growth of POGOs in the country.

Condominium residents complain of noisy POGO neighbors, while non-POGO offices say the same thing about Chinese occupants in their buildings. Noise is just one. Concerns have also been raised about the notorious drinking and smoking habits of Chinese workers.

But POGO operators said these are not impossible issues to resolve. Property players themselves now recognize the need to have buildings dedicated only to POGO entities so their employees do not mix with Filipinos.

POGO hub

One operator has gone a step further.

“We will now have a 14 hectare POGO hub in Cavite where the group could transfer all the POGO operations and just contain it in one place,” an offshore gaming operator told The STAR.

This will limit inter-racial friction and minimize the risk of foreign workers falling prey to criminal gangs in the city.

Treat with caution

In all, Leechiu said government must be careful in dealing with POGO firms.

“I think the mentality is, everyone is harassing these investors. At some point, they will get tired of all our harassment and they will say ‘it’s too difficult to work here and we will just pack up and go’,” he said.

“We have to remember these businessmen are taking risks investing in the Philippines and living here. We should learn to take care and appreciate them and not treat them as cashcows,” he added.

In the end, Aesop’s famous fable is instructive: local regulators should handle POGOs with care lest they “kill the goose the lays the golden eggs.”