Growing fuss over POGOs

So much negativity is happening lately in the Philippine offshore gaming operations (POGO) sector that may force us to rethink just how long-term (or short-term) we should view this now billion-peso money-generating initiative.

The latest blow has been a sternly worded post by the Chinese embassy in the Philippines that POGOS are “posing a threat to China’s financial security and supervision.”

The post also warned “any form of gambling by Chinese citizens, including online gambling, gambling overseas, operating casinos overseas to attract citizens of China as primary customers, is illegal,” further hinting that the Chinese government will deal harshly with gambling that has rued millions of mainland Chinese.

POGOs, which started legally operating in 2016, have burgeoned to extremes that the Philippine Amusement and Gaming Corp. (PAGCOR), its initiator and regulator, had never (now nightmarishly) dreamt possible.

Confluence of events

Consider the escalation of the following noteworthy events:

Chinese workers in the POGO sector, both legal and illegal, have increased to more than 200,000 to serve what is estimated to be billions of mainland Chinese now lured or addicted to online gaming, who bet as little as a dollar in simple live-stream wagers or bet big-time in casino games.

Many of the Chinese workers in the POGO sector, have supposedly been subjected to oppressive working terms and conditions. Worse, many work in the Philippines without proper documentation and have evaded paying income taxes, estimated to be at least P24 billion a year, to the Philippine government.

Ancillary noise includes a handcuffed Chinese worker who jumped to his death, unruly behavior of Chinese in gambling sites, presence of Chinese military-looking men in casinos, skyrocketing of real estate rental fees in areas where Chinese POGOs operate, increased incidences of extortion and kidnapping involving Chinese nationals, and the open-to-Chinese-only restaurants.

‘Bright’ idea

When China started to tighten its surveillance over its citizens going to Macau to gamble, PAGCOR came up with a “bright” idea to put up POGOs and become the new Macau of Southeast Asia.

The idea held traction with the growing sophistication of online gambling aided by computers and smartphones that Chinese gamblers could easily hide from authorities. The Chinese now also have the time and money, as well as knowledge of credit card payment systems that could evade surveillance.

More importantly, hundreds of millions of Chinese represented an emerging market that could be entrapped in online gaming and gambling, and that it would be difficult for Chinese authorities to monitor and apprehend. It was the perfect brewing pot.

According to studies, if Beijing will not be able to effectively enforce a crackdown on native Chinese gamblers, easily half of its 1.4-billion population could be actively patronizing online gaming in five years’ time.

PAGCOR’s “bright” idea has blossomed into a P185-billion sector by end- 2018, and accounted for the P6 billion earnings ceded to the national coffers, definitely much more than what any other government corporation could contribute.

Administrative mayhem

The administrative mayhem that ensued from the unexpected growth of POGOs, however, is something to think about. Clearly, PAGCOR was unable to foresee and prepare for the influx of foreign workers – and more. Consider:

Recognizing the existence of a huge number of unregistered foreign POGO workers, the Department of Finance and the Bureau of Internal Revenue initiated procedures to collect income taxes from their employers, initially by issuing income tax numbers to appropriate POGO workers.

The Department of Justice and the Bureau of Immigration have tightened visa rules for Chinese tourists after being made aware of loopholes in the Visa Upon Arrival (VUA) rule that have been exploited by Chinese travel agencies and Chinese POGO employers.

The Department of Foreign Affairs has asked for the suspension of the 30-day VUA for Chinese tourists after the allowed extension of six months had been abused to enable Chinese POGO workers to illegally take on local jobs.

The Office of the President, through the presidential spokesperson, has called for aggrieved Chinese workers in POGOs to report ill treatment, something that the Chinese Embassy in Manila had lengthily detailed in its recent post.

Even the Department of Defense has raised concerns that the presence of Chinese POGO hubs near military bases could be considered security risks, even as the Office of the President later rebuked this.

After all the furor, PAGCOR has proposed to set up Chinese POGO hubs in Pampanga and Cavite to respond to complaints from Filipino communities in areas where the Chinese workers are lodged. The gaming regulator also said this would enable government to closely monitor the activities of the POGOs.

Is this worthwhile?

The only happy party for now seems to be real property agents who have been gloating over the 37 percent rise in office space uptake by offshore gaming companies. The President has even issued an administrative order that bans new office space building for business process outsourcing (BPO) companies in Metro Manila in deference to POGO needs.

All these royal treatment for Chinese POGO is understandable given the potential revenues for the government. But its long-term significance to the country’s economy must be weighed carefully, especially with the Chinese government’s recent threat to inhibit its citizens from accessing online a gambling operations.   

BPOs, unlike Chinese POGO, are great employment generators of Filipinos of all ages, making it more meaningful to our growing economy and rapidly growing population.

Our government is pulling all stops to respond to China’s concern over their POGO workers, but we could soon wake up to a future when gaming patronage by the Chinese people has effectively been curtailed through a crackdown by the Chinese government, leaving us holding an empty bag.

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