We will probably be forced into a policy judgment on whether the Philippine Online Gaming Operators (POGOs) are a boon or a bane. Some of our politicians see them as a variant of pestilence.
Last Tuesday, Sen. Richard Gordon delivered a speech tackling the entry of $447 million in cold cash over the past six months. The 47 individuals who brought in the cash hoard duly filled out Customs declarations, unusual as the sums might be.
Gordon suspects the money was being laundered and linked the unusual cash flow to the operators of online gaming. He called for a Senate hearing on the matter.
Before that, Sen. Rissa Hontiveros exposed widespread bribery of our Immigration personnel by Chinese nationals entering the country. Large sums, it is alleged, were paid out to Filipino officials to facilitate the issuance of visas upon arrival.
The bribery, the crackdown on prostitution dens catering to POGO workers and the series of kidnappings of gaming workers fuel protests against the mushrooming “industry.” On one occasion, the police arrested two armed Chinese nationals. They yielded ID cards of the People’s Liberation Army.
The proliferation of POGOs drastically pushed up rental rates for homes and office space. Obviously, the nature of this “industry” brings into the country a lot of unsavory characters. It does seem, at times, that the dizzying expansion of POGOs has resulted in our importing the Chinese underworld.
A number of factors explain the rapid proliferation of gaming operations. They were banned in Laos and forced to resettle here. Gambling is illegal in China and the online operations take advantage of a loophole opened by digital technology – although there is an unconfirmed report that Beijing is cancelling the passports of its nationals involved in “online fraud.”
Although it might seem otherwise, the Philippine Amusement and Gaming Corp. (Pagcor) is mandated to regulate this “industry.” Online gaming operations are required to acquire licenses from the Pagcor offshore gaming licensing department.
Pagcor’s regulatory mandate is further reinforced by Executive Order No. 13 titled Strengthening the Fight Against Illegal Gambling and Clarifying the Jurisdiction and Authority of Concerned Agencies in the Regulation and Licensing of Gambling and Online Gambling Facilities, and for Other Purposes. This Executive Order was issued on Feb. 2, 2017.
According to the Pagcor website, there are 59 licensed POGOs employing an estimated 100,000 to 250,000 Chinese nationals. By Pagcor’s rules, the POGOs shall not allow their gaming websites to be accessed within the territory of the Philippines. The operators “shall not allow placing of bets and paying of winnings to occur within the territorial jurisdiction of the Philippines.” These operations cannot cater to Filipino citizens.
By Pagcor’s estimate, the global market value for online gaming is expected to double from $45 billion in 2017 to $94 billion in 2024. In 2016, Pagcor reports that these operations contributed P657 million to government coffers. In 2017, revenues from these operations shot up 497.26 percent to P3.924 billion. They have been rising exponentially since, especially after the BIR went after errant POGOs since last year.
Pagcor also collects from each POGO applicant $150,000 in application and processing fees, $200,000 in licensing fees and $300,000 in security bond fees. Each licensed POGO will need at least P33 million to set up and legally operate.
The BIR expects P2 billion every month in tax payments from POGO workers who are now required to observe withheld taxation. The workers are also required to pay their SSS dues and contribute to the Pag-IBIG Fund.
In a report, the Nikkei Asian Review estimates the POGO “industry” has now created 470,000 jobs and contributed over $11 billion to the economy. The income taxes of Filipinos hired add further to government’s revenues.
Pagcor required each POGO to have a minimum of 10,000 square meters of office space. Projections show the online gaming “industry” will soon need 800,000 square meters of office space. That translates into 20 percent of total available office space in Metro Manila. Some experts anticipate that the POGOs will soon overtake the BPO industry as the leading tenant in the country.
Supply of office space had overtaken demand shortly before the online gaming phenomenon happened. Should the POGOs disappear tomorrow, that will result in a massive glut in office space.
In order to minimize all the adverse activities related to the proliferation of POGOs in the metropolitan area, Pagcor advocates the establishment of “hubs” for these operators. Relocating these operators in designated areas away from the central business districts will enable Pagcor to better supervise their activities and lessen the social friction they currently create. Doing so would insulate our communities from the vice on which this “industry” relies.
It is understandable that government will want to continue hosting the POGOs. They are a major source of revenue to fund expanded social services and investments in infra. They help soak up domestic unemployment. With higher disposable incomes, POGO workers support our retail sector in particular and domestic economic activity in general.
Surely, we cannot rely on the POGOs to support our economy forever. Political pressure could lead to the curtailment of their presence. Beijing frowns on this “industry” and could take steps to prevent its own citizens from getting involved in POGOs.
For all the unsavory side effects of hosting online gambling, they do provide business activities our economy needs during this time of global economic decline. The economic upside offsets the moral hazards they pose on our communities.
While we may profit from them, these enterprises are difficult to love.