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MANILA, Philippines — “It’s game over for the POGO industry,” Sen. Sherwin Gatchalian said during the Senate plenary session on Wednesday.
Gatchalian, chair of the ways and means panel, was presenting his report on the findings of his committee in its inquiry into the socio-economic impact of Philippine offshore gaming operators (POGOs).
Based on the committee findings, he said: “The Filipino people stand to lose more than they will gain from allowing POGOs to continue operating in the Philippines. In light of this, we recommend the permanent banning of offshore gaming operations in the Philippines.”
‘Unstable’ business model
The business model of POGOs is “inherently unstable due to the outsized foreign regulatory and political risks involved,” Gatchalian said.
He noted that the panel had found enough ground to “safely assume” that most customers placing their bets in POGOs were Chinese nationals which, he said, was “problematic” with gambling being outlawed in China.
“In essence, Chinese nationals are using offshore gaming operations based in the Philippines as a loophole to circumvent Chinese criminal law,” he said.
Gatchalian also cited the string of statements released by China concerning the involvement of its people in gambling in the Philippines.
“I can imagine the Philippine government would react in a similar way if a foreign ally were allowing Filipinos to bet on prohibited games like jueteng or e-sabong through online casinos housed in another country,” he said.
Spate of POGO-related crimes
Crimes related to the POGO industry have repeatedly sparked heated debates on whether such operations should be banned.
Gatchalian said information from the Philippine National Police showed that at least 102 POGO-related crimes were reported between Jan. 1, 2017, and Jan. 23, 2023.
Some 316 people were victimized by the crimes, including 214 Chinese and 28 Filipinos.
In those five years, 30 cases were kidnap-for-ransom, 14 were human trafficking, 13 were violations of the Access Devices Regulation Act, and 10 were kidnapping and serious illegal detention, Gatchalian said.
“The police themselves are witnesses to these crimes involving POGOs. This is not something new to us lawmakers,” he said in Filipino,
He cited the outlawed activities involving Brickhartz Technology Inc. and now-closed-downLucky South 99 – both implicated in kidnapping and human trafficking cases. Both firms were licensed by the Philippine Amusement Gaming Corp. (Pagcor).
“It appears that legal POGOs are also involved in criminal activities in the Philippines, along with their illegal counterparts,” Gatchalian said.
The POGO industry is also a breeding ground for financial crimes, he said, citing a study where the Anti-Money Laundering Council deemed Pogos and their service providers “highly vulnerable to money laundering.”
“Given that financial transactions of internet-based casinos are generally remittance-based and non-cash, regulators and authorities have limited access to their transactions, making Pogo operations highly risky and susceptible to abuse,” Gatchalian said.
Data from the Bureau of Internal Revenue (BIR) and Pagcor also suggest that POGOs have been evading their taxes by underreporting their gross gaming revenue, he added.
Staining PH reputation
Various government stakeholders have taken note of the high social cost that comes with the presence of POGOs in the country, according to Gatchalian.
“Their continuing operations in our country pose a reputational risk that could dissuade foreign firms from investing in the Philippines, discourage foreign tourists from visiting our shores, and result in severe economic consequences for our country,” he said.
Gatchalian pointed out that if the Philippines should become a hotspot for POG-related crimes its image would be tarnished before potential investors.
He also cited a survey conducted by Pulse Asia from Nov. 27 to Dec. 1, 2002, that found that 58% of 1,200 respondents see the existence of POGOs as harmful to the country.
“It seems that POGOs are damaging the reputation of our country in the eyes of our very own citizens,” the senator lamented.
‘Overrated, moderate, erratic’ economic benefits
One of the primary selling points of the POGO industry is its economic benefits to the country, but Gatchalian’s report called these gains “overrated, moderate and erratic.”
Citing data from the Department of Finance, Gatchalian said POGOs only accounted for only a small portion of the total tax collection.
“In short, POGOs are only contributing a little to our economy. That’s why it’s not enough reason to say the economy will be on the losing end if we abolish POGOs,” he said.
According to Gatchalian, the net result of a cost-benefit analysis of the POGO industry is negative P8.44 billion.
Estimates from the National Economic and Development Authority in 2022 also point to a declining trend in the economic benefits of POGOs.
“The numbers are clear: The costs of POGOs outweigh the benefits. This implies that banning POGOs will not have an adverse effect on the economy, even considering foregone tax and licensing revenues. In fact, banning POGOs may result in a net positive for our economy when taking into effect the potential benefits of improved investor and tourist confidence,” Gatchalian said.
So what now?
Gatchalian said the POGO industry turned out to be “more of a liability than an asset to the Philippine economic and social order.”
This is why he submitted in his report a recommendation to adopt a Senate resolution urging the executive branch to ban POGOs with the goal of “upholding the safety of the Filipino people, and [sustaining] the path to growth and development consistent with the administration’s economic reforms.”
He also called on Congress to pass a law separating the regulation and operation roles of Pagcor.
“It is recommended that a new entity be created to perform solely regulatory functions, authorizations, and licensing of games of chance and other forms of gambling, while Pagcor will continue solely as a gambling operator,” Gatchalian said.
Pagcor had already earlier revealed that it was “seriously considering” taking on a regulatory-only role as it broached the idea of privatizing its self-operated casinos across the country.
Gatchalian is further seeking to direct the Department of Labor and Employment (DOLE) to explore alternative employment options for Filipinos employed by POGOs.
He also recommended that the BIR be made to review the tax liabilities of POGO licensees, service providers, and its former third-party auditor.
The agency is likewise called to report to the congressional oversight committee on its actions taken, particularly the money it was able to collect to fund priority development initiatives of the government.
Finally, Gatchalian urged the Bureau of Immigration to cancel or revoke the working visas issued to foreign nationals employed in the POGO industry.
They must also be deported following immigration rules and regulations, he said.
Gatchalian said DOLE should also be directed to cancel or revoke the alien employment permits (AEPs) issued to foreign nationals working in the POGO industry and to ensure that the AEPS will not be revived or used for any other purpose.
Former President Rodrigo Duterte was a staunch backer of the POGO industry. He repeatedly danced around the idea of halting POGOs in the country only to have it stay until his last day in office.
His successor Ferdinand “Bongbong” Marcos Jr., meanwhile, earlier said he could not see the point in coming up with a blanket policy of banning POGOs altogether.
“It depends on what the purpose is of banning them or removing them, because the problem in reference to POGOs, the problems come from the illegal ones, not the legal ones,” he said.