MANILA, Philippines – The Marcos administration is weighing the social and economic costs of allowing online gambling to continue in the Philippines.

The policies of the previous Duterte administration resulted in the boom of Philippine offshore gaming operators or POGOs, with both the government and private sector benefiting from billions of pesos from the highly contentious industry.

But while the cash was good for the economy, POGOs were also linked to crimes such as kidnapping, murder, human trafficking, and prostitution. Regulators struggled to address these crimes, while the reputation of registered POGOs suffered because of underground companies.

In a House hearing on Wednesday, October 19, various government agencies enumerated the benefits and risks of allowing POGOs in the country.

GDP

National Economic and Development Authority (NEDA) Assistant Secretary Sarah Lynne Daway-Ducanes said their estimates showed that POGOs, so far, have contributed P53.1 billion in 2022, which is 0.31% of the Philippines’ gross domestic product (GDP).

The amount includes operational expenses, salaries, and benefits of employees, as well as office rent.

The figure is much lower than the P104.5 billion in 2019, during the peak of POGOs, which accounted for 0.67% of GDP.

But looking at the matter from a tax collection perspective, economic benefits are declining.

Finance Undersecretary Maria Magno said total taxes collected from POGOs in 2021 reached P7.38 billion, lower than the P12.46 billion collected in 2020 or the first year of the coronavirus pandemic, and also lower than the P14.44 billion in 2019 or the peak of POGO operations.

Magno said that should the Philippines discontinue POGO operations, the country is set to lose P64.6 billion in direct economic contributions, which is 0.3% of GDP.

Jobs

In terms of employment, the Philippine Amusement and Gaming Corporation said there are 7,534 Chinese working in accredited POGOs, accounting for 18% of the total workforce.

This means there are some 41,855 POGO workers. Of the total, 47% or 19,671 are Filipinos.

Pagcor’s figures differ from the numbers of the Association of Service Providers and POGO. The group’s spokesperson, Mike Danganan, said there are 11,776 Filipino direct hires in POGOs, while there are 11,342 indirect hires.

Tourism

China is cracking down on gambling operations targeting its citizens and even launched several appeals to the Philippine government to stop POGOs.

NEDA said the Philippines risks losing Chinese tourists, should Beijing choose a total tourism ban to pressure President Ferdinand Marcos Jr. to stop POGOs.

Prior to the pandemic or in 2019, China ranked second in the number of tourist arrivals at 1.74 million, just behind South Korea.

China has not allowed outbound leisure travel yet for its citizens due to its zero-COVID-19 policy. This resulted in only 17,454 visitors in the Philippines in 2020, and 6,615 in 2021. So far in 2022, some 23,483 Chinese have visited the Philippines.

Business environment

NEDA also flagged possible suspicious cash flows that could hurt the economy. Data from the Anti-Money Laundering Council showed P14 billion out of the P54 billion worth of POGO transactions from 2017 to 2019, or 26%, were deemed suspicious transactions.

Given the government’s desire to attract more employment-generating investments, both local and foreign, the existence and effects of such fraudulent activities do not bode well in creating an economic environment conducive to these investments.

Neda assistant secretary Sarah Lynne Daway-Ducanes

Magno also said the Department of Finance (DOF) is looking at the impact of crimes on foreign direct investment. 

Citing a study of 67 countries, the DOF said one crime incident for every 100,000 people can cut GDP growth by 1%. Using that result, the department estimated that the Philippines may risk losing between P16.7 billion and P26.2 billion in foreign direct investments due to POGO-related crimes.

Magno added that crimes also pose a risk to institutions and may lead to additional spending for law enforcement.

Real estate

Figures from property consultancy firm Leechiu Property Consultants (LPC) showed that POGOs have vacated a total of 630,000 square meters of office space since the pandemic or the first quarter of 2020.

Recovery is driven mainly by tech and business process outsourcing companies.

LPC chief executive officer David Leechiu estimated that the complete exit of remaining POGOs, which currently occupy 1 million square meters of office space, would result in P18.9 billion in lost annual office rentals.

– Rappler.com