POGOs

[Vantage Point] POGOs: Savior or villain?

Val A. Villanueva
[Vantage Point] POGOs: Savior or villain?
'Banning POGOs without a well-thought-out, definite, and viable plan...is putting hundreds of thousands of Filipinos in jeopardy'

The government stance to entirely ban Philippine offshore gaming operators (POGOs) is making President Ferdinand Marcos Jr. look like a saint compared with his predecessor. 

This has raised eyebrows among his detractors, thus putting a shade on what his men are trying to accomplish. To most critics, the government’s sudden concern for the erosion of the nation’s moral fabric over the monetary contribution of this gaming platform to the nation’s coffers does not fit the reputation of the Marcoses – a family unrepentant about the human rights abuses under Marcos Sr.’s 20-year despotic rule and the documented plunder of public funds, among others – an image that the despot son’s namesake has long been trying to deodorize.

I must admit, however, that the efforts of the Department of Finance (DOF) to wean the  Philippines away from an industry which thrives on a game of chance to “more high-value-added” industries have won considerable brownie points among a number of Filipinos who fear for the society’s moral corrosion. On the flipside, it has also gained condemnation from some lawmakers and interest groups, who are apprehensive about the economic fallout and losing their golden egg-laying goose, respectively.

The shift

The government’s turnaround from former President Rodrigo Duterte’s position on the importance of POGOs to the Philippine economy surprises the business sector, which expected the continuity of the previous administration’s economic programs. For one, Marcos Jr. inherited most, but not all, of the senior members of former president’s economic team, excluding former DOF chief Sonny Dominguez. It may be recalled that Dominguez had staunchly defended POGOs from those who were averse to the gaming business.

A source deep into the gambling industry points to factionalism among groups within the current bureaucracy. There seems to be an effort, the source says, to undo some of the policies of the Duterte administration which had then received push-back from the public. The source alleges that all of these efforts are being made to refurbish Marcos Jr.’s image. This claim could not be independently verified, but recent resignations – such as those of former Executive Secretary Vic Rodriguez, former Solicitor General Jose Calida, and former Press Secretary Trixie Cruz-Angeles – led our source to suspect that pockets of skirmishes have been happening behind closed doors. Duterte has publicly and vehemently denied the alleged rift between him and Marcos Jr. But he earlier turned down his successor’s offer for him to become the country’s drug czar, even as Marcos Jr. indicated in a television interview that he would shun his predecessor’s hardcore approach to fighting drugs.

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Economic contribution

These POGOs, which offer online gambling services to markets outside the Philippines, have been influencing the country’s economic indicators. Gambling, after all, is one of the underpinnings of many bustling cities around the world. Everybody doubted mobster Benjamin “Bugsy” Siegel’s vision of a vibrant Las Vegas when he ventured into building the glitzy Flamingo Hotel and Casino in what started out in the 1800s as an isolated, barren expanse of sand. Who would have thought that a hotel remotely situated in the Las Vegas desert, deep into what is now known as Paradise, Nevada, could start a boom that would burst into the now famous Las Vegas Strip? Atlantic City, Reno, Cripple Creek, and Macao are just a few cities which have mushroomed and benefited from the monies of high rollers and tourists.

But gambling has a dark side. Flamingo was built literally from the crimson blood of Italian-American Mafia families. Bugsy, one of the founders and leaders of Murder, Inc., was felled from a bullet fired from afar by what was largely suspected to be a hit masterminded by his childhood friends, Lucky Luciano and Meyer Lansky.

Here at home, the Senate Ways and Means Committee and the DOF admit that POGOs’ contribution to the country’s economy remains sizeable and could cause financial losses, if and when the gaming business is banned. 

Records show that POGOs have directly and indirectly infused some P34.68 billion to the nation’s coffers: P10.9 billion in real estate taxes; P7.4 billion in taxes on retail stores selling household items, communications devices, and other goods; and P7.2 billion representing the sector’s 5% franchise tax.

In sum, the country gets P3.07 billion related to the 25% withholding tax on foreign nationals; P1.78 billion in value-added tax; P1.683 billion in tax on food service activities; and P1.58 billion in remittances to the national government. Also, POGOs paid P1.41 billion in foregone tax on utilities, P232 million in corporate income tax, and P4.312 million in income tax.

In a recent Senate hearing, when pressed by Senate Committees on Energy and Economic Affairs Chair Sherwin Gatchalian, DOF Undersecretary Bayani H. Agabin admitted that the 1% effect on Gross Domestic Product (GDP) that POGOs contribute is “quite big and a cause for concern.” Gatchalian wondered then where the government would source the possible income lost from banning POGO operation in the country. 

“There is a cause for concern, but…if we can attract industries with more high-value-added, better higher technical requirements, higher professional employment rate, we can get tourists as well, then that should be more than enough to cover what we may potentially lose if POGOs exit the country,” Agabin pointed out. “The economic team has submitted a medium-term development plan. If we follow the roadmap, I believe we can replace [the POGOs’ contribution].”

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Social cost

The “modest” contributions of POGOs to the national economy “does not outweigh” its social costs to the country, according to DOF Assistant Secretary Valery Joy Brion during the same Senate hearing. “Social costs are inherently difficult to quantify, particularly those that go beyond direct victims and heightened social fear,” Brion explained. “What is clear, though, is that these social costs affect investor perception, and consequently foreign direct investment decisions.”

The pursuit of investments that will create value and high-quality jobs for Filipinos, Brion added, is in line with the government’s vision of “an inclusive and sustainable economic development.” Citing a study by the Anti-Money Laundering Council, she narrated that POGOs and their service providers are “highly vulnerable to money laundering” since their financial transactions use the internet which has been a tough challenge for local authorities to monitor, making these gaming operations “highly risky and susceptible to abuse.”

No so fast

Officials of the National Economic Development Authority, (NEDA) and other economic managers of the country are optimistic that the proper implementation of recent tax reforms, such as the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, amendments to the Retail Trade Liberalization Act (RTLA), Public Service Act (PSA), and Foreign Investment Act (FIA), will enable the Philippines to lure investors who can generate the jobs that would be lost when the POGOs depart.  

In an interview with Rappler, a former high official of the previous administration said that this is easier said than done.  “Are these so-called jobs already waiting for the unemployed?” the former official asked. “Will new investors be able to set up shop and hire displaced POGO workers in a month’s time?”

According to the official, the fact that our government officials are willing to gamble with the lives and livelihood of thousands of Filipinos POGO workers and their families reflects how out of touch they are with the realities on the ground. Philippine Statistics Authority data show that a fifth of working-age Filipinos are either unemployed (5.3%) or underemployed (14.7%), meaning that their work is inadequate to meet their needs. “Pray tell, where are these 50,000 workers going to immediately find new jobs? Does the administration expect them to simply compete with other Filipinos who are already desperate in finding employment?”

He decried that the apparent nonchalance of our policy makers with regard to the employment of thousands of workers is grating in light of the skyrocketing costs of basic food and necessities. The minimum one-way jeepney fare is now at P12. A kilo of pork costs at least P300. Carrots are priced at P100 per kilo. “Who will shoulder the food costs of the families of POGO workers who will lose the monthly salaries, meal allowances, and free transportation they receive from licensed, legitimate POGOs and their service providers?”

Weighing the import of social against economic costs is indeed difficult to navigate. The country suffers from the misdeeds of previous administrations which plundered the nation’s coffers and tossed the entire country into a seemingly bottomless economic pit. Placing monetary value on POGOs’ effect on the country’s moral fiber is just like asking trafficked women who were forced into prostitution whether their meager earnings can sufficiently heal the emotional and physical trauma they suffer each passing day. 

On the other hand, while gambling has been proven to increase criminal activity and cause personal and work problems in the community, banning POGOs without a well-thought-out, definite, and viable plan to help these would-be displaced workers is putting hundreds of thousands of Filipinos in jeopardy. – Rappler.com

Val A. Villanueva is a veteran business journalist. He was a former business editor of the Philippine Star and the Gokongwei-owned Manila Times. For comments and suggestions, email him at mvala.v@gmail.com.

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