Marcos’ team wants to eliminate the POGOs. Here’s how it can affect businesses.

MANILA, Philippines — The Marcos administration has been called the continuity government of former President Rodrigo Duterte.

A departure from this narrative is the likely avoidance of online gambling – a controversial industry that flourished under Duterte – under President Ferdinand Marcos Jr.

During the Development Budget Coordinating Committee budget briefing in the Senate on Thursday, September 15, Finance Secretary Benjamin Diokno expressed the need to terminate the Philippine Offshore Gambling Operators (POGO) due to its “social cost”.

“In fact, China has abandoned POGO. Even Cambodia. It also carries reputational risk. People are going to ask, ‘Why are they going to the Philippines, it’s broken in China. Why are they going to the Philippines? Maybe because we’re cowards, we’re not strict on our rules,” said Diokno, who had served as Duterte’s budget chief and central bank governor.

If POGOs left the Philippines altogether under the Marcos administration, a web of business relationships could likely take a hit.

Economic gains

Since POGOs were allowed to expand in Manila in 2016, businesses such as properties, fintech, transportation, and restaurants have been given a massive dose of steroids with in-game money. Banks from which real estate companies borrowed funds also benefited from the rise of POGOs.

Industry estimates show that POGOs bring in 551 billion pesos in revenue to the economy annually. Businesses around POGO sites have also become somewhat dependent on them for their income.

However, POGOs were forced to close in March 2020 amid the coronavirus pandemic, with their workers returning to China. (READ: Manila office vacancy to hit peak since global financial crisis)

During the pandemic, POGOs vacated a total of 454,000 square meters (m²) of office space, resulting in a sharp drop in rental rates.

Property experts had earlier expected POGOs to have a ‘revenge’ return as borders opened up, but data from Leechiu Property Consultants showed that the occupation of online gambling companies’ offices was almost zero from the first quarter of 2020 to the last quarter of 2021.

POGO office take-up only reached 21,000 m² in the second quarter of 2022. This pales in comparison to outsourcing companies, with 114,000 m² over the same period.

Latest figures from Leechiu Property Consultants showed that economic activity will return the office market to the pre-POGO and pre-pandemic state of 2016.

Companies like Eton Properties said they were “experiencing demand for their office developments for the second half of the year” as POGOs reappear to create new expansion offices in the Philippines.

Eton Properties, part of the Lucio Tan group of companies, has struck a deal with one of Southeast Asia’s “biggest” POGO companies, to lease more than 6,000 square meters of office space or two floors of its eWestPod building located inside the mixed-use Eton WestEnd Square development near Makati’s central business district.

“With the perceived stability and confidence of a new administration and the market beginning to normalise, Eton Properties has gradually felt an increase in demand for rental space during this second half. One of the main effects we see is the confidence of POGOs to return to the Philippines. These operators come not only from China, but also from our neighboring Southeast Asian countries,” said Kyle Tan, Executive Director of Eton Properties. (READ: What the POGO exodus means for the Philippine economy)

Worrying headaches

Diokno pointed out that POGO’s revenue fell to 3.9 billion pesos in 2021 from 7.2 billion pesos in 2020.

POGOs have to pay their host government much more.

Former Finance Secretary Carlos Dominguez III had repeatedly stated that POGOs and their employees evaded taxes. An interagency effort to padlock these POGOs was led by Dominguez himself.

Despite scathing remarks from former Cabinet members, Duterte continued to encourage the industry.

Social and political costs

Gambling is illegal in China and is strongly opposed by the communist government. Authorities stepped up the crackdown to serve as a stark warning.

To circumvent this hurdle, gambling companies are operating outside the continent to countries like the Philippines. (READ: The plight of a Chinese online gambling worker in Manila)

POGOs were also found to confiscate the passports of their employees, who had no idea they were working for gambling companies.

With their passports gone and unions and immigration officials associated with the project, Chinese nationals are forced to work in the Philippines and cannot visit the Chinese embassy for fear of persecution.

The sudden influx of Chinese workers into central business districts like Makati and Parañaque has led to friction between foreigners and locals. POGO workers were also raising rents in these areas, providing relief to residents.

To resolve the friction, the Philippine Amusement and Gaming Corporation has offered to move Chinese workers to “stand-alone” centers. China opposed it.

The Philippine National Police has also uncovered kidnappings involving POGOs. Prostitution dens targeting POGO clients have also sprung up in Manila. (READ: Hontiveros sees link between influx of POGO workers and rise in sex trafficking in Manila)

Meanwhile, former defense chief Delfin Lorenzana said POGO workers could “easily switch” to espionage.

Due to these incidents, the Chinese Embassy urged Duterte to end POGOs, but the former president did not budge.

Simultaneous investigations by the House and Senate also reached conclusions about the social costs of POGO money. –Rappler.com

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