PH's gamble on the multi-billion peso POGO industry

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Metro Manila (CNN Philippines, November 30) — After largely receding from the public eye during the height of the pandemic, the Philippine Offshore Gaming Operators (POGO) industry finds itself at the center of a high-stakes debate this year.

The industry, said to pump in billions of pesos to the economy, faces the possibility of being kicked out after a fresh string of crimes linked to it triggered a government probe on just how valuable — or detrimental — to the country its continued operations would be.

It's a difficult balancing act.

On one hand, those pushing for a POGO ban argue that the "social costs" the industry carries ultimately outweigh the economic gains it brings. On the other, some warn that the firms' exit would do more harm than good, leaving a significant number of Filipinos jobless and delaying the nation's recovery from the coronavirus crisis.

Just how big of a gamble will the country take if it pulls the plug on the sector? CNN Philippines enumerates the arguments raised and the projections made on the issue.


Many Filipinos stand to lose their jobs if POGOs leave the country, according to those opposing the move.

Government data showed that during the peak of the industry in 2019, over 144,000 POGO workers were registered in the country, although only 14.5% were Filipinos.

After pandemic restrictions heavily affected operations, the official number went down to just 34,245 registered employees as of June this year, where 17,509 (51%) were foreign nationals and 16,736 (49%) were locals.

But if POGO-related establishments are also to be considered, there are a total of around 225,400 Filipino and foreign workers, based on figures from the Philippine Amusement and Gaming Corporation (PAGCOR), which were cited in a Senate hearing last month.

David Leechiu, CEO of the Leechiu Property Consultants, even believes that the potential ban's impact on employment is much bigger.

He said a lot of employees, such as those in the service sector, are likely unregistered, and that there is "very significant indirect employment that is not found in the buildings or premises."

"A very large chunk of the Philippine economy is informal," Leechiu told lawmakers. "It is very hard to appreciate on paper the real contributions…not just of the POGO sector, but all these other industries, to the economy."

In an earlier press briefing, the Association of Service Providers and POGOs (ASPAP) also argued that Filipinos get better pay from the POGO industry, saving them from having to seek jobs abroad.

"Maganda ang sweldo, maganda ang benepisyo [There are better salary and benefits], then we are keeping the family together," said ASPAP spokesperson Michael Danganan.

Among the group's members is Nelia Leonardo, a former overseas Filipino worker in Taiwan who is now a translator for POGOs. She said on top of her monthly pay of ₱35,000, she enjoys free food, accommodation, and transportation.

"Walang magbibigay sa akin ng salary offer, government or private (employer), doon po sa nari-receive kong salary sa kasalukuyan [No government or private employer would offer me a salary that would equal my current one]," she said.

Real estate, revenue losses

Shutting down POGOs could also cost the Philippine economy around ₱170 billion to ₱200 billion a year, according to Leechiu.

He said among the biggest losers would be the real estate industry, as offshore gaming firms occupy around 1 million square meters of office space, while its workers take up about 2.4 million square meters of residential space, mostly in Manila.

Some have complained that the influx of Chinese nationals have driven up rent prices, affecting locals. This is because POGOs are willing to pay rates twice or thrice the original amount, and one to two years in advance.

However, Leechiu maintained that an abrupt POGO pullout would be bad for the country, leading to annual losses of ₱18.9 billion in office rent and ₱28.6 billion in housing rent. He pointed out this is on top of the tens of billions more in workers' salaries, government revenue, electricity costs, and daily spending, among others.

"We cannot ignore the economic benefits of this industry," Leechiu said.

"We need them, at least for now, to be able to insulate ourselves from the damage that's about to happen to the world in the next 12 months…I think this is the time to kind of encourage more employment and investment than not," he added.

However, Senator Grace Poe — who backs calls to ban POGOs — believes that the real estate situation could only be a short-term headache, and that owners can eventually find alternative uses for their properties.

"Whatever perceived loss might just be a drop in the bucket," she said.

In a House hearing last month, the National Economic and Development Authority (NEDA) said its preliminary estimates for 2022 showed POGO firms have contributed ₱53.1 billion to the economy, or about 0.31% of the country's gross domestic product (GDP).

This is much lower than the 2019 figures when NEDA said the industry contributed ₱104.5 billion, or 0.67% of the GDP.

For taxes, the Bureau of Internal Revenue (BIR) said collections from January to August 2022 stood at ₱4.4 billion. This is also a long way from the projection of ₱32.1 billion for the entire year, when the BIR assumed POGO operations would return to their pre-pandemic levels.

Social costs

Much has been said about the economic side of the issue, but proponents of the ban assert that the social ills that have marred the industry are too heavy to ignore.

The ongoing probe into POGOs was prompted by new criminal activities linked to it, particularly kidnapping and illegal detention cases. According to the Philippine National Police, 17 out of 31 reported kidnapping incidents from January to September this year were POGO-related.

Authorities said some of these cases can be attributed to the shortage of Chinese POGO workers in the country due to pandemic restrictions in China. They explained that firms fight over employees, at times holding them against their will.

Industry players claim unlicensed POGO entities are to blame for the crimes. PAGCOR, for its part, said its five-year road map not only aims to increase income sourced from POGOs, but also contains a more robust regulatory framework that will eliminate social ills associated with illegal operations.

"In the long term, we see POGOs as a contributor to the government of important revenues without the social costs that are associated with it," said Renfred Tan, senior manager of PAGCOR's offshore gaming licensing department. "Hopefully, there would be less, or if not, zero illegal operations wherein doon po nanggagaling 'yung [which are the source of the] social costs that have been reported."

However, even those licensed by the government were found to have broken the law.

For instance, in September, dozens of Chinese nationals were rescued by police after being "detained" at Lucky South 99, a firm in Pampanga licensed by PAGCOR before the raid. In the same month, at least two more companies were also reportedly linked to abductions, which authorities identified as Xionwei Technology Co. Ltd. Inc. and L-Y Group Admin Pogo Company.

"I have never heard of a factory in the Philippines kidnapping another employee of another company…Bakit meron sa POGO [Why does that happen in POGO]?" asked Senator Sherwin Gatchalian. "What type of group are we attracting here?"


But the dark side of the offshore gaming industry is nothing new.

There have been multiple exposés concerning it even before the pandemic, including on online sex dens, a "powerful" government official allegedly backing illegal recruitment, and the "pastillas" bribery scheme. There were also other reported violations of labor laws, including employment of minors.

While POGO revenues indeed contribute to government coffers, the Department of Finance (DOF) contended that the industry's "modest" contributions do not outweigh the harm it carries.

Not only are peace and order disrupted, the DOF said the controversial industry also affects investment perception and becomes an economic risk.

It projected sizable decreases in foreign direct investments (FDIs) and inbound tourism revenues due to perception of crime and corruption, as well as additional expenditures for law enforcement and immigration.

The department's estimates showed that potential losses to FDIs may reach ₱16.7 to ₱26.2 billion amid issues hounding the sector. In terms of tourism, it said its study found that a 1% increase in crime rate lowers tourism inflows by 4.97% — or around ₱8.9 billion annually.

The DOF further argued that as POGOs remain illegal in China, the Philippines "incurs greater reputational risk" by allowing them to operate.

Meanwhile, Gatchalian also said the state may have lost ₱1.9 billion due to the failure of some licensed POGOs to settle correct taxes from January to August this year. He added that his research showed that the country was "not realizing the full benefits" of allowing these companies to operate.

Like Leechiu, however, former Finance Secretary Gary Teves stressed the importance of timing in deciding the fate of the industry.

While he expressed support of the ban, Teves suggested it may be better for the country to implement it in a phaseout mechanism instead of at once. He also said the government should be ready to create more employment opportunities for those who will be affected.

"The timing of its decision and its implementation should be considered given that the most urgent economic concerns of Filipinos today are inflation and jobs," the former DOF secretary said.