The maelstrom created by calls to shut down the operations of Philippine Offshore Gaming Operators, or POGOs, is obscuring many valid arguments for their existence.
Offshore gaming operations, just like any sector in the economy, are not perfect—a few unscrupulous players in the industry will take advantage of the lax enforcement of the law. But one bad apple does not necessarily spoil the rest of the bunch.
Criminal elements have clearly infiltrated the sector because of the thriving nature of the industry. The POGOs’ link to illegal activities like prostitution, illegal recruitment and employment of minors, however, are law enforcement issues that should be effectively handled by concerned authorities. The failure to enforce Philippine laws against shenanigans is not the fault of the industry.
Albay Rep. Joey Sarte Salceda, a respected economist, has appealed to the critics of Philippine Gaming Operations, amid calls to abolish the sector. The chair of the House Committee on Ways and Means says a “blanket ban on a specific sector, when there are laws that already exist to prevent abuses in any kind of business, will be seen as arbitrary.”
“That will hurt our reputation with investors not just in the gaming sector. We will be known as a country that burns down houses just to kill the rat inside,” says Salceda, noting that the Philippines will lose 70,000 job opportunities for Filipino workers.
The Albay lawmaker suggested that it would be in the best interest of the government, which is in dire need of revenues to boost the pandemic-hit economy, to “keep POGO operations within POGO-specific zones that are ring-fenced from the rest of the country.”
For Salceda, any offshore gaming that operates outside such zones should be considered illegal. With POGOs kept within controlled and heavily regulated spaces, “we have a potential global advantage in that we recognize them [POGOs] as taxable entities, unlike other countries that consider them a gray area.”
The lawmaker argues that banning POGOs that pay billions of pesos in tax revenues was not the solution to alleged unabated crimes, since the Philippines has full of laws that can deal with infractions in the industry.
“Our policy cannot be to give an entire industry up just because there are bad actors. All industries have bad actors. My stand is for the government to wield the full weight of the law,” says Salcedo.
The economic cost of shutting down the industry is wide-ranging. A sudden downturn in office occupancy, he says, will kill jobs and erase at least P18.9 billion in rental income from offices, and P28.6 billion in housing rent.
Salceda cited that POGO employees spend about P950 million daily in Philippine stores and their commissaries shell out P11.4 billion annually from Filipino caterers.
Leechiu Property Consultants chief executive David Leechiu, when grilled by Senator Francis Escudero, during a recent hearing, says the Philippine economy could lose up to ₱200 billion a year if the government decides to close down the operations of POGOs.
“Our estimates are somewhere around ₱170 to ₱200 billion and that’s comprised of different parts. A big chunk of it is the real estate market, both in the office being rented and residential condos (condominiums) being rented. And a big chunk in the service sector because the informal economy is significantly employed by this sector also,” says Leechiu.
The negative impact on the Philippine real estate sector is equally telling. POGOs occupy 1.05 million square meters of office space, mostly in Ortigas and Makati, along Manila Bay, Alabang and Cavite, as well as 2.4 million sqm of residential space.
Leechiu confirmed that shutting POGO companies would result in a loss of ₱18.9 billion in annual office rent and ₱28.6 billion in yearly housing rent, and 347,000 losses in employment. He added that POGO workers spend P11.4 billion for their meals, P9.5 billion for electricity services yearly and P952 million for their daily needs. These estimates, he says, amount to about P70 billion in revenues for the private sector each year.
“Investor sentiment (will) become very negative very quickly and property prices on both rents and capital values will be impacted and all of us will be negatively impacted by that,” said Leechiu.
A knee-jerk reaction to the current woes plaguing POGOs is not the solution. The Philippines, instead, should develop the industry and professionalize the sector further. The Philippines can be a major POGO hub, just as it promoted the business process outsourcing sector.