The Special Treatment of Chinese POGOs
Philippine offshore gaming operators, otherwise known as Chinese POGOs or just POGOs, have managed to cement a multi-billion-peso industry within a matter of years, but not without drawing the ire and condemnation of an increasingly critical public. While POGOs have contributed billions to the Philippine economy, the very nature of the industry has brought with it the vices that come with gambling. Chinese POGOs have now attached to itself murky associations to money laundering, human trafficking, and the black market—all of which are occurring on Philippine soil.
Even during a pandemic, the power of POGOs—and the money they bring—is enough to allow the government to give it a special permit to operate during enhanced community quarantine, despite the fact that many more Filipino industries remain grounded and closed. The government’s decision has caused more than a little fury among a public already irked by China, with lawmakers moving to illegalize POGOs altogether.
With the economy gutted and the government running out of funds, it’s no surprise that the revenue-generating machine that is Chinese POGOs has been given heed to operate during ECQ. It’s a Band-Aid solution for a struggling economy, but will it last?
And is the price tag worth it?
The Social Costs
POGOs, despite their bid to redefine itself under the business process outsourcing (BPO) industry, are regulated by the Philippine Amusement and Gaming Corporation (PAGCOR) as POGOs deal solely in the online gaming industry. “Gaming” being an operative word for “gambling.”
But gambling is illegal in China, which is why offshore platforms like those in the Philippines are needed so they can cater to the eager underground gambling market in China. This requires Chinese workers to fly to the Philippines where the POGO bases are held. While POGOs are owned by Filipinos, it is no secret that POGOs exist to service Chinese gamblers and Chinese workers.
It might be regulated, but the nature of POGOs was already murky from the start. Since its boom in the Philippines, it has become embroiled or associated with illegal activities, such as a WeChat market for Chinese officials to unlawfully purchase Filipino passports, certificates, driver’s licenses, and bank accounts. A senate hearing found that agencies were also selling blacklist delisting for workers to enter the country. There are also reports of POGO-related money laundering, tax violations, human trafficking, and kidnappings in public.
The police even broke up a POGO prostitution ring where Chinese POGO workers would pick their trafficked sex workers from a deplorable “menu.” The Bureau of Immigration has also been under fire for an alleged “pastillas” bribery modus that would give Chinese POGO workers VIP treatment at immigration in exchange for cash. The Department of Labor and Employment also discovered that there were 4,000 workers using the same TIN number.
These are just a few of the many reports on POGO-related criminality, but to some, the social costs of Chinese POGOs is negligible compared to the taxes they bring into the country—when they deign to pay them, that is.
All About the Money
There are a total of 60 registered POGOs in the country, not counting the unregistered POGOs operating illegally, of which there are estimated to be 100. One was busted just the other week in Makati when POGOs were allowed back to work.
The Bureau of Internal Revenue (BIR) collected P6.42 billion in taxes from POGOs in 2019 alone. Aside from franchise taxes and licensing fees, POGOs must also pay a two percent remittance fee sourced from annual revenues to PAGCOR. According to PAGCOR, POGOs paid them P5.7 billion in 2019, and in the first quarter of 2020, POGOs had already paid P1.8 billion. In the last four years, PAGCOR has reportedly collected P20.83 billion in POGO fees.
Now that’s a lot of money—but it’s not all of it. According to BIR, POGOs still owe the government around P50 billion in unpaid franchise, corporate, and other taxes. Despite being given the greenlight by the IATF, the BIR is demanding that POGOs pay all their unpaid dues before they are allowed to reopen.
POGOs are already expected to make a strong comeback when travel bans are lifted, said David Leechiu, president of Leechiu Property Consultants. According to Leechiu, the POGO sector has been taking a big bite out of real estate after it made the biggest demand for office space in 2019, beating out BPOs.
BPOs vs. POGOs
In an effort to justify the reopening of POGOs, pro-POGO officials have taken to lumping them in with BPOs, a sentiment that is not shared with BPOs themselves.
The IT & Business Process Association (IBPAP) released a statement saying that, without question, POGOs and BPOs don’t belong in the same category. Despite both having offshore natures, IBPAP President Rey Untal stressed that POGOs operate offshores because they are illegal in China. Meanwhile, BPOs, which brought in $26.3 billion revenues in 2019, operate to service countries abroad based on a number of specific skills.
“The IT-enabled jobs CPO companies create are much higher value, requiring a range of technical, domain, and soft skills,” said Untal.
“BPOs come to the Philippines to leverage off our human capital, i.e. our strong English and technical skills, customer service orientation, malasakit, and ability to adapt to foreign cultures. This in turn has directly benefitted millions of Filipinos by providing them with better employment opportunities throughout the years. In the case of POGOs, majority of their staffing comes from foreign labor brought into the country to support their operations.”
Essential or Illegal?
Given the shaky ground it stands on, the long-term fate of POGOs in the country is unclear, despite how badly the government needs its money. Gambling is hardly a reliable industry, and online gambling is even more fickle. And then there is the fact that online gambling is illegal in China, where most POGO customers reside. For now, POGOs operate on the whims of the Chinese government who simply haven’t yet rolled out aggressive measures to stop online gambling once and for all. Beijing has already its expressed its opposition to the industry, and Asia can wait until the day they act.
In the Philippines, despite the executive department’s call to let POGOs operate, the lawmakers in Congress are already moving to make the industry illegal. The Anti-POGO Act of 2020 was filed on May 5, just days after POGOs were allowed to reopen during ECQ.
“It is therefore declared by the State that ‘Philippine Offshore Gaming Operations’ conducted within the Philippines have increasingly become a social menace and a source of unimaginable corruption,” states the bill. “It has made a mockery of our anti-money laundering, immigration, and tax laws. It has been a source of untold criminal offences and heinous crimes related to the conduct of such operations. But most of ask, it has displaced hard-working Filipino people in favor of foreign workers.”
Yet, presidential spokesperson Harry Roque has said that the government needs Chinese POGOs revenues to fund the government’s response to COVID-19, a statement that was seconded by finance secretary Carlos Dominguez III.
Online gambling casinos are far from what one would deem essential—but money is, according to the decision-makers in this country. And until the Philippine economy can get back on its feet, the special treatment of POGOs will continue until the day comes that they are no longer needed.