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Philippine President Ferdinand Marcos Jr’s landmark decision to ban foreign-facing online gambling operations (POGOs) has attracted near-unanimous political support, but leaves questions hanging on enforcement and the fate of the domestic online industry.
The shock announcement of a POGO ban at the end of Marcos’ State of the Nation Address on Monday (July 22) continued to ricochet through the Philippine political establishment on Tuesday, with praise from delighted political friends and foes offset slightly by job loss concerns and cascading sector impacts.
Marcos told Congress in his speech’s climax: “Effective today, all POGOs are banned”, bringing much of the chamber to its feet in a noisy standing ovation accompanied by chants of the President’s informal initials, “BBM” — Bongbong Marcos.
The President said he had had enough of the criminality of the POGO sector and refused to distinguish between regulated and illegal operations; therefore, ordering gambling regulator PAGCOR to “wind down and cease the operations of POGOs by the end of the year”.
In the end, a combination of raids on POGO-linked crime precincts in and outside Manila, political hostility towards the sector and bilateral difficulties with China had placed the sector in peril.
In particular, the debacle involving Alice Guo, an ethnic Chinese mayor and de facto POGO investor, now accused by senators of espionage and faking her Philippine nationality, overwhelmed the government with mounting law enforcement nightmares and endless bad press.
PAGCOR chairman and CEO Alejandro Tengco was briefly shown on television, laughing and clapping in his seat in the chamber as his boss delivered the announcement.
After years of intensifying hostility to POGO operations, Tengco had become the last and most passionate high-level advocate of POGO regulation, arguing frequently and publicly that it was better to regulate than proscribe, for the latter would only drive problematic businesses underground and out of reach.
Prohibition will now shift the resources burden from regulators to police, the Presidential Anti-Organized Crime Commission and other enforcement agencies, which are grappling with hundreds of illegal foreign-facing online gambling operations of all sizes around the country.
Marcos’ decision therefore comes as a blow to Tengco and his PAGCOR colleagues, who must now dismantle the regulated sector they spent difficult years building and repairing, and instead find alternative revenue sources for PAGCOR’s substantial tax and welfare obligations.
When asked by Vixio GamblingCompliance on Tuesday if the ban will encourage the regulator to explore expansion of the smaller domestic online gambling segment, PAGCOR board member Gilbert Remulla said: “PAGCOR’s leadership is exploring all avenues to make up for the revenue shortfall that will result from the eventual ban of POGOs.”
Jade Entertainment & Gaming Technologies CEO Joe Pisano, whose company holds a licence for domestic online operations, including a sportsbook, told Vixio that eradicating the POGO segment will be a highly complex task and will require the “support of industry”.
This involves targeting “enablers of illegal activities, which include payment gateways, platform providers, ISPs, social media and electronic and print media”, he said.
Pisano said the domestic online gambling segment might have an opportunity to fill some of the market vacuum left by POGOs if the government is supportive.
The domestic industry has been “set up with the correct set of regulations, they have know-your-customer [processes], anti-money laundering [protocols], geo-blocking, proper monitoring”.
Domestic online gambling licences “are an extension of land-based licences, and if called upon they could step up and service offshore customers from countries where gaming is legal and geo-block countries where gaming is illegal, such as China”, he said.
It remains unclear if Marcos’ announcement applies to legacy POGO-style operations in Cagayan Province, whose one-time, laissez-faire regulatory structure under the control of a private regulator spawned the foreign-facing online industry before PAGCOR took control of the bulk of regulation.
Marcos did not mention Cagayan in his address, and the fate of the Cagayan Economic Zone Authority’s online gambling interests will now depend on the fine print of Marcos’ as-yet unissued orders.
Meanwhile, Michael Ricafort, chief economist at RCBC bank, is predicting initial negative impacts from the POGO ban, although not without balancing elements.
“Global investors patronise countries that comply with ESG [environmental, social, governance] standards … compliance on ESG signals good business for the country,” Ricafort told Malaya Business Insight.
“I do not have precise estimates but compliance on ESG standards would encourage more foreign and local investments,” he said.
However, Ricafort added: “Supplies or any other businesses/industries in the supply chain of POGOs could be adversely affected, such as rental/lease income, employment agencies, and other related/allied products and services needed by POGOs from the locals.
“Transport and logistics servicing POGOs could also be adversely affected in terms of reduced/lost business,” he said.
The wider political problem for the government is the loss of around 50,000 jobs for Filipinos in the sector, an issue Marcos anticipated in his address when ordering the Department of Labor and Employment to help retrain and employ those affected.
Overall, however, the response to Marcos’ bombshell was strongly positive.
Finance secretary Ralph Recto, long a critic of POGO tax avoidance, was delighted that Marcos had followed his advice.
“In truth, we incur more losses from POGOs than what we earn from them, since they do pay taxes, but we spend a lot, for example, [on policing] because of the crimes,” Recto told Philippine television after the address, in comments translated by Rappler.
“So when you sum it all up in my recommendation to the President to ban POGOs, we also showed the cost-benefit analysis of it. In my opinion, the President’s decision is correct.”
Opposition senator Risa Hontiveros, a leading opponent of POGOs whose Senate committee has uncovered industry criminal networks, praised Marcos.
“As the chairperson of the Senate Committee on Women who led the investigation into crimes linked to POGOs, I cannot express my joy and relief at the banning of POGOs in our nation,” she wrote on Facebook on Monday.
“POGOs have brought innumerable and unspeakable social ills into the country. I commend the President for his resolute pronouncement.
“Our Senate hearings will continue to demand accountability. We will also continue to ensure that we strengthen policies that would prevent industries like POGOs from ever emerging again.
“And to all POGOs — legal or illegal — goodbye.”
Other senators such as Joel Villanueva remain committed to shutting down online gambling in its entirety and have bills in place to this end, although it is unclear if the POGO ban will deflate or fuel momentum against the domestic sector.
"We agree with the president's statement that ‘evil triumphs when good men do nothing’,” Villanueva said, citing Marcos’ reference to John Stuart Mill.
“Thus, we continue to call for the prohibition not only of POGOs but all forms of online gambling in the country.”
