Senate casts doubt on rosy POGO revenue forecast

THE Philippine Amusement and Gaming Corp. (PAGCOR) issued a forecast for revenue generated by the Philippine Offshore Gaming Operator (POGO) industry of P10.23 billion by 2027, which was called overly optimistic at a Senate hearing.

Senator Sherwin T. Gatchalian, who chairs the Senate Ways and Means Committee, said at a hearing on Wednesday that the forecast was “ambitious” after the industry peaked at P8 billion in revenue in 2019.

The forecast was issued in the context of debate on whether the industry should be phased out.

Renfred Tan, PAGCOR senior manager for the Offshore Gaming and Licensing department, replied: “The gradual increase in the income is based on the increase of the number of licensees.”

Mr. Gatchalian also cited the forecast’s sensitivity to events like a crackdown on Chinese gambling.

Jackie Lou D. Rivera, PAGCOR acting senior manager for Compliance Monitoring and Enforcement, said the POGO industry took in revenue from 24 countries in 2019, and downplayed fears that it is too dependent on the Chinese market.

Revenue in renminbi accounted for 47% of the industry’s total, Mr. Gatchalian said, asking whether this strongly indicates a heavy weighting towards Chinese customers.

“From a business standpoint, you should know where your customers are coming from,” Mr. Gatchalian said, noting that if China decided to further restrict gambling, then revenue will be impacted. “There are policy considerations from that country of origin that we need to consider,” he added.

“You plan to grow (revenue), but the growth… also has risk because our source of revenue can change its policy,” he said. “We are getting revenue from a country that declared POGO illegal. That’s a risk and we need to (consider) that risk.”

Former Finance Secretary Margarito B. Teves, speaking at the hearing, said that continued POGO operations may put the Philippines’ bilateral relations with China at risk, noting as well the possible impact on foreign direct investment.

“Since governments have some influence on their investors, we have to relay to these governments and also get a feel (for the government position),” he said. “We’re saying that since most POGO operators come from China, it would be net advantageous for us to consider (the Chinese government’s) position and attitude towards the POGOs.”

Gambling is illegal in China, with Beijing calling cross-border gaming an attempt to circumvent its laws.

The Anti-Money Laundering Council, Mr. Teves said, estimated that of the P54 billion worth of POGO transactions between 2017 and 2019, 26% were deemed suspicious transactions, “which puts the credit rating of the Philippines at risk, something we need to be careful about given the country’s very tight fiscal position.”

“Opposition would be in favor of stopping POGO operations. The social costs of continued operation of POGOs do not only outweigh its current economic benefits, it’s social costs will bring further economic costs,” he added.

Valery Joy A. Brion, finance assistant secretary for Fiscal Policy and Monitoring, said direct economic costs from POGO operations include additional funding for law enforcement and immigration.

A clearly directed and implemented phase out of POGOs may resolve these issues, Mr. Teves said.

“The signal will have to be very clear that we’re going to stop POGO operations but we’re going to have a phase out mechanism because of its impact on our economy,” he said, noting urgent economic concerns including inflation and job loss. “But the signal has to be continuously conveyed to both investors as well as governments.”

Mr. Tan said “social costs or social ills stem from illegal operations and not from those that are licensed by PAGCOR.”

“In the short term, that would be very helpful for the POGO industry to differentiate itself, to show that it is a business that does not come with the social costs that is associated with it,” he added.

For the medium term, the agency seeks to encourage the establishment of more POGO hubs with the inclusion of government regulatory offices.

“In the long term, we see POGO as a contributor to the government of important revenue without the social costs that are associated with it, and we hope there will be reduced or zero illegal operations,” Mr. Tan said.

“As of now, we have 33 remaining licensees. This was reduced during the pandemic, most of the licensees closed shop… so now our long-term goal is to reach that number again so that we can provide the same revenue to the government, if not more,” he added. — Alyssa Nicole O. Tan