POGO: Easy come, easy go

Last week, the Chinese embassy in Manila announced that passports of Chinese nationals working in the Philippine Online Gaming Operations (POGO) industry will be cancelled if they do not voluntarily return to the mainland before a designated deadline. Those with cancelled passports face immediate deportation and will be prohibited from leaving China for ten years. With punishment as severe as this, we can expect a mass exodus of online gaming workers and the eventual demise of the POGO industry.

The Chinese government frowns at off-shore gaming. Gambling is a crime in China and doing it through the internet is viewed by Beijing as a way of skirting the law. Online gaming is considered a serious telecommunications-related crime used to launder money out of the mainland, said the Chinese embassy. It has also spawned related criminal activities such as illegal recruitment and human trafficking.

Since POGO’s entry into our cities in 2017, acts of criminality have spiked to alarming levels, particularly in Makati and Pasay. According to Teresita Ang-See, the chair of the anti-crime watchdog, Movement for the Restoration of Peace and Order, “ the Philippines has become a haven for Chinese criminals and syndicates.” In fact, records show that 634 Chinese fugitives were confirmed operating in the Philippines through POGO companies. 

These syndicates are involved in all sorts of illegal activities including investment scams, prostitution, beatings, knifings, ambushes, grenade throwing, illegal immigration, bribery, money laundering, human trafficking, torture, kidnapping and murder.

The Duterte administration has turned a deaf ear on Beijing’s call to shut-down POGOs citing economy benefits, the main beneficiary of which is the real estate industry. In Metro Manila alone, as much as 1.15 million square meters of office space are leased by POGOs. This represents 10% of the total leasable inventory.

As for tax revenues, government collected P6.42 billion last year, a 170 percent increase from what was collected the year prior. While this amount may seem substantial, the Department of Finance affirms that it is only a fraction of what is due the government. POGOs are notorious for tax evasion and as a result, have pending tax liabilities with the Bureau of Internal Revenue to the tune of P27.3 billion.

For crimes and tax evasion alone, its obvious that the economic benefits of POGOs are not worth its social cost. It has grown to be a “monster” that threatens the very safety of our people while depriving the nation of its due taxes.

How did POGOs start and why has it thrived in the Philippines?

Contrary to what many believe, POGOs are not a recent phenomenon promulgated by the Duterte administration. It has been around for more than 15 years but operating under the radar at the Cagayan Economic Zone Authority. Neither is it true that POGO operators are solely run by Chinese for the Chinese market. Fact is, the POGO industry has branches that cater to the Malaysian, Korean, British and Swedish markets too, although to a lesser extent.

Online Gaming was invented by the Americans back in the late ’90s and introduced to China in 2002. It was readily embraced by the Chinese market given their fondness for gambling and absence of casinos wherein they could indulge in physical gaming. Eventually, online gaming was outlawed in China.

The virtual ecosystem in which online gaming operates allowed it to move to other countries whilst still catering to the Chinese market. The Philippines and Cambodia played hosts to the most number of online gaming operators but they also operate in Malaysia and the Isle of Man, among others. The Philippines is the world’s biggest online gaming operator today.

Under pressure from the Chinese government, the Cambodian government declared online gaming illegal in August last year. Almost overnight, the entire city of Sinhanoukville, a city built on online gaming, was shut down by the Cambodian government and abandoned by Chinese workers who fled under threat of passport cancellation. Today, the Philippines has the lion’s share of the business.

Why do Chinese online gaming operators like the Philippines? The primary reason is that government legalized POGOs under PAGCOR’s charter. PAGCOR is authorized to issue 60 master licenses for on-line gaming, wherein each license is entitled to have five sub-licensees. The second is that in the Philippines, POGOs are allowed to operate in the big cities unlike in other countries where they are relegated to far flung provinces. Being allowed to operate in the city makes it easier to attract young Chinese workers. The third is the high level of confidence among Chinese gamblers on gaming websites based in the Philippines. For some reason, Philippine based POGO operators are perceived to be more honest (does not cheat in the game) and more reliable (winnings are sure to be credited to the gambler’s account).

In addition, the lenient visa policy of the Philippine government toward the Chinese has made it easy for POGO workers to obtain a working visa. In the early days, Chinese visitors were allowed to stay for six months, enjoy multiple entry, after which, their tourist visas could be converted to a working visa. This policy was tightened late last year. Chinese visitors can now stay for only 30 days, enter once with their itinerary fully declared. Tourist visas are no longer convertible to working visas.

POGO operators basically do three things. The majority of the workforce manage the websites, all of which are coded in Mandarin. The second is live virtual dealing. Dealers are not required to speak, hence, good looking Filipinas are occasionally hired as card dealers operating virtual baccarat, crap, poker and blackjack tables. The third is online marketing wherein an army of young Chinese spend their days enticing Chinese citizens to visit their gambling websites. Apparently, the bulk of marketing is done through text messaging.

Revenues derived from POGO operations do not pass through the Philippine banking system as they are diverted to countries with less stringent banking and anti-money laundering regulations. Such countries include the British Virgin Islands, the Isle of Man, Jersey and Mauritius. This is why the multiplier effect of economic benefits are minimal to us.

President Duterte has resisted the call of Beijing to outlaw POGOs. China’s move to cancel the passports of POGO workers is its way of putting an end to POGO operations without embarrassing its good friend. With this development, we can assume that POGOs days are numbered and our cities will be safer as a result.