Despite strong revenue and growth, all POGOs will be gone in the Philippines by year's end

For the Phillipines is it better to just shut down all online gambling or deal with the issues and set up practices to cut down on crime and force out the bad actors? Current leader Bongbong Marcos has decided to shutter the entire online gambling industry, despite huge revenue for the country.

Gambling has been going on for centuries

Gambling in the Philippines has been around for centuries. Some text suggests gambling has been occurring regularly in the Philippines since the 16th century whenit was a vice to attract interest to the Philippines from Chinese businessmen, and though it was never specifically legal, it was never really discouraged either. Over the years, Philippine locals also started to wager on casino games, cockfighting and sports, often in amounts they could not afford, so some governments tried to curtail it for locals, but it was a futile effort. Consequently, in the mid 1970s the government decided that since they could beat it, they should at least profit from it and made gambling legal under a monopoly system which they could control.

PAGCOR created

By way of a presidential decree, Ferdinand Marcos created the Philippine Entertainment and Gambling Corporation (PAGCOR), whose task was to regulate all gambling in the country and ensure that companies involved in the activity paid taxes and fees to raise money for use on social issues like healthcare, education, social assistance for the poor and infrastructure. At the time PAGCOR was created in 1977, there were 10 small casinos operating in the country, mostly illegal operations that were involved in crime and exploitation, so PAGCOR made them legal and increased the number of casinos in an effort to stamp out the crime. PAGCOR itself was also operating some casinos, which upset some in the industry since they were acting as both an operator and a regulator.

PAGCOR was also tasked with expanding casinos to help increase tourism to the Philippines and was instrumental in the licensing of not only casinos and card rooms, but also Resort casinos. That started with Resorts World, owned by Genting which was a major integrated resort in Newport City that had 1,600 rooms, an entertainment complex and is equivalent to some of the nicest hotels in Las Vegas. PAGCOR later also helped develop Entertainment City in the heart of Manila, which was deemed a Las Vegas type city spanning three miles that would attract gamblers worldwide. Currently three integrated resort casinos are operating in Entertainment City and two are under construction. One of those resorts is Solaire Resort and Casino operated by PAGCOR itself, although it is owned privately by Bloomberry Resorts, a Philippines holding company. In total there are 46 casinos or cardrooms in operation in the country which contributes hundreds of millions of dollars to the country’s coffers.

Rise of online gambling and POGOs

Along with legal physical casinos, president Rodrigo Duterte decided that the Philippines could profit from online gambling catered to non-Philippine residents. So, in 2016, Duterte issued a decree to PAGCOR to start licensing these companies, giving them a clear set of guidelines they must follow, including rules related to underage gambling, problem gambling and of course paying a portion of winnings to the Philippine government. They were also required to register with PAGCOR. Duterte believed these operations called POGOs would not only help provide revenue to the country but would also employ thousands of Filipinos at a time when unemployment was high. That didn’t happen. POGOs indeed hired some locals, but the vast majority of employees at the POGOs were Chinese nationals who could speak the language and knew how to target Chinese citizens. Less than 20% of the POGO workforce were actually from the Philippines.

But the lack of Filipino workers was the least of the issues that POGOs created for Duterte. POGOs also upset governments they were targeting, specifically China. Gambling in China is illegal, except for Macau and Hong Kong, which are deemed special administrative regions. So, in 2019 the Chinese government met with Duterte and expressed their displeasure with these operations and asked Duterte to rein them in. China was also wielding their strength to shut down gambling in countries catering to China, including Cambodia. Duterte refused, saying they were essential to the national economy. But later that year PAGCOR did shut down what they said were 200 illegal POGOs, which they said were unlicensed fly-by-night operations and thousands of Chinese nationals were deported back to China. That left approximately 60 PAGCOR licensed POGOs.

To make matters worse for the Duterte government, reports showed that POGOs were also linked to organized crime. These included, but were not limited to, human trafficking and exploitation, kidnapping - some with ransom demands, money laundering, tax evasion, scam operations, prostitution, bribery, robbery and in at least one case, murder. To make matters worse there were suggestions that some Philippine police were working with the POGOs providing the operators protection in return for money.

The biggest death blow to POGOs, however, occurred in June 2022 when Ferdinand Marcos Jr., also known as Bongbong, took over the presidency from Duterte. It was clear that Marcos was not as enthusiastic about gambling as Duterte and he was also less willing to challenge China. So, in 2023 Marcos called for stricter regulation and oversight by PAGCOR, including providing better welfare for POGO workers, strengthening tax collection rules and also phasing out remaining POGOS that were deemed to be tied to organized crime. This led some POGOS to leave voluntarily and the number of licensed POGOs that are currently listed on PAGCORs website is just under 40. But that was just the start.

In July of 2024 Marcos indicated in a state of the nation address that due to the extent of organized crime linked to POGOs, combined with national security threats to the Philippines that POGO employees created, (since he said some workers at POGOs are believed to be spying for China threatening Philippine sovereignty) required him to look at taking more drastic measures. And just last week Marcos followed up on his July statements and ordered all POGOs gone by December 31st or they would face prosecution.

The question is whether the Philippine government is making the right decision or are simply pandering to China.

PAGCOR estimated that in 2017 POGOs contributed about $47 million USD (in today’s exchange rate) to the government, about $192 million by 2018 and almost $380 million in 2019. Moreover, in 2020 POGOs generated about $145 million USD despite rules forcing workers to stay home and social distance for most of the year, and in 2021 they contributed almost $500 million despite the fact some restrictions were still in place and about 200 illegal POGOs had left. The number dropped to about $120 million in 2022 due to Marcos’ election and in 2023 it was expected to be about the same or a bit less, although official figures were never released.

Needless to say, closing these POGOs comes at a tremendous price to the Philippines coffers, although the revenues from gambling as a whole are up tremendously. Reports just released show that overall gambling revenue is up by over 37% spurred on by licensed physical casinos, electronic games and bingo. Nowhere in the report is POGO revenue mentioned, so Marcos likely feels that the Philippines can still be very successful without the revenue from POGOs and instead rely on tourism revenue, which includes expanding resort casinos, beginning with the two forementioned ones at Entertainment City.

I spoke to a friend who worked as a director for a company that was affiliated with one of the POGOs and he said that the Philippines is making a mistake because they are effectively throwing the baby out with the bathwater.

"The Philippines had a lot of shady offshore operators, but for every bad offshore operator there were 20 or more good ones. The good operators are licensed and recognized by PAGCOR, so why they are being treated the same as the shady ones is confusing. It’s illogical to give up all this revenue because of a few bad outfits. I know the real reason Marcos is forcing the operators to leave is because of pressure from China and he doesn’t want to get on Xi’s bad side, but Chinese citizens are going to gamble anyways and if they can’t bet with offshore operators in the Philippines, they’ll bet with offshore operators located elsewhere. The difference is that many of the other offshore locations accepting business from Chinese customers are shady and offer no real protections for gamblers, while the Philippines had very strict regulations in place to protect the bettors, the operators and the government. It’s just a silly decision. I’d say almost every adult Chinese person gambles whether they go to Macau, play Mahjongg, Chinese Poker or other gambling games with friends, and if they are rich enough, they may travel to Vegas or Macau. But gambling is in their blood and, like most gamblers anywhere, they will find a way to bet. It's just a bad decision and sadly while the rest of the world, like the United States, Brazil and various European countries have realized they can’t stop online gambling so they might as well profit from it, the Philippines has decided to go backwards. It’s a jobs killer and it’s a blow to the country’s best interests."

So, by the end of the year all POGOs will be gone in the Philippines. It’s just accepted with gambling comes the good and the bad for jurisdictions. While gambling companies raise a lot of money for social projects, they also tend to attract a criminal element and unfortunately some operators are not on the up-and-up. But when that happens is it better to just shut the whole thing down or do you deal with the issues and set up practices that help cut down on crime and force out the bad actors? Gambling in the Philippines will still continue as more resort casinos are being constructed, so the ban is actually only on online and offshore gambling and not on gambling itself. It’s the same arguments we’ve been hearing for decades in North America from the likes of John Kyl, Robert Goodlatte and Sheldon Adelson that physical casinos are good but online gambling is bad because it can’t be controlled. It was a nonsense argument then in the U.S. and it’s just as irrelevant now in the Philippines.

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