Fate of Chinese gambling companies in Philippines hangs in balance

A necessary evil?

Despite the posturing of economists in government that Filipinos will “reach upper middle-income status by next year” and that the Philippines is on the way to becoming “a moderately prosperous country by 2040”, the facts revealed the exact opposite when one considers the plight of ordinary Filipinos. Social inequalities continue to widen while the poor majority continue to struggle for their day-to-day survival.

According to the independent think tank IBON Foundation, 18.8 million Filipino families, or seven out of 10, do not even have any savings as of the second quarter of the current year. By the third quarter, the number increased to 19.4 million Filipino families, or 72.5 percent of all households.

Around 14.5 million, or six out of 10, have family incomes of at most P22,000 (US$378) monthly as of 2018, but this income has drastically decreased in the last two years because of the COVID-19 pandemic lockdowns. Unemployment is pegged at 2.6 million persons, and underemployment at 5.9 million.

According to IBON, the country’s job situation revealed most of the jobs created are “poor quality” and generally cannot empowered families to go beyond surviving. Given this situation, the debate of whether or not gambling, one of the most prosperous industries in the Philippines, should be closed down is no longer in black and white.

Calls to close down gambling industry

Currently, public officials are calling for a ban against Philippine Offshore Gaming Operations (POGOs) in the country while workers in the said industry are appealing to the government to let POGOs be. Some are calling for a “middle ground” – stricter regulation and the weeding out of illegal POGOs.

POGOs refer to businesses that offer sports betting and online gaming services to foreign nationals, particularly to the Chinese who comprise a majority of the clients of POGOs. Live dealers facilitate the games, and the winners rake in money.

The Philippine Amusement and Gaming Corporation (PAGCOR), a government entity, prohibits Filipinos who live abroad and foreigners residing in the Philippines from engaging in online gambling activities to supposedly protect minors and Filipinos in general from exploitation. 

PAGCOR, however, is the one that gives licenses to POGOs which began operations in the Philippines during the term of former president Rodrigo Duterte who was a big ally of China. While online gambling is illegal in China, many POGOs in the Philippines are run by Chinese business entities.

According to reports, there were 56 PAGCOR-licensed POGOs as of June 9, 2019. Unlicensed or illegal POGOs, however, were said to number over 100. Calls for the closure of POGOs are not new. Since they first entered the country, advocacy groups have been campaigning against them, saying they are devoted to gambling, and promoted many anti-social activities.

Recently, however, the calls have gained greater traction in the wake of reports that many Chinese POGO employees are involved in kidnapping, murder, and other criminal activities. According to the Business and Human Rights Resource Centre in January 2020, a series of cases of abductions involving and perpetrated by mainland Chinese have been traced to POGOs. From 2017 to December 2019, 67 gambling-related kidnappings were reported with nearly all the victims being Chinese.

The resource center said the victims were scammed and were enticed to come to the Philippines and gamble in casinos, or they were employees at the POGOs. They were reportedly given loans so they could gamble, and the lender took a percentage from the winnings. If the victims lost, they were abducted and held for ransom which their relatives in China were made to pay. Chinese employees who wanted to quit were also targets of kidnapping.

“Philippine authorities face three big issues when it comes to dealing with related crimes: dozens if not hundreds of underground POGOs that sprout overnight and operate without permits, generating zero revenue for the government; a rise in undocumented workers from China; and a weak, uncoordinated response from government agencies,” the resource center said.

San Chey, executive director of the Affiliated Network for Social Accountability, said online gambling comes with many social risk factors such as increased money laundering, human trafficking, and other illicit activities.

Impact on real estate and local employment 

On the other side of the fence is the Philippine Chamber of Commerce and Industry (PCCI) which worries the real estate sector will take severe loss if POGOs are closed, because many buildings built in the last five years took on POGOs as renters. Closing down the POGOs will have a ripple effect on these buildings, services supplied, and employees who are engaged in hospitality and housekeeping work.

Speaking for workers in the POGO industry, a group argued that 23,000 Filipinos will be left unemployed if the government bans POGOs. The Association of Service Providers and POGOs (ASPAP) said the social costs of allowing the continued operations of POGOs are outweighed by the benefits. The group said a clampdown will have disastrous economic effects, with job losses being only one of them.

The group’s spokesperson Michael Danganan in a press conference said “decent and well-paying jobs” are on the line. The group is made up of 16 PAGCOR-licensed POGOs and 68 service providers. Members numbered a total of 23,118 Filipinos, with 11,776 directly hired, and 11,342 indirectly hired. 17,130 foreign nationals are also members of ASPAP.

Danganan also shared that ASPAP has 129 offices for customer relations service, IT support, live studio streaming, and functions. Altogether, these offices occupied a massive 407,841 square meters and are located mostly in key cities Paranaque, Makati, Cavite, Pasay, Pampanga, Manila, and Mandaluyong.

Based on ASPAP’s data, about 31.4 percent of their Filipino workers served as team leaders or supervisors, administrative assistants, sport-book handlers, kitchen staff, security officers, finance assistants, accounting assistants, and 60 other jobs. Sixteen percent of those employed worked as data entry clerks, 10.5 percent as customer service representatives, 10 percent as housekeepers, and the rest function as general office staff, company drivers, payment officers, maintenance staff, dealers or presenters, data processors, and security guards.

David Leechiu, Leechiu Property Consultants, said the abrupt exit of POGOs will cause “serious economic damage”. While the government admitted that 250,000 Filipinos will be affected, Leechiu said 567,000 jobs are at risk should POGOs close as the government figure referred to direct employment only.

In a Senate hearing on POGOs, Leechiu said in the aftermath of the news that the Ferdinand Marcos government is going after POGOs, the rent in some key cities such as Pasay and Paranaque in the Philippines’ capital region has gone down. From P1,700 per square meter, rent has fallen to P700. He said government collections for value-added taxes (VAT) will also decrease.

Case in point, more condos and dormitories were built in Pasay and Parañaque to house Chinese POGO workers. Mainland Chinese businesses caused the demand for residential, commercial, and hotel spaces to spike as they sought housing for their employees.

The real estate sector will reportedly lose at least P47.5 billion, or P18.9 billion in annual office rental revenues, and P28.6 billion in annual housing rental. The PAGCOR, in the meantime, also stands to lose P5.25 billion in annual revenue in regulatory fees. The Bureau of Internal Revenue (BIR) on the other hand, will have to say goodbye to P5.8 billion in annual taxes from companies, as well as P54.3 billion to P57.1 billion in income taxes from foreign FTEs or full-time employees.

Leechiu said there will also be losses of P11.4 billion in annual expenditure on commissary meals, P52.5 billion in fit-out costs, and P952 million in daily spending. He said shutting down POGOs will also affect local employment as about 347,000 Filipino jobs relied on the sector.

As for employment, way back in March 2020, PAGCOR admitted only one-fourth of POGO workers were Filipinos. By its reckoning, 30,521 Filipinos were employed under the legal POGO systems in 2020 and at least 69,000 were Chinese nationals hired for their language skills.

Special treatment for Chinese workers

The most progressive labor center in the country, however, is demanding that the Marcos government stop perpetuating the lies about POGOs that were first perpetuated by its processor.

The Kilusang Mayo Uno (KMU), May First Movement, said the government is only protecting the interests of China when it defends POGOs. Previously, the Duterte government insisted that POGOs were part of the Business Process Outsourcing (BPO) industry and this was why they were allowed to operate even during the height of the COVID-19 pandemic.

The group’s chairperson Elmer Labog said POGOs mostly catered to Chinese gamblers, and continued to operate even during COVID. He also questioned how much economic benefit POGOs provided as the Bureau of Internal Revenue (BIR) said almost all of the Chinese-run POGOs were behind in their income and franchise tax payments, amounting to P50 billion pesos as of May 2020.

Labog also took issue with the Chinese workers who were working illegally as well as the unpaid P72 billion in income taxes that these workers did not pay by end of 2019. His views are not unfounded. Workers continued to suffer relentless exploitation by their companies but they were forced to tolerate the situation to remain employed. 

Dismal numbers

Out of the 47.5 million employed as of July 2022 from July 2020, over half (54.7 percent) of the jobs created in that period were part-time. Those working less than 40 hours increased by 2.7 million from 13.4 million to 16.1 million. 

By class of worker, the number of Filipinos working under informal or irregular arrangements has also increased. From January 2020 to July 2022, the number of self-employed grew by a huge 1.8 million from 11.1 million to almost 13 million, unpaid family workers by 1.1 million from 2.6 million to 3.7 million and employers in own family-operated farms or businesses by 269,000 from 1 million to 1.3 million.

IBON estimated 20.1 million or 42.4 percent of jobs as of July 2022 were outright informal work made up of domestic help, those employed in small family farms or businesses, and self-employed and unpaid family workers. This was an increase of 3.4 million since January 2020 and did not even cover informal workers in private establishments.

The Philippines has the highest unemployment rate (7.4 percent in Q4 2021) compared to Indonesia (6.5 percent in Q3 2021), Malaysia (4.3 percent in Q4 2021), Vietnam (3.6 percent in Q4 2021), Thailand (2.3 percent in Q3 2021), and Singapore (two percent in Q4 2021).

The Philippines also has the highest inflation rate of 3.9 percent in 2021, compared to Malaysia’s 2.5 percent, Singapore’s 2.3 percent, and Indonesia’s 1.6 percent. It also has the biggest trade deficit at 11 percent of the Gross Domestic Product or GDP in 2021, compared to Thailand (0.7 percent surplus), Vietnam (1.4 percent surplus), Indonesia (three percent surplus), Singapore (12.8 percent surplus), and Malaysia (16.3 percent surplus).

Finally, the real value of wages has continued to decline in the last six years, falling by 8.2 percent, the lowest in 26 years.

These dismal statistics were inevitably connected to the lack of stable jobs with social security, health benefits, and a living wage. Given this overall poor state of the economy, the employment and revenues the POGOs provided cannot be easily overlooked. The Department of Finance stated that on average, the POGO sector accounted for 0.03 percent of the GDP from 2021 until August 2022, equivalent to P4.20 billion in monetary terms.

There were also other forms of gambling that contributed to government coffers. While operations of the online cockfighting industry were suspended due to public pressure only last May, prior to the closure, industry heads argued that revenue from this gambling sector boosted PAGCOR’s contributions to the government to P22.91 billion in 2021. This, they said, was higher than revenues in 2020.

Industry insiders said the cockfighting suspension not only caused revenue loss for the government, but it also helped further perpetuated illegal betting activities in the country. Licensed online cockfighting operators expected illegal betting to grow because the government refused to crack down on illegal betting operators.

A common argument was “If the government allows casinos to operate, as well as horseracing, why not online cockfighting? What makes it different from gambling in casinos? Gambling is gambling, but only certain forms are considered bad but others are ok?”  

The hypocrisy, it can be argued, was palpable. It also made one wonder if it was issues of public safety and security or even just moral standards that are prompting government calls for the closure of these gambling sectors. There were allegations many officials themselves from different branches of government were involved in gambling syndicates or were on their payroll 

Worried POGO workers

As expected, workers in the POGO companies were alarmed about losing their jobs and, given the sorry state of the economy, will fail to find employment elsewhere. Winnie Pascual has been working in the POGO industry since 2019. She was originally from Bicol and went to Manila to find work, and she did not know what POGOs were. On the advice of a relative, she applied to a POGO and was immediately accepted.

“I was so happy when I was told that I would be getting a salary that was twice what I was earning back in Bicol. I am very grateful to the POGO industry because we had work even during the pandemic. We received hazard pay, vitamins, free meals, shuttle services, and other benefits. I would never have landed a job like the one I have now. I’m praying hard that POGOs will be allowed to continue operating,” she said.

Single mother Chelly Subiera said she raised her teenage children on the salary she received working in a POGO company as a security guard. “I am not exactly young and at my age, it’s not easy to find work that pays enough or even just work. Without the POGOs, I will be jobless. It’s not like the government provides enough assistance to people like me who do not have the education or the skills to find other work. I support POGOs all the way,” she said.

Ruben Rodriguez worked as an internal security officer for a POGO and has been there for almost three years. His family relied mainly on his salary for all their basic needs including health access. 

“Some may have a different impression about the POGO industry but they should know that licensed POGOs help the economy. If it weren’t for POGOs, more Filipinos would have been jobless during the pandemic. The government should focus on the illegal operators of POGOs and not lump them together with the legal operators, so as not to destroy the good image that legal operators have,” he said. 

The typical POGO worker who directly worked for the POGO such as the online casino dealers and the customer service staff usually earned a basic salary of P20,000 as starting pay which can increase to P25,000 within six months after hiring. 

The requirements are pretty straightforward: one must have good English communication skills, be computer literate, and be willing to be deployed anywhere. Degrees are not always required, high school graduates can join, but some POGOs preferred degrees for higher positions. For examples, certain positions required applicants to have at least a college diploma and experience in business management, marketing, and cryptocurrency trading. 

The POGOs also usually offer free meals and accommodation as employees have to work six days a week, some for 12 hours a day.

A Meta Trader 5 team leader, in the meantime, earns at least P64,000 per month and is given allowances for transportation or for buying a car. Similar or even higher salaries and perks are also enjoyed by employees in computer and IT-based functions.

Noemi Quiramit felt very anxious about losing her job, even going so far as comparing the feeling as similar to that when losing a loved one.

“I don’t want the POGOs to close. I am still supporting my children and their education. The POGOs have been so good to us, looking after us employees during the pandemic and ensuring that we had steady salaries. They also do charity and welfare work for poor communities. I am proud of and happy about my work,” she said.

Encoder Jackielyn Adap has been working for a POGO for the last two years. She was allowed to choose her shift and she worked 12-hour daily shift inputting payouts to China mainland bettors. She has four straight days-off every month, and with her salary, she has been able to invest in an eatery with her husband.  

When she started out, her salary was P30,000 and she was provided with a room in a condominium, free laundry and shuttle services, as well as meals. With her salary, she sent her daughter and younger sibling to college. Her appeal is simple: “Please help us keep our jobs.”

Middle ground

Some groups are in favor of closing down POGOs, but only the illegal and unlicensed ones. The Federation of Filipino Chinese Chambers of Commerce and Industry (FFCCCII) said it is against illegal POGOs and the presence of Chinese employees who are in the country without valid government permits and visas. 

“All POGOs and their employees, whether Filipinos or foreigners, must follow the relevant laws and regulations, obtain the necessary permits, and pay the correct taxes and fees. Illegal POGOs must be closed and their illegal employees deported,” it said.

The FFCCII argued legal POGOs cannot be closed down because the industry brings many economic benefits. It went on to add, however, that crimes and illegal activities related to POGOs are increasing.

“These have come to adversely affect not only those involved in the industry and the Chinese or foreigners working therein but also many Filipinos,” and pointed to “reported incidents of abductions, forced labor, prostitution and homicide related to POGOs.”

The group said the government should find a middle ground on the issue of POGO closure.

“Declaring all POGOs as illegal and closing them may be a fast solution, but there may be other means to keep the economic gains POGOs bring.”   

Senator Sherwin Gatchalian said POGOs should be banned and other businesses and industries should be established to take over and replace the revenues and income losses that the government will incur if and when the POGOs are shut down.

Wilson Flores, executive of a group of Filipino-Chinese businessmen, was also for closing down POGOs, pointing out online gambling operations are illegal in neighboring countries like Cambodia, Singapore, and China itself.

Flores said: “It is disturbing that our past politicians since several administrations have cynically allowed POGOs here even though they seem to be obviously nefarious and immoral, and even though these are illegal in strong law and order countries like Singapore and China. 

“I think the POGOs have in recent years become a breeding ground for massive, systemic corruption, and I think they also attract many crooks and sinister crime syndicates all over Asia to come here. Why don’t we instead focus our efforts in attracting legitimate, ethical, smart foreign investors from industrialized Asian countries, especially their export-oriented factories and other businesses.” 

Workers lose in the end

As the Philippine economy continues to deteriorate, efforts to revive it are ineffective as the government relies on the remittances of Filipinos working overseas on the one hand, and activities of non-sustainable industries like gambling on the other hand.

The government prohibits Filipinos who live abroad and foreigners residing in the Philippines from engaging in online gambling activities to supposedly protect minors and Filipinos in general from exploitation. The government, however, also gives licenses to POGOs and all other gambling institutions because of their supposed contributions to the economy.

While gambling companies generated massive revenues, the country also lost billions from unregistered operators who did not pay taxes. With the gambling industry, especially those built with foreign companies, the likelihood of losing more than gaining is greater in the long run, when counting the social costs.

As the clamor against POGOs continues to grow, it becomes imperative for the government and labor agencies to ensure the workers who will be displaced will find jobs. It is also important to assess the government policies that allow the entry of foreign businesses and determine whether allowing them to operate in the country will bring real benefits or just temporary, superficial ones. The same goes for so many other aspects of Philippine governance wherein social welfare and service are not given priority to the detriment of millions of Filipinos and their families. 

The fact that so many are now relying on the POGO industry to keep afloat is proof of the government’s failure to create and provide sustainable jobs that provide salaries and benefits that the POGOs bring. In the end, it is not the real estate industry or the tax agencies that will be losing – it is the workers in the POGOs that will close down who will be suffering the most. 

Photo credit: Pexels/ Javon Swaby

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