Philippine Offshore Gaming Operators (POGOs)
Philippine Offshore Gaming Operators (POGOs) were companies based in the Philippines that offered online gambling services to customers outside the country. Many of these operations catered to the Chinese market. They were formally known as Internet Gaming Licensees from October 2023 onwards.
POGOs began operating in the Philippines in 2003 and were regulated by the government starting in 2016. The industry grew rapidly and generated significant revenue for the country. However, due to concerns about crime, corruption, and social issues, President Ferdinand Marcos Jr. announced a complete ban on POGO operations in July 2024.
Background
Philippine Offshore Gaming Operators (POGOs) are online gambling businesses based in the Philippines that serve international customers. To operate legally, they require a license from the Philippine Amusement and Gaming Corporation (PAGCOR). POGOs are prohibited from offering services to Filipino citizens, both domestic and abroad, as well as to individuals in jurisdictions where online gambling is illegal. Non-compliance can result in license revocation.
PAGCOR began issuing POGO licenses in 2016 to boost its revenue following the termination of PhilWeb’s license. POGO operations fall into three categories: live streaming with online dealers (Category 1) and back-office support services (Categories 2 and 3). While Categories 2 and 3 align with the business process outsourcing (BPO) sector, the IT and Business Process Association of the Philippines (IBPAP) excludes POGOs from its definition of BPOs. IBPAP argues that POGOs’ regulatory oversight by PAGCOR distinguishes them from traditional BPOs, which are registered with either the Philippine Economic Zone Authority or the Board of Investments.
Prevalence of POGO
POGO firms, primarily Chinese-owned and based in Metro Manila, emerged in 2003 but experienced rapid growth following Rodrigo Duterte’s presidency in 2016. At its peak in 2019, PAGCOR licensed nearly 300 POGO operators, a number that dwindled to around 75 by the end of 2023 due to tightened regulations. Since August 2019, no new POGO licenses have been issued.
The industry has significantly impacted the real estate market. POGOs are estimated to have occupied at least 800,000 square meters of office space, with most catering to Chinese customers, although some also serve Korean and Vietnamese markets. In 2019, POGOs surpassed business process outsourcing as the largest office space leaser, accounting for 34% of total demand and 12% of Metro Manila’s office stock. Annual rents for POGO-related commercial and residential spaces reached $219 million and $680 million, respectively.
The POGO industry’s contraction has impacted the real estate sector. Between 2020 and the third quarter of 2022, POGOs vacated approximately 630,000 square meters of office space. As of October 2022, they still occupied 1 million square meters, and their complete withdrawal is projected to result in annual rental losses of PHP 18.9 billion.
Impact of POGO to the Economy
Philippine Offshore Gaming Operators (POGOs) have been a subject of increasing scrutiny in the Philippines. Since 2015, these online gambling operations have been regulated by the Philippine Amusement and Gaming Corporation (PAGCOR), which imposes a 2% license fee on their gross gaming revenue. While POGOs contributed less than 5-6% to PAGCOR’s overall income, they generated significant tax revenue for the government.
In addition to license fees, the Bureau of Internal Revenue (BIR) began collecting a 5% franchise tax from local POGO providers and income taxes from their employees in 2017. Tax collection intensified with the passage of Republic Act No. 11590 in 2021. Between 2017 and 2022, combined tax collections from POGOs reached ₱53.8 billion.
At its peak in 2019, the POGO industry contributed ₱104.5 billion to the Philippine economy, representing 0.67% of the gross domestic product. However, the industry faced challenges, particularly during the COVID-19 pandemic, leading to a decline in revenue and the closure of some operators.
Recent government data suggests a complex economic impact of POGOs. While the industry generated an estimated ₱166.49 billion in total economic benefits, it also incurred a significant economic cost of ₱265.74 billion, primarily due to negative reputational risks and its impact on foreign direct investments.
- Financial impact: Revenue generation, tax contributions, economic benefits, and costs.
- Regulatory environment: Government policies, licensing, and taxation.
- Social and economic consequences: Impact on employment, crime, and reputation.
- Industry trends: Growth, decline, and future outlook.
POGO and the Rise of Crime
The POGO industry in the Philippines has been linked to a significant increase in crime, particularly those involving Chinese nationals. Several factors contribute to this correlation:
1. Large Amounts of Cash:
- Attractive target: POGO operations handle substantial amounts of cash due to the nature of the gambling industry. This makes them highly attractive targets for criminal syndicates.
- Extortion and kidnapping: Criminals often target POGO employees or executives for kidnapping or extortion, demanding large sums of money for their release or to avoid harm to the business.
2. Vulnerable Workforce:
- Exploitation: POGOs have been known to employ a significant number of foreign workers, many of whom are Chinese nationals. These workers are often in a vulnerable position, susceptible to exploitation by criminal elements.
- Human trafficking: Some women are trafficked into the country to work in POGO-related businesses, such as entertainment or hospitality, where they are subjected to forced labor and sexual exploitation.
3. Weak Regulatory Framework:
- Criminal infiltration: The rapid growth of the POGO industry has outpaced the government’s ability to effectively regulate it. This has created opportunities for criminal organizations to infiltrate the sector.
- Corruption: Allegations of corruption among government officials involved in POGO regulation have further weakened the regulatory framework, allowing criminal activities to thrive.
4. Cultural and Language Barriers:
- Difficulty in reporting crimes: Many Chinese workers in the POGO industry face language and cultural barriers, making it difficult for them to report crimes to local authorities.
- Fear of retaliation: Victims may be afraid to report crimes due to fear of retaliation from criminal groups or their employers.
These factors have created a conducive environment for criminal activities to flourish within the POGO industry, leading to a surge in kidnapping, extortion, murder, and human trafficking cases involving Chinese nationals.
Impact on Employment
The POGO industry has experienced significant fluctuations in employment, particularly in terms of the nationality of workers. At its peak in 2019, an estimated 470,000 people were employed in the sector, with a substantial portion being foreign nationals, primarily Chinese. However, government data on the exact number of Chinese workers varied widely.
The COVID-19 pandemic led to a sharp decline in POGO employment. Subsequently, there has been a gradual increase in the number of Filipino workers in the industry, replacing some foreign workers. While the overall number of employees has remained relatively low compared to pre-pandemic levels, the composition of the workforce has shifted towards more Filipino representation.
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