Marcos orders total ban on POGOs

President Ferdinand R. Marcos, Jr. on Monday announced a total ban on all offshore gaming operations in the Philippines, saying these have been linked to illegal activities including money laundering and financial scams.

“Effective today, all POGOs are banned,” he said during his State of the Nation Address (SONA), referring to Philippine offshore gaming operators (POGOs).

He also ordered the Philippine Amusement and Gaming Corp. (PAGCOR) to wind down and end the operations of all POGO facilities by the end of 2024. He also ordered the Labor department to find new jobs for POGO workers that will be displaced.

“We hear the loud cry of the people against POGOs… The grave abuse and disrespect to our system of laws must stop,” Mr. Marcos said.

Mr. Marcos received a standing ovation after announcing the ban in his third SONA, which analysts said lacked details on the reform agenda and failed to discuss medium-term economic goals.

POGOs have been “disguising” as “legitimate entities” but their operations have ventured into illicit areas, he said.

He linked POGOs to financial scams, money laundering, prostitution, human trafficking, kidnapping, brutal torture, and “even murder.”

The reputational risk from POGOs, which mostly involve Chinese nationals and cater to Chinese markets, could cost the government P55.36 billion in forgone investments due to crimes linked to them, and P29.01 billion in forgone revenues in tourism, the Finance department earlier said.

Several business groups led by the Makati Business Club recently called for a total ban on POGOs, saying their investments accounted for just 0.2% of the Philippines’ gross domestic product (GDP) in 2023 and pointed out significant social costs.

Over 50% of kidnapping cases in 2022 were POGO-related, according to Philippine National Police (PNP) data.

Even Senator Ana Theresia Hontiveros-Baraquel, the highest elected official among opposition personalities, joined the crowd in applauding Mr. Marcos’ announcement.

“This was something people were expecting, thus the standing ovation,” Maria Ela L. Atienza, a political science professor at the University of the Philippines, said in a Viber message. “Hopefully, this can bolster his popularity and trust ratings.”

Mr. Marcos’ performance and trust ratings dropped in the latest Pulse Asia Research, Inc. poll, which was released as he completed his second year in office.

Ms. Atienza noted that POGOs are viewed by many in the government as “negligible” because they are no longer bringing in much revenues.

Foundation for Economic Freedom, Inc. President Calixto V. Chikiamco also expressed support for the phaseout of all POGOs.

“This will help reduce criminality and corruption and even improve our relations with China, which has called for dismantling of POGOs,” he said.

Finance Secretary Ralph G. Recto said the President’s decision to ban POGOs would not lead to major revenue losses for the government.

“When you look at the cost-benefit analysis done by the DoF (Department of Finance), we are spending more than we are earning from POGOs,” he told BusinessWorld after the SONA.

Mr. Marcos began his third SONA speech, which was longer than last year’s, with a discussion of government efforts to address rising prices, touting his executive order that further reduced tariff rates for rice and other key commodities until 2028, as well as the temporary price cap on rice in October.

The Philippine leader said his government had seized more than PHP 2.7 billion worth of smuggled agro-fishery products through modernized Customs procedures and heightened enforcement, “preventing them from entering the market and negatively influencing prices.”

Mr. Marcos said the government would soon enforce a pre-border technical verification and cross-border electronic invoicing of imports. “This will send a strong signal that we mean serious business.”

He also focused on his administration’s “aggressive” infrastructure development program, which he said is key to making the Philippines an upper middle-income economy.

“With the results that we have seen two years into this administration, we can claim that despite challenges, we are steadily progressing towards our targets in the medium term,” he said.

The Marcos administration targets a 6-7% gross domestic product (GDP) growth this year. Under the Philippine Development Plan (PDP) 2023-2028, GDP annual growth target was set at 6.5-8% until 2028.

By 2028, the country also aims for a gross national income (GNI) per capita of $6,044-$6,571, a 3% deficit-to-GDP ratio, and debt-to-GDP ratio of 48-53%.

“To sustain the country’s economic gains, we are promoting investment-led growth. We have set in motion policies and programs to create an environment conducive for businesses to thrive, like reforms in the capital markets, and implementation of ‘green lanes,’” Mr. Marcos said.

Fiscal analyst Zy-za Nadine M. Suzara said Mr. Marcos’ third SONA heavily focused on the government’s accomplishments in the implementation of existing programs that were mostly initiated during previous administrations.

“He did not detail a reform agenda on improving bureaucratic efficiency and sound fiscal management even if these two are part of his eight-point socioeconomic agenda,” she said in an e-mail.

“It appears that these are not among his governance priorities even if these are actually at the core of achieving the rest of his socioeconomic agenda.”

On industrial policy, Mr. Marcos said the IT and creative sectors are burgeoning industries, “knowing no territorial bounds, and holding great promise for our talented and hardworking people.”

Cielo D. Magno, a professor at the University of the Philippines School of Economics, praised Mr. Marcos for touching on the creative and IT sectors, but said he should have discussed a “comprehensive industrial policy.”

“I appreciate clear instructions regarding human capital,” she added.

Mr. Marcos said in his speech that “schools will serve as the preeminent incubators of the innovative and creative energies of all Filipinos.”

He said the government would bank on Technical and Vocational Education and Training (TVET) to address joblessness, which hit a four-month high in June.

“Eight out of 10 graduates of TVET ultimately land decent jobs. So with its high employability rate, TVET will definitely be instrumental in capacitating our people.”

Jesus Felipe, director of the Angelo King Institute for Economic and Business Studies at De La Salle University, noted that the manufacturing sector accounts for only about 8% of the country’s employment share, making it more impossible for the country to produce jobs that are tech-driven.

“Look at the jobs that this economy generates — people riding motorcycles for delivery, etc.,” he said in a phone call. “Do you really believe that you can have a high-income economy?”

PHL ‘CANNOT WAVER’
Mr. Marcos gained a standing ovation after saying that the Philippines would not yield or waver in defending its features in the South China Sea.

Philippine officials “continuously try to find ways to de-escalate tensions in contested areas with our counterparts without compromising our position and our principles,” he said.

“The Philippines cannot yield, the Philippines cannot waver.”

Mr. Marcos, who has visited over 20 countries since his presidency in June 2022, said a substantial number of investment pledges have already commenced operations, “with many more at various stages of development.” These could create over 200,000 jobs for Filipinos, he added.

Among the administration’s priority bills, Mr. Marcos only mentioned the proposed amendments to the Electric Power Industry Reform Act of 2001 and the Corporate Recovery and Tax Incentives for Enterprises Act of 2021, which significantly lowered taxes on domestic and foreign corporations. 

“While it’s good to hear promises and instructions, it is important for the public to continuously monitor and engage the government to hold them accountable,” Ms. Magno said. “Promises can dissipate once the spotlights on his speech are turned off.”

Diwa C. Guinigundo, a former central bank deputy governor, said Mr. Marcos’ headline messages were sound “although we need to dissect them.”

The President should have disclosed why the Philippine Health Insurance Corp. needed to remit P80 billion to the National Government “when this amount could have secured wider and higher health coverage for its members,” he said in a Viber message.

British Chamber of Commerce of the Philippines Executive Director and Trustee Christopher James Nelson told BusinessWorld in a phone call that he was pleased to hear the President discuss agriculture policies, and hoped for Congress’ swift passage of the Anti-Agricultural Smuggling Act.

He said the real issue for foreign investors is whether the Philippines will continue to open up markets and remove foreign restrictions.

Senate President Francis G. Escudero told reporters on the sidelines of the President’s address to Congress that Mr. Marcos’ speech showed that he was serious about improving public transportation, agriculture and dealing with crimes linked to POGOs.

However, the POGO ban could also negatively affect the country’s real estate market, Albay Rep. Jose Ma. Clemente “Joey” S. Salceda, who heads the House ways and means committee, told BusinessWorld. 

“We just have to find the lost revenues, lost employment [due to the POGO ban],” he said after Mr. Marcos’ SONA. “And of course, it will dampen the real estate market.”

“I hope they make a differentiation with IGLs (internet gaming license), [so that] when they ban POGOs it will not lead to a banning of the entire IGL, because that’s PHP 43 billion [that could be lost],” he added.

Philippine Exporters Confederation, Inc. and Employers Confederation of Philippines President Sergio R. Ortiz-Luis told BusinessWorld by telephone that a less than six-month transition for licensed POGOs to wind down operations would mitigate immediate joblessness within the industry.

“The problem is whether we like it or not, there are a lot of investments and contracts, services that revolve around legal POGOs, and I’m sure they are hoping for a way to find an extension (to wind down operations).”

“One area I was hoping he would stress on is the ease of doing business. Although he mentioned the CREATE More bill, it is important to make this point with local governments to reduce the bureaucracy and make it easier for businesses to expand here,” Philippine Chamber of Commerce Chairman George T. Barcelon told BusinessWorld by telephone.

He said legal POGO firms affected by the ban could get back on their feet by pursuing other legitimate businesses that would hire Filipino workers instead of Chinese immigrants serving a Chinese market. – Kyle Aristophere T. Atienza, Reporter, with Chloe Mari A Hufana, Kenneth Christiane L. Basilio and John Victor D. Ordoñez