Commentary: The problem with POGO regulation

The thing about the rule of law in just and democratic societies is that laws should be applied evenly to everyone. It makes sense, since like any other set of rules, laws draw strength and legitimacy from a sense of stability and universality. 

This is important since it assures us that no one is above the law and it prevents the arbitrary use of power. Yet in recent months, the Duterte administration has shown that it has no problem with arbitrarily interpreting the law, weaponizing it one day to single-mindedly attack legitimate businesses, then waking up the next and using it to defend fly-by-night Philippine Offshore Gaming Operators (POGOs).

What gives?

On one hand you have POGOs, online casino operators that provide gambling services over the internet to foreigners, mostly in mainland China since gambling there (even online) is prohibited. 

It is a flourishing industry that seemingly popped up out of nowhere, but has, in just a few years generated employment for over two hundred thousand foreign nationals and has outpaced the BPO sector in terms of floor space occupied. 

POGOs too have been at the center of a Senate Blue Ribbon Committee investigation into the industry’s apparent links to crime, corruption and money laundering. During the Senate hearing, Committee Chairman Richard Gordon said that $633 million in suspected illicit funds or dirty money was brought into the Philippines just between September 2019 and February 2020 that may have been laundered through POGOs. The Anti-Money Laundering Council (AMLC) too said that it flagged P14 billion in “suspicious transactions” within a two-year period in connection with POGO operations.

Furthermore, while the Department of Finance (DOF) estimates that there are more than 230 POGOs operating in the Philippines, according to the Philippine Amusement and Gaming Corp. (PAGCOR), the agency tasked with regulating the online gaming industry, only 60 of them were licensed to operate in the country. 

Making matters worse, according to the Bureau of Internal Revenue (BIR), of the 60 licensed POGOs, only 10 were actually paying taxes to the Philippine government. In fact, the BIR was expecting to collect as much as P50 billion from POGOs in 2019, but was only able to collect P8 billion or just 15% of what was expected, in part due to most POGOs refusing to pay franchise tax.

These allegations of financial crimes, coupled with the alleged “pastillas” bribery scheme that allowed the illegal entry of Chinese POGO workers into the country, and the links of the industry to a spike in kidnapping, human trafficking and prostitution in the country, has led to calls for the shutdown or suspension of offshore gambling operations.

Yet, according to President Rodrigo Duterte there is no basis to shut down or suspend these POGOs. In fact, quite the opposite, despite the reports of the AMLC and BIR, the president personally vouches for them. And what of the evidence of money laundering, corruption and crime linked to the POGOs? 

Well, according to presidential spokesperson Salvador Panelo, that’s the job of law enforcement and regulatory agencies. Duterte even goes one step further and passes the buck on to Congress to pass legislation regulating these operations.

But where was this tempered approach to enforcement and regulation when it was ABS-CBN’s franchise on the line? 

Just a month ago, the Duterte administration’s top lawyer, Solicitor General Jose Calida, pleaded no less than the Supreme Court of the Philippines to revoke the franchise of the nation’s largest broadcast network for allegedly violating the rules of its franchise. 

In doing so, it cut away at Congress’ power to grant or revoke franchises. Also, part of the government's campaign against ABS-CBN were allegations of tax evasion and unpaid debts. 

Yet while a Senate hearing attended by the BIR and other regulatory agencies cleared the broadcast network of any violations, the government’s offensive continued, and only due to fierce public backlash the was ABS-CBN granted temporary authority to operate while awaiting the renewal of its franchise in Congress.

And what about Duterte’s reaction to the government losing its arbitration case against the water concessionaires Maynilad and Manila Water? Despite both companies saying they will no longer wish to implement the arbitration ruling nor demand payment from government, Duterte still seems hell-bent on forcing the water distributors to renegotiate their government sanctioned contracts or face a military takeover and jail time.

So, why is it that the rules are so narrowly interpreted and harshly wielded against legitimate businesses like ABS-CBN, Maynilad and Manila Water – publicly listed companies no doubt, already highly regulated by the Securities and Exchange Commission--, yet so tamely read and arbitrarily glossed over when it’s the fly-by-night and under-regulated POGOs that are concerned? 

How does the administration reconcile their labelling of tax evading foreign-owned online gambling companies as “essential" to the Philippine economy, with the ease with which it threatens the closure of legitimate local businesses that serve as the source of livelihood of thousands of Filipino families and provide essential services to millions more?

It is imperative that our laws are applied evenly to everyone in order to prevent the arbitrary use of power and to assure us that we are all equal in the eyes of the law. Now, more than ever, we must call for the strengthening of the rule of law, because it seems if left to the eyes of Duterte and his allies, some are more equal than others.

Paco Pangalangan is the executive director of think tank Stratbase ADR Institute and convenor at Democracy Watch Philippines.